OFFICE PREMISES

Growing demand is based on a stable economic situation. As local developers gain experience and international developers step in, more professional office projects will appear meeting growing demands of the market.

Class 'A' business centres typically do not have vacant offices, which is due to high demand and low supply. Class 'B' business centres are very popular as well - about 98-100 % of their sites are full. Kyiv needs about 2 152,78 square feet of office premises every year.

The most popular are business centres and office premises of A class. They are 100 % full, which is based on such premises deficit. The main tenants of office premises in class A business centres are multinational companies, representatives of foreign companies or large domestic corporations : IMA Group, TAC, Panasonic, Sony, Samsung, WBB, SAP AG, Da Vinci, Nafta-Service Ukr.Marsh, Philip Morris, Intel.

Class B business centres are popular too, the level of fullness there is about 97-100 %. In such premises around 60 % of the sites are leased by western companies, another 40 % are divided between Ukrainian and Russian companies. The following companies are the tenants of offices in class B business centres: Mary Kay, Adidas, Renault, Robert Bosch, Yamanochi, BBC, Visa, PepsiCo, Whirlpool, Nokia, Interpipe, Regus, Ratiopharm, Ernst & Young, Altima, USA and UK embassies.

Class C business centres are 90-95 % full, and their tenants are such companies as: Burda-Ukraine, Kodak, Nagel, Polfa, Polfarma, Thomson, Furnel, Sanitec Kolo, Ukrturinvest, Naftogaz of Ukraine, Kyivstar, different advertising agencies, magazines' and newspapers editorial offices.

The most popular sites in class A business centres are those of area less than 100 square metres and bigger ones - 400-600 square metres. Due to companies' diversification, office premises of big size - about 800-1 500 square metres are in deficit as well.

CBD- Central Business District,
NC - Non-CBD.

During six months of 2006 office premises price has grown up by 20-50% and reached: in CBD - 2 000-3 000 $ per sq metre, 1 500-2 000 $ per sq metre business centres located near to CBD, and 1 000-1 500 $ per sq metre in business centres located outside the CBD.

Regional information:

According to 2006 statistics there were about 48 BC which could be rated as class B business centres. Their total area amounted 200 000 sq metres.

Current deficit and price growth caused the market to flourish and developers to advance their business. In 2005 there were only 60 000 sq metres of office premises built, but in 2006 total area reached 77 000 sq metres. Moreover, the total area of an average BC in 2006 has grown up by 28% and amounted 4 800 sq metres.

During year 2006 the rental rates for office premises rose considerably as to the end of 2005. Rental rates have grown up by 30-40 %, while the selling prices rose only by 25-35%. Office premises price achieve its maximum in the central business districts (CBD). There, the leasing price is about 40-50 $ per sq metre, and selling price is 3 000-4 000 $ per sq metre. In other cities and regional centres price are a bit lower - 30 and 2 000 correspondingly. Current deficit of office premises is illustrated by Donetsk prices, that are higher than in other regions. In Dnepropetrovsk, for example, these indicators, due to higher supply, are much lower.

Conclusions:

- Demand still exceeds supply, even though the level of supply is growing year by year
- Rental rates continue their constant growth
- Free sites in class A business centres are only 1,5-2 % from its total area
- 60 % of all the business centres are rated as B class, and only 9% of the class A.
- Total office premises area reached 570 000 sq metres, which is still not enough for developing businesses.
- The main trends of the last year were: high demand on office premises situated in non-central business districts, and growing demand for quality premises. Leasing of offices is currently more popular than its purchase. This is a sequence of high selling prices and low supply of quality office premises for sale.
- Many market participants prefer leasing to sale, because of instability in political and economical spheres.
- Well-developed infrastructure of the business centre, made according to market researches and potential tenants' surveys will lead a business centre to prosperity
- Currently there is a trend of building office premises within a large business centre which include food courts, fitness centres, and even shopping area.

Prospects:

- Demand for quality professional office premises will remain high in 2007 and the tendency of rental rates growth will consequently be at level of 10-15 % per annum. Only business centres that will not be able to compete with its rivalries will show negative tendency (not more than 5-10 %) and may even lose their high class.
- Saturation of the market is expected in few years when another 14 business centres will be ready for their star-ups. But a continued economic growth in Ukraine and prospective amount of the direct foreign investments will raise the demand again.

- Competition between sellers and lessors will cause office premises quality's growth.
- The overwhelming disparity between demand and supply will cause new office premises to be fully absorbed by the market before commissioning. It means that 'lessor's market' will be prevailing during at least two following years.