Office real estate in Kiev is about 2 million square meters. m, accumulated in more than 170 business and office centers of various classes. And although officially the capital’s BC did not stop working, most employees of companies that place their offices in them, work remotely for the period of quarantine. “The schedule of business centers has not changed, everyone works day and night, but people have become many times less. Up to 90% of offices now operate remotely,” said Volodymyr Gelyuta, Managing Partner of UTG Offices.
At the same time, according to the expert, the degree of remoteness of companies is different. “There are companies that have locked their office, put alarms, and no one goes to the office anymore – about half of them. Some companies need to prepare and print contracts, keep accounting activities: they do not work permanently in the office, but come there to solve these issues – even at night, so that there are fewer people and no one to face in the elevator,” said Volodymyr Gelyuta.
The forced transition to remote work marked the beginning of a dialogue between tenants and landlords to reduce or even abolish rents. For example, the Kyiv City Council provided tenants of communal property with a 50% discount until July 31. If the leased object is not used at all due to restrictive measures, the tenants of communal property are completely exempt from paying under the contracts.
“We promised and found a mechanism to reduce the financial burden on small and medium-sized businesses operating in the capital. It is unknown when the restrictive measures will end and whether entrepreneurs will be able to return to the usual rhythm of work. But today we made a serious gesture of support. Small and medium-sized businesses will be entitled to these benefits from March 11,” said Kyiv Mayor Vitaliy Klitschko.
And although with almost 900 thousand square meters. m of communal non-residential premises for rent, only part of the office, in any case, this is a significant reduction in the financial burden and losses, which in the current circumstances is borne by the Ukrainian business. Some owners of small office centers do the same. “Loyalty and individual approach come to the fore today. Discounts are formed taking into account what the tenant company does and how much its activities have suffered from quarantine. Companies that, for example, were engaged in concert activities, and were simply forced to go home, of course receive the maximum discounts on rent, not including OPEX,” said Volodymyr Gelyuta.
However, not all landlords follow a similar path. This is especially true of large business centers. “Mostly these are large landlords with a large pool of tenants. There is nothing about customer orientation here,” adds Volodymyr Gelyuta.
“Such a position could provoke an outflow of tenants. There is already a high-profile case when Promodo, after unsuccessful negotiations with the landlord, decided to simply close its offices in Kyiv and Kharkiv on April 1 and move to remote work,” said Andriy Ryzhykov, CEO and managing partner of DC Evolution. According to Promodo CEO Oleksandr Kolb, this will save UAH 1 million in turnover and jobs.
In conditions of uncertainty and unwillingness to yield to landlords, many companies will follow a similar path. “I will explain what the tenant thinks. Suppose it occupies 1000 square meters. m in the business center, work in the office is stopped, but he is not given a discount. He understands that it is more profitable for him now to optimize up to 500 square meters. m. Thus, he will save on renting the current office, and in addition, the new rents cheaper. I anticipate a massive outflow of tenants from large business centers. Now is just the beginning at the level of letters and conversations. But this process will increase, and if the quarantine lasts until the end of May, then at least small and medium-sized tenants, which occupy 200-300-400-500 square meters. m, will be at least optimized, at most, resent the disloyalty of their landlords and move,” adds Volodymyr Gelyuta.