Kiev market to see falling rental rates in 2009 - CBRE

The Kiev office property market will experience a downturn of business activity in 2009 which might lead to a decline in rental rates, CB Richard Ellis has said in its latest Kiev Office Property Forecast. World financial crisis has affected Western European property markets and its echoes are becoming evident in Ukraine, according to the global property advisor.

Radomyr Tsurkan, Managing Partner of CBRE in Ukraine, said that 'growth of rental rates observed over the last few years has reached its absolute historical maximum'. He added: 'Given the current economic situation, it is with high probability that we expect rental rates to decline.'

Ukraine's rapid economic growth, coupled by an acute deficit of quality office space in Kiev has lead to a sharp increase in rents for A class properties, which now level with the world financial centres. According to CBRE market report, the Kiev market demonstrates one of the highest rates - $85 to $90 per m² per month.

'At time of instability and uncertainty companies will aim to cut their costs. Evidently, many requests for new office premises will be cancelled due to companies rethinking their expansion plans. The given trends is specifically applicable to high-quality A/B+ class premises, which boast the highest level of rental rates,' Tsurkan continued.

'We do have experience of working in a recessional market and we remember the rates collapse at the end of the 1990s. Exactly 10 years ago, Kiev prime office rents plummeted from $75 to $25-30, as a result of the economic crisis in Russia. This year, while the rents in the most mature property markets have already demonstrated negative growth, emerging markets of CEE have seen their prime rents growth either slowing down considerably or stabilizing. In Kiev the drop in demand will be partly offset by still low vacancy rates and the cancellation of a number of projects, which will lead to a record small new supply.'