Property Valuations and Asset Models Indicate 2021 Commercial Real Estate Prices and Rents Will Continue to Decline

The year 2021 will be a true ‘buyers-market’ for real estate in Kyiv as offer prices for the sale of residential and commercial real estate in general continue to decline. Much vacant property was purchased for cash at peak market prices and held as an investment for the rental market. But as the financial position of many investors continues to deteriorate, they are increasingly unwilling to hold onto real estate with declining market prices for rent or sale. They are now more interested to recover some of their past investments, while they still can. Prices for all real estate are not expected to recover until at least late 2021 or later.

The situation, from a renter or buyer’s point of view is favorable because many large commercial buildings entered the property market in 2018 and 2019, adding to an already oversupplied commercial rental asset market, driving down both rental and sales prices. As the economy declined during 2020 and as many businesses reorganized for remote working conditions, their need for large commercial office space declined. Some of this decline is permanent and companies are not renewing their leases for large offices as this space is no longer needed.

Two factors are working together to drive down asset valuations and subsequent rental and sales prices for commercial property. First, many companies have failed or understand that they cannot sustain ongoing losses well into 2021. These failed companies no longer need any office space and if renting are leaving and if owning are selling.  Second, many companies that remain viable have readjusted their working regimes to allow for a higher percentage of their professional workforce to work from home permanently, both partially and completely.

For an investor with a longer time frame for holding commercial property assets, and who is in a position to do so, then taking advantage of declining sales prices for commercial property represents a strategic investment opportunity.