EDITORIAL Commercial Property Special Edition Guide to Ukrainian Real Estate Market 2021 Founder and Publisher: UCMGroup LLC Project Manager: Tetiana Antoniuk Commercial Director: Yulia Adeyeva, [email protected] Sales Department: Vitalii Sakhno, [email protected] Editorial materials: Tetiana Antoniuk, Oksana Babenko, Lucia Bondar, Victor Nahorskyi, Tetiana Khomiak, Maryna Paraliush For subscription contact us: [email protected] Forward your press releases to: Dear Readers! [email protected] Forward your journalistic materials and propositions to: [email protected] Last year, the annual catalog from the publishing house CP PUBLISHING, Web-site: www.commercialproperty.ua “Guide to Ukrainian Real Estate Market”, was published before the pandemic in our country and the introduction of quarantine. Now, this edition, as well Legal support: Antika Law Firm as in 2020, comes out in the period of another tightening of restrictions. This year’s “Guide” is prepared in a slightly updated format. Unlike Editorial Address: previous issues, we changed the headings, grouping articles by the real 01030 Kyiv-30, Ukraine estate sectors. However, as before, the mission of the publication is to p/o box 94 become a valuable and most comprehensive source of information on the Cover: innovation park UNIT.City (Kyiv) situation in the Ukrainian commercial real estate market. It presents reviews Photo: Ivan Avdeenko of the offi ce, retail, hotel, and warehouse sectors of Kyiv and the largest and most active regional markets of Ukraine: Kharkiv, Dnipro, Odesa, Lviv. © UCMGroup LLC The editorial materials cover key trends, events, results of the last pandemic year, and forecasts for the near future from the market players, etc. Special emphasis is placed on investments, key legislative changes in urban © Guide to Ukrainian Real Estate Market is published yearly by UCMGroup LLC. planning, and the fi eld of architectural and design services. Although the Publisher tries to make The COVID-19 pandemic has shown how both global and narrow our an information as accurate as possible, world is. Global means how broad and fast the virus has spread, and he accepts no responsibility for any loss, injury or inconvenience sustained by any person narrow means the forced restrictions we all face: from closing borders to using this magazine. Views expressed in this isolation. In this unusual and diffi cult period, the real estate market players magazine do not necessarily reflect the opinion adapted to new conditions, continued to build, open, and plan new projects. of the Editorial Team or Publisher. No part Traditionally, the “Guide” contains two parts, which provide information of this publication may be reproduced, stored in a retrieval system or transmitted in any form about the companies working in the real estate sphere and their services, by any means without written permission of as well as about the market supply: fi nished and future real estate projects. the Publisher. Advertisers are solely responsible We are grateful for your cooperation and loyalty! We believe that new for all claims based on nonavailability or opportunities and prospects await us! nondelivery of merchandise appearing in this publication. Tetiana Antoniuk, Project Manager CONTENTS 8 ANALYTICS 8 INFOGRAPHIC 10 OFFICE REAL ESTATE 10 On the Way to Change 12 Offi ce Property in Kyiv: under Mild Stress 14 Kharkiv Offi ces: Using Old Resources 16 Dnipro Offi ce Real Estate Market Caught a Wave of Growth 18 Offi ce Real Estate in Lviv: Reality of 2020 and Expectations for 2021 20 RETAIL REAL ESTATE 20 Year of Restrictions 22 Kyiv Retail Property: to Withstand the Crisis 24 Retail Real Estate of Kharkiv: on the Threshold of Change 26 COVID Fluctuations: Review of the Dnipro Shopping Malls Market in 2020 28 Shopping Malls in Odesa: is the Market Put on Hold? 30 HOTEL REAL ESTATE 30 Fighting and Surviving 32 Kyiv Hotel Market: Super Complicated 2020 34 Hotel Market in Odesa: New Reality in Terms of Figures 36 Hotel Real Estate in Lviv: Results of 2020 38 WAREHOUSE AND LOGISTICS REAL ESTATE 38 Without Pandemic Fever 40 Warehouse Property Market in Kyiv and Kyiv Region: Results of 2020 42 Warehouses & Logistics: Lviv Region Market Review 44 INVESTMENTS Real Estate Investment in the Time of Coronavirus Article by Alexander Nosachenko, Managing Director of Colliers Ukraine 48 LEGAL Quarantine Year of Urban Planning Reform Article by Alexander Burtovoy, Partner, and Vasyl Sheretko, Senior Associate of Antika Law Firm 52 ARCHITECTURE & DESIGN Slava Balbek: “Architecture is Music, but Each Architectural Solution must be Logical” Interview of the Founder of balbek bureau 59 COMPANIES 81 PROJECTS / NEW SUPPLY 97 BUSINESS CARDS 8 UKRAINE INFOGRAPHIC UAH4194.1 billion Nominal GDP -4% Real GDP fall UAH199 billion Volume of executed construction works 104% Index of executed construction works KYIV UAH42.87 billion Volume of executed construction works 97.8% Index of executed construction works KYIV REGION UAH12.6 billion Volume of executed construction works 116% Index of executed construction works Source: State Statistics Committee of Ukraine, all statistics are for 2020 9 INFOGRAPHIC KHARKIV REGION UAH14.35 billion Volume of executed construction works 92.2% Index of executed construction works DNIPROPETROVSK REGION UAH17.75 billion Volume of executed construction works 84.9% Index of executed construction works ODESA REGION UAH27.92 billion Volume of executed construction works 145.8% Index of executed construction works LVIV REGION UAH14.14 billion Volume of executed construction works 122.3% Index of executed construction works 10 ON THE WAY TO CHANGE New trends caused by the coronavirus pandemic, in particular the shift of some businesses to remote work, have changed the current situation in the offi ce property market and pushed this sector to some changes. REORGANIZATION OF WORK decrease in rental activity was observed PROCESSES during the spring lockdown. It recovered Remote work format is the main trend partly with the easing of restrictions. OFFICE REAL ESTATE in the offi ce property market, which was In general, as for the categories of tenants caused by COVID-19. Since the beginning that were the most active last year, this of quarantine, a lot of companies have was primarily the IT sector. adapted to work in the pandemic, setting up operational processes based on the DISCOUNT PERIOD new realities. Depending on the specifi cs The introduction of quarantine initiated of the activity and corporate policy of a dialogue between landlords and tenants each company, now, work schedules to ease the lease terms. Therefore, as of and fl ows are divided as follows. Some 2020 year-end, rental rates for offi ces tenants visit offi ces as usual as possible, in key property markets of Ukraine as they did before the pandemic. Others decreased by 10-15%. Business center implemented a hybrid work model. owners compromised, for example, Some companies operate almost entirely by deferring payments or providing remotely, and right this attracts the most discounts. The main period when attention as a trend that will lead to landlords made concessions was the fi rst changes in the offi ce property segment. spring lockdown. Some of them provided Market players are sure that it will be an discounts up to 70% depending on the incentive for further reorganization and contract terms, and some, conversely, did adaptation of work processes and offi ce not change the price. As for discounts, areas. For example, in big cities, the model landlords determined their size individually, is projected to grow in popularity with analyzing how much a particular business a smaller head offi ce and several satellite suff ered from the pandemic as well as offi ces near major residential centers. the business relationship with a partner, Demand for the hot-desking format, i.e. opportunities for further cooperation, the use of the same workplace by diff erent etc. These actions and loyal approach, employees at diff erent times, is also in general, allowed maintaining expected to increase. Also, the pandemic a signifi cant pool of tenants. Currently, has already resulted in the reformatting of the practice of discounts is almost non- large and open spaces to minimize staffi ng existent. As for the new agreements, and comply with the rules of social there are examples of contracts when the distancing. parties prescribe special conditions for the period of inability to use offi ce space. RENTAL ACTIVITY As was expected, in the current crisis, the NEW REQUIREMENTS main offi ce property markets in Ukraine Currently, there is a greater demand for suff er from an increase in vacancy. Trends smaller offi ces, fi nished premises, which that caused this were the launch of new require minimal additional investments from projects, the abandonment of leased tenants. They are also interested in safety premises or their reduction, in particular issues. Now, in particular, more attention due to the remote work format, reduction is being paid to air purifi cation, ventilation, of take-up of offi ce premises. Thus, in 2020, and air conditioning systems. Business given the instability and unpredictability of centers have already become accustomed the situation caused by the coronavirus, to such measures as thermometry and companies paused negotiations and enhanced antibacterial surface treatment, postponed lease plans. The strongest installation of contactless sanitizers. 11 OFFICE REAL ESTATE In the photo: business center City Garden, Kyiv PROVIDED BY FORUM PHOTO 12 OFFICE PROPERTY IN KYIV: UNDER MILD STRESS 155,000 m2 of new supply that entered the Kyiv offi ce property market in 2020 led to an increase in the vacancy rate to 11.5%. It took place amid the decrease of take-up of such premises. But the players of this property sector believe that offi ces will be in demand with tenants despite the uncertainty that still prevails in the market due to the pandemic and the remote work as one of its consequences.