Warehousing property market review in Ukraine in Q3 2020: minimum vacancy

Author

Victoria Bereshchak

Warehouses in Ukraine have changed pace to a deficit: the amount of warehouse space leased in Q3 2020 have exceeded the figure for the same period last year by 75%, while in the first nine months, Kyiv and its suburbs did not receive a new supply. is reporting about what is happening in the segment of warehousing property in Ukraine and what is the forecast for the warehouse sector.

According to a new report by the international consulting company Cushman & Wakefield, the total volume of warehouse and logistics premises that were leased in Kyiv and the suburbs in Q3 2020 amounted to approximately 31,000 sq. m and that is 75% higher than in Q3 2019, but conforms to the level of Q3 2018.

During the first three quarters of 2020, approximately 110,800 sq. m were leased, and that is similar to the figure for the corresponding period of 2019, but 30% less than in January—September 2018.

As analysts have pointed out, the vacancy in Q3in the warehousing property amounted to 2.2%, having decreased further from 2.6% in Q2 2020, and the hryvnia devaluation has had an impact on rental rates.

"For prime warehouses, prices were in the range of $4—5.8 per sq. m per month, slightly decreasing in Q3 due to the hryvnia devaluation, and for high-quality B class warehouse premises—at the level of $3—3.5 per sq. m per month," said Marta Kostiuk, Head of Research and Development Consultancy at Cushman & Wakefield.

According to her records, in a number of real estate objects with contracts concluded in hryvnia (without reference to $), basic rental rates in dollar equivalent have decreased due to a decrease in the hryvnia exchange rate by more than 19% since the beginning of the year.

According to Cushman & Wakefield estimates, in Q3 2020, the segment's net absorption was 8,620 sq. m, and that corresponds to the previous quarter. Demand dynamics remained high throughout the year.

However, the tenants are left without new warehouses. But soon, the developers will be able to increase the supply. According to Cushman & Wakefield data as of October 2020, several warehousing properties with a cumulative area of approximately 103,000 sq. m. may still be brought to the market by the end of the year and another 60,000 sq. m. are planned for 2021.

In general, the warehouses are predicted to have a good year. Marta Kostyuk notes that despite the economic downturn and the current crisis, the demand for professional warehouse property is high, and its growth in the Kyiv region is limited by a record low vacancy rate in the segment.

"We can witness a high interest in the warehousing property market in Ukraine from developers, investors, and financial institutions. The main cities on radar of market players are now not only the Kyiv region but also Lviv and other cities with a population of over one million, in particular, Kharkiv," she said.

Dmytro Omelchuk, Commercial Director of DELTA Ukraine, is convinced that smart cost optimization in the development of logistics real estate will become the fundamental trend in the warehouse segment for the next period.

The point is that warehouse projects will develop together with the administrative block (where offices, dispensing areas, retail, etc. can be located).

"Despite the in-city logistics format attractiveness, you’ve got to be quite careful with it. Only using a detailed market analysis and a reasonable concept, we can get a successful project with positive dynamics of financial indicators and low or zero vacancy," Omelchuk is convinced.

According to him, first of all, it is necessary to pay attention to the location of the market and the competitive alternatives in a particular region. This format will be relevant, for example, for online retail and for companies that require to be close to their product and warehouse stocks.