Blue-chip tenants such as Philip Morris and Panasonic are queuing up for office space in the Ukrainian capital Kiev, underpinning high investment returns.
DTZ Debenham Zadelhoff, acting for a group of private Dutch investors, has recently bought two refurbished buildings on Ivana Franko, having secured pre-lets from Procter & Gamble, Philip Morris and an international firm of accountants at $60 per m2 a month.
Roy Gregory, director of DTZ’s Kiev office, said investors in such schemes could expect to see a payback on their investment within two to three years. Capital values reflected around $3,000 per m2, he added. Tenants were typically signing five-year leases and paying rent in dollars, outside the Ukraine.
“There is tremendous opportunity here,” said Gregory. “There are no large international standard buildings or developments under way and over the next 12 months the market will only be able to provide 10,000 m2 to 12,000 m2 of office accommodation. Some tenants are having to wait for up to 12 months.”
Rents could increase to as high as $70 per m2 during the next year, added Gregory, but “this would be the highest limit”.
US as well as Dutch investors were showing interest in the city, he said. ITG, an investment company run on behalf of a group of US businessmen from North Carolina, recently bought an office conversion on Mikhailovskaya Ulitsa in the centre of Kiev. DTZ is negotiating with a number of tenants for the 600 m2 building.
