Economy 2024-05-15T06:54:09+03:00
Ukrainian news
After a Year at Home: How did the Real Estate Market Change Because of the Pandemic

After a Year at Home: How did the Real Estate Market Change Because of the Pandemic

The global real estate market starts to slowly recover from the pandemic. However, it faces some changes that COVID-19 has made. What does the global real estate market look like now, is it still worth investing in, and is there any chance for the offices to be filled again, read in our material. Ofer Kerzner, investor, believes people are back to the offices.

The changes in the global real estate market because of the pandemic

Because of the steps that national governments have taken to stop the spread of COVID-19, real estate business activity has declined. However, it is expected that the market will recover from this shock because the decrease is not caused by its weakness.

The global estate market is expected to grow from $2687.35 billion in 2020 to $2774.45 billion in 2021.

Because vaccination programs are at different stages around the world, some real estate markets are moving to pre-pandemic results faster than others. Nevertheless, experts expect that the second half of the year will be beneficial for the market, as pent-up demand will show itself.

The dynamic in global leasing activity of non-residential property remains slow because most of the people still work remotely. The first quarter of 2021 has leased volumes down 31% on the first quarter of 2021. However, rental activity in China has returned to the pre-pandemic activity level. U.S., UK and Germany have a positive sign for later in the year. Australia also shows signs of improvement, while India is holding back demand.

In 2020, market restrictions and supply chain disruption caused delays to many construction projects. In most cases, the restrictions are now eased and works have resumed. Development completions in 2020 are expected to rise by 41% in 2021, which is the highest level of deliveries since 2008. 

A chance for living for offices

Despite spending around a year working remotely, people still tend to want to return to the pre-pandemic working system. According to the recent CBRE research, even though employees find their work from home productive, they still wish to go back to offices. Participants explained that offices give an opportunity to create a healthier work-life balance, build personal connections with colleagues, and have a comfortable working environment.

A new view on an office life

This CBRE research suggests that the role of modern offices is changing. Now they are expected to be a place for communication, groupwork and network creation. In the future, offices can become centers for educational events and career development. Employees will be less attached to an office but it will still play a big role in supporting corporate culture and cooperation.

It is no surprise that with the new vision of face-to-face work came new requirements for office real estate. In Ukraine, the typical office building is a product of the 20th century. It has a small lobby, limited parking spaces, almost no additional services. It cannot fulfil the demands of post-COVID work.

As the spokesman for CBRE commented: "Nowadays the requirements for business centers have changed. People want more than just a place to organize a work meeting. They want a business center to be a comfortable place to spend the whole day in. Clients wish for a children’s zone, lounge zone, cafés and restaurants both in a building and within walking distance".

Now investors turn to the hybrid office model. Such a concept includes a chain of main offices and a chain of small satellite ones near big apartment complexes. It allows employees to work within walking distance from home, and it has everything they need to rest from work.

Hours spent in a hybrid office are flexible – workers can meet only when they feel that ongoing projects need discussing. So, hybrid offices offer flexible discussion rooms – or co-workings – which can be booked by appointment.

A modern option for small companies

However, not all companies are big enough to need a chain of offices. Co-working can be a great option for them. Apart from flexible working hours, such format attracts clients with negotiable lease periods, various sizes of rented spaces and the ability to quickly change their working format.

Co-workings are a good variant not only for small companies but also for freelancers, who want to give into a productive atmosphere and meet colleagues. One of the first co-workings in Kyiv was opened at "Art-zavod Platforma" specifically for this purpose. The founder of “Art-zavod platforma” investor Ofer Kerzner wanted to give start-uppers (especially IT-specialists) a place to find like-minded people, extend their network and come up with ideas for startups.

"It is important that Ukrainian IT talents have a place to communicate, talk about their experience and support each other. One of the missions of "Art-zavod Platforma" is to become a city in a city where great IT products see the world for the very first time – something similar to Silicon Valley", - Ofer Kerzner explains.

Dive into your community: residential premises and country life

Communities gather people with similar ideas and values, and most of new properties will be built using community and happy life concepts.

Ofer Kerzner commented: "Co-workings have proved themselves as a great place to find a community, so we are moving forward and planning to develop residential property based on mutual community values. Young professionals and young families want to extend their network. They need help with coming up with new ideas or developing existing ones. They want to dive into their projects and quickly progress. For them, community residences will be a very suitable variant, both is city and on countryside". 

What does it mean for investors and landlords?

According to another research, globally office rents will rise in the first quarter of 2022 and return to pre-crisis levels in 2025. It means, 2021 could be the right time to invest in business centers: it is possible to find objects at reasonable prices, especially considering that the market was overheated in 2019 and early 2020.

In Kyiv, the trend for a hybrid office model can kick-start new projects on the Left bank of Dnipro River. There are plenty of former industrial zones there, which can be transformed into up-to-date business centers. Low capital costs for purchase and renovation, along with a shorter project duration and smaller market density, will enable investors to offer quality office space at 2/3 of the B-class rental price near the city center.

It is important to keep in mind, though, that unlike stable global markets where it is typical to sign a 10-year lease contract, in Ukraine 3-5-year rental periods for smaller spaces are more common.

Drawing a bottom line…

COVID-19 has made significant changes to the real estate market. Nevertheless, it is slowly recovering from the crisis and with patience and flexibility, it is absolutely possible to continue working on this market.