Office rents in Kiev likely to drop, says CBRE

The office market in the Ukrainian capital of Kiev will witness a recession in 2009, which, in turn, could lead to a decline in rental rates, according to a report from CB Richard Ellis. 'The world financial crisis has already affected Western European property markets and its echoes are becoming evident in Ukraine,' Radomyr Tsurkan, managing partner of CB Richard Ellis in Ukraine said. 'Growth of rental rates observed over the last few years has reached its absolute historical maximum. Given the current economic situation, we believe it is highly probable that rental rates will decline.'

Tsurkan said that Ukraine's rapid economic growth, coupled by an acute deficit of quality office space in Kiev has led to a sharp increase in rents for A class properties, bringing the city level with world financial centres. According to CB Richard Ellis market report, rental rates in Toronto stand at $56 per m² per month, $93 in New York, $74 in Frankfurt, $43 in Vienna, while in Prague they reach $50. The Kiev market has one of the highest rates - $85 to $90 per m² per month.

'At a time of instability and uncertainty companies will aim to cut their costs,'Tsurkan added. 'Already we see a considerable weakening of the labour market and stabilisation of wage growth, which clearly shows employers' more cautious approach with respect to their business development plans. Hence it is both logical and likely that demand for additional office space among many companies will subside noticeably. Evidently, many requests for new office premises will be cancelled due to companies rethinking their expansion plans. The given trends are specifically applicable to high-quality A/B+ class premises, which boast the highest level of rental rates (starting from $60 per m² per month).'