Cushman & Wakefield : COVID-19 Impacts on Ukraine Real Estate

On 20 May, the Government issued the decree, extending quarantine until 22 June, though further gradually relaxing the lockdown rules (to be implemented subject to local authorities' decision). Amongst others, the following activities have been allowed:

• 22 May: hotels (except for restaurants) and public road transport (within city/region);
• 25 May: metropolitan and kindergartens;
• 1 June: indoor sports and fitness centres (excluding group training >10 people), passenger rail transport along with public inter-regional road transport;
• 10 June: eateries with indoor seating areas, hostels / sanatoriums / recreation complexes, and culture establishments with the requirement of a maximum 1 person per 5 sq m;
• 15 June: operation of air transport.

From 11 May, the majority of the shopping centres across the Ukraine opened fully, with the exception of entertainment zones and food-courts (except for take away and delivery). As of 24 May, the shopping centres remained largely closed in regard to non-essential retail only in Kyiv.

Significantly, on 21 May, the President signed the law banning the return of the nationalised bankrupt banks to their former owners. On the same day, the IMF reported that a new US$5 billion 18-month Stand-By Arrangement for the Ukraine was agreed, further contributing to the currency stabilisation and strengthening the positive expectations for the country's return to growth when the COVID-19 crisis ends.

21 May

For the week 11 - 17 May the epidemiological situation in Ukraine remained stable. According to the official data 375 to 533 new COVID-19 cases are reported daily.

Although the Government extended the quarantine until 22 May, from 11 May some lock-down rules were relaxed. This includes businesses being able to resume operations enabling F&B operators to run takeaway services and open summer terraces only, non-food retail shops (including those located in shopping malls) and beauty salons to reopen.

However, as per the adaptive quarantine approach, the relaxation was not applied in all regions of Ukraine. It remains at the discretion of local authorities and according to the local epidemiological situation.

Since 11 May, most shopping centres across Ukraine opened fully, excluding entertainment zones and food-courts (except for take away and delivery). Non-essential retail within shopping centres in Kyiv, Lviv and Chernivtsi, has largely remained closed.

Among the noticeable events of the week, on 14 May IKEA opened its Ukraine online store, while its first regular store format is still to open in the country.

During the period from 30 March 2020, the Ukrainian currency has remained generally stable.

14 May

The epidemiological situation remains generally stable in the Ukraine with over 500 new cases daily. On 4 May, the Government therefore decided to extend quarantine until 22 May, however allowing certain types of businesses and relaxing some lockdown rules.

On 11 May, parks and outdoor relaxation zones along with open-air sports and playgrounds opened to the public. Also, some businesses will resume operations (with additional sanitary requirements), and these include eateries (takeaway service and summer terraces only), non-food retail shops (including those located in shopping malls), beauty salons, dental clinics and community servicing enterprises.

At the same time, food-courts and entertainment facilities in shopping malls, cinemas, theatres and fitness centres remain banned, while metropolitan, suburban and intercity public transport, regular railway and flight connections do not operate, and access for the population to municipal transport remains limited.

Many non-food retailers, restaurants and landlords in the retail sector, which was hit the hardest, prepared to reopen on 11 May both in shopping malls and street retail locations.

Business centres are open for access by tenants' employees, but most office occupiers apply a work-from-home approach. The logistics property sector has so far proved to be the most resilient.

7 May

The COVID-19 quarantine commenced on 12 March 2020 with some activities being prohibited, including operation of retail and entertainment facilities, except for essential retail (food products, fuel, medical products and devices). Parks and outdoor recreation zones were closed for public access. In Kyiv the metro was closed, and other public transport stopped servicing passengers not employed in strategic industries.

On 22 April, the Government extended the quarantine until 11 May. The quarantine exit plan was announced, which envisages the following 5-stage lifting of restrictions for businesses:

• Beauty salons, non-food retail and wholesale, coffee cafés (takeaway), car washes, bike stores and rentals; parks and outdoor relaxation zones (except for playgrounds) to open for public, and group sports activities allowed.
• Public services, eateries (takeaway), open-air cinemas, sports and fitness centres (except for swimming pools) and hotels.
• Sports and playgrounds, metro (partially) and intercity pubic transport, shopping malls (except for entertainment zones and kid's play areas), theatres and cinemas, hostels / sanatoriums / recreation complexes, eateries (indoor seating area).
• All municipal public transport, shopping malls and entertainment centres.
• Cancellation of all other restrictions.
• Stage 1 might commence on 11 May, if the number of new infections does not increase over a period of 10 days in a row.
• Q1 2020 was generally stable for the commercial property market in Ukraine, but more significant impact of COVID-19 is likely in Q2.

30 April

Since the start of 2020 real GDP contracted for the first time since 2016. The country's risks were seen to increase in March due to the Government's reshuffle at the very unfavorable time of coronavirus outbreak with no IMF deal achieved.

During Q1 transactional dynamics on the office property market in Kyiv is traditionally lower compared to the other three quarters of the year, but in Q1 2020 amid the spread of COVID-19 many deals planned for March were temporarily put on hold and postponed till after the quarantine, which resulted in low take-up and net absorption figures. Nevertheless, vacancy reached 6.7% with only minor increase, and rents remained unchanged.

In Q1 2020, vacancy on the logistics property market in the Greater Kyiv area increased to 2.9% from 0.8% at the end of 2019, being largely attributable to a change in some landlords' leasing strategies prior to the spread COVID-19. Though many lease transactions were postponed until after the quarantine and occupiers initiated negotiations on rent reductions, demand dynamics and prime rents remained stable.

All leisure, dining and non-essential retail facilities have been closed since mid-March; therefore, the retail property market was hit hard, with no significant support provided by the Government.

In the Ukraine, quarantine commenced on 12 March 2020 and is now extended until 11 May 2020.

23 April

Since the start of 2020 real GDP contracted for the first time since 2016. The country's risks were seen to increase in March due to the Government's reshuffle at the very unfavorable time of the coronavirus outbreak and no IMF deal achieved.

During Q1 transactional dynamics on the office property market in Kyiv is traditionally lower compared to the other three quarters of the year, but in Q1 2020 amid the spread of COVID-19 many deals planned for March were temporarily put on hold and postponed till after the quarantine, which resulted in low take-up and net absorption figures. Nevertheless, vacancy reached 6.7% with only a minor increase, and rents remained unchanged.

In Q1 2020, vacancy on the logistics property market in the Greater Kyiv area increased to 2.9% from 0.8% at the end of 2019, being largely attributable to a change in leasing strategy of some landlords prior to the spread COVID-19. Though many lease transactions were postponed till after the quarantine and occupiers-initiated negotiations on rent reductions, demand dynamics and rents remained stable.

As all leisure, dining and non-essential retail facilities have been closed since mid-March, the retail property market has been hit hard, with no significant support provided by the Government.