Office market Saint Petersburg Q research. executive SUmmarY. The quality office property market shows stability.

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1 research Q3 Office market Saint Petersburg executive SUmmarY The quality office property market shows stability. In Q3, the offering of quality office property increased by 1%. ccording to official data, 17, sq m of quality office property has been commissioned. 1.3 p.p. decrease of the vacancy rate was observed in А class business centers. The vacancy rate at the end of the quarter was 17%. Vacancy rate for В class business centers did not change and stood at 8%. Within first three quarters of, total acquisition amounted to 116, sq m, which was comparable with the aggregate amount for the first three quarters of 213. verage rental rates in rubles did not change. There was a slight downward correction within the past quarter by 5% in the class office center segment. There were no changes in the average indicator for the В class business center segment.

2 Q3 Office market Saint Petersburg Office market Marina Puzanova, Head of office department, Knight Frank St. Petersburg The third quarter with its traditionally long period of vacations was stable for the office market. gainst minor official commissioning of new spaces, the rental rates experienced almost no change, and the projects commissioned in the previous periods managed to improve their occupancy rate. Economic and political factors influenced the behavior of tenants when developing longterm strategies, they are not ready to assume financial obligations for the period exceeding three years, but suggest that the owners review their rental terms with respect to the market situation. Key indicators. Dynamics Class А Class В Total amount of quality area, thousand sq m 2,141.9 including, thousand sq m Changes after the end of H1, % Commissioned in Q3, thousand sq m 17 including, thousand sq m Vacancy rate at the end of Q3, % 17 8 Changes after the end of H1, % -1, Requested rental rates in business centers in operation*, $/sq m/year Changes in average rental rates in business centers in operation starting from H1, % Requested rental rates in business centers under construction*, $/sq m/year * VT excluded (18%), operating expenses included, 1USD = RUR. Source: Knight Frank St. Petersburg Research, ,1 6-9, Positive trends included a continued practice of moving to newer, quality projects from older buildings. However, most of these moves are performed with rental budgets remaining unchanged, through optimization of occupied areas, or due to favorable terms offered by lessors in new locations. Increase in the currency rate against the ruble further reduced the number of contracts settled in foreign currency. nd even if such contracts appear, they provide a "corridor" - the upper and lower limit of the exchange rate applied in payments. The most popular facilities are still turnkey solutions, where the tenants make no initial investments in finishing and further equipping of premises, and lessors offer these solutions more frequently, while also providing free services. They help clients draw up terms of reference, take care of planning at their own expense, and then carry out construction and installation operations. Key events Trubetskoy class usiness Center located in the Central District of St. Petersburg was sold. The purchaser of the usiness Center was MC Flagman, the vendor was FORTGROUP. nother transaction was closed for the rental of a business center by development company GHP Group. Trinity Place usiness Center was fully occupied before official commissioning. Senator class usiness Center at olshaya Pushkarskaya St was officially commissioned, project developer being Imperia Holding. 2

3 usiness centers commissioned in Q3 Project Name ddress District Class Total office area, thousand sq m Rentable area of office premises, thousand sq m Senator 22- olshaya Pushkarskaya St Petrogradsky dministrative office building 59-V Stachek ve1 Kirovsky 8 6 No name Plot 19, 17th Line, V.O. Vasileostrovsky Source: Knight Frank St. Petersburg Research, Supply In Q3, according to official data, 17, sq m of quality office property has been commissioned. In Q3, the amount of quality office property on offer increased by 1%. Total rented area of quality office centers amounted to 2,141,9 sq m at the end of Q3. Dynamics of total rented area in quality (А and В class) business centers of St. Petersburg, Q3 29 Q3 2,, 1,5, 1,, More than a half of office centers in St. Petersburg are concentrated in the center and adjacent districts: Moskovsky venue, Embankments with Views, Petrogradsky, and Central-2. 5, Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Class А Class Source: Knight Frank St. Petersburg Research, Distribution of total rentable area among business districts of St. Petersburg broken down by class of business centers, Q3 South-Western 1% North-Eastern 2% Vasileostrovsky-2 - dmiralteysky Eastern South-Eastern Central-1 5% 7% Class Class Vasileostrovsky-1 7% Obvodny 7% North-Western 8% Central-2 11% Petrogradsky 12% Embankments with 1 ViewsMoskovsky ve Source: Knight Frank St. Petersburg Research, 3

4 Q3 Office market Saint Petersburg Demand Commercial terms Forecast In Q3, there was minor decrease in the vacancy rate for class business centers due to a number of large-scale transactions, in addition to a slight increase in new office spaces. The vacancy rate was 17% at the end of Q3. The decrease amounted to 1.3 p.p. compared to the first half of the year. Vacancy rate in the В class office center segment was stable; there was insignificant increase by only.1 p.p. The share of vacant areas stood at 8%. Within first three quarters, the market acquired 116, sq m, which was comparable with the indicator for the first three quarters of , sq m. The total area of all rented spaces in А and В class business centers amounted to 123, sq m. It should be noted that more than a half of rented areas (57%) were occupied by oil and gas companies Distribution of rented areas in quality business centers broken down by the tenant s profile The average weighted rental rate for class business centers in operation at the end of Q3 amounted to 422 $/sq m/ year (including operating expenses and excluding VT); for class it was 39 $/sq m/year (including operating expenses and excluding VT). Since the office premises rental market is denominated mostly by national currency, and the third quarter showed drastic depreciation of the ruble, this resulted in a decrease of rental rates expressed in dollars. verage rate in class reduced by 1, in В class by 1%. It is noteworthy that this factor does not reflect market changes with respect to commercial terms of rental rates. Dynamics of the amount of vacant space and the share of vacant spaces in А and В class business centers, Q3 21 Q2 sq m % 25, 35 2, 15, We expect that about 12, sq m of quality office premises will be commissioned by the end of. No substantial rise in rental rates at new modern business centers may be forecast against such a strong commissioning rate of quality office property. The forecast amount of acquisition in combination with expected commissioning of new office centers will result in an increase in the share of vacant spaces in the market in general by 2 3 p.p % 2% 58% 1, 5, Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Vacancy rate volume, Class Vacancy rate, Class Vacancy rate volume, Class Vacancy rate, Class Q1 Q2 Q Source: Knight Frank St. Petersburg Research, Dynamics of rental rate changes for А and В class office premises in Q3 29 Q3, $/sq m/year (VT excluded, operating expenses included) Oil / Gas / Raw Materials IT / Telecommunication Construction / Development / Engineering Manufacturing anks and Finance Companies Vendors, Distributors / Retail Health and eauty / Tourism Logistics Education / R&D Institutes Public uthorities / Consulates Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q1 Q2 Q3 213 Other Class А Class Source: Knight Frank St. Petersburg Research, Source: Knight Frank St. Petersburg Research, 4

5 usiness district Vacancy Moskovsky ve 26% Central - 2 2% Embankments with Views 1 Petrogradsky 6% dmiralteysky 6% Central - 1 5% Obvodny North-Western Eastern South-Western South-Eastern Vasileostrovsky - 1 Vasileostrovsky - 2 1% North-Eastern 1% Map of St. Petersburg business districts 1. Central Central dmiralteysky 4. Petrogradsky 5. Vasileostrovsky Vasileostrovsky Embankments with Views 8. Moskovsky ve 9. South-Western 1. South-Eastern 11. Eastern 12. North-Eastern 13. North-Western 14. Obvodny Source: Knight Frank St. Petersburg Recearch, Source: Knight Frank St. Petersburg Research, Key business centers expected to be commissioned by the end of (over 5, sq m) Declared year of Rentable area of Class commissioning office premises, sq m Project Name ddress Trinity Place 22 dmirala Lazareva Emb 27 Flandria Plot 1, Tashkentskaya St Expoforum Convention and Exhibition Center Shushary, Peterburgskoye Hwy 2 No name Plot 1, Varshavskaya St 21 7 Zeppelin 6 Startovaya St Senator 6/129 - А, Moskovsky ve 95 Passage/Italyanskaya Italyanskaya St 7 Senator Kropotkina 1 Kropotkina St 6 7 Gardner Center 28 olshoy Sampsonievsky ve 21 2 Golden Tulip Hospitality Group 5-3 Kievskaya St 17 Victoria Plaza 2- Pobedy Sq 15 Luch 7 Metallistov ve 13 3 Marx 29 Izmaylovsky ve 11 4 Lakhta 4-K Optikov St 1 3 Melnik 1-K Melnichnaya St 1 No name 8-1- Sofiyskaya St SOV 22 Marshala Tukhachevskogo St 9 No name Plot 1, Kushelevskaya Rd 8 88 Formida Plot 1, Utkin ve 7 94 H2O 28 Khimikov St 6 85 Na Tsarskoselskikh Kholmakh Shushary Village, Pulkovskoye Hwy Source: Knight Frank St. Petersburg 5

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