COMMERCIAL REAL ESTATE RUSSIA # MARKETBEAT. Cushman & Wakefield Research Q4 2015

Transcription

1 COMMERCIAL REAL ESTATE RUSSIA # MARKETBEAT Cushman & Wakefield Research Q4 2015

2 CONTENTS SECTION 1 OUTLOOK SECTION 2 COMMERCIAL REAL ESTATE SECTION 3 APPENDIX SECTION 4 OUR TEAM Major economic trends of current period, market review and forecast Macroeconomic and analytic review of various commercial real estate market sectors Major indicators of Moscow commercial real estate market, standard commercial lease terms Information about Cushman & Wakefield in Russia, Research department contact details 05 Macroreview 11 Capital markets 19 Office 30 Retail 41 Warehouse & industrial 58 Market Indicators 60 Lease terms #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 2 #MARKETBEAT Q4 2015

3 RENTAL RATES WILL HIT THE BOTTOM IN 2016 OUTLOOK 2016 will be difficult year for both landlords and tenants. Landlords will focus on minimizing losses. Utilization of vacant commercial space will require creative approach. Retail real estate will be the first to demonstrate signs of recovery. Real estate indicators will show lowest values in Q1-Q In this period we expect diminishing business activity in financial sector and consumer markets. By mid year retail sales may stabilize and consumers will adapt to drop in income. Retail rents will consolidate and may start recovering in the second half of the year. Office rents will remain low. We will see less rents nominated in foreign currency. Investment activity will remain on the same level with We expect volume of investment transactions at 2 bn USD. Investors will be looking for assets with predictable and sustainable cash flow. CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 3 #MARKETBEAT Q4 2015

4 REGULATION IN 2016 RUSSIA WILL FACE BUDGET DEFICIT 2.36 bn RUB (17% of revenue) budget deficit will be compensated from sovereign wealth fund. If oil price will be below 40 USD/barrel deficit will reach 5% of GDP. 1.3% Of cadastral value PROPERTY TAX RATE IN % Of GDP WILL BE BUDGET DEFICIT IN 2016 AT OIL PRICE AT 50 USD/BARRELL In spite of the very high popularity of the political course of the federal government, in 2016 we will see more local conflicts between different elite groups. Also there will be a number of local protest outbursts. Population will adapt to new reality by returning back to the old-fashioned consumer model (spending focused on food and immediate needs). However in bigger cities urban post-industrial culture emerged in previous years will remain strong. As the result we will see consumer behavior split between conservative approach (street markets, discounters, etc.) and modern culture (cafeterias, designer shops, etc.). However both groups will experience drop in income. Unemployment rate will remain low because since 2009 public sector became major employer. In Russia public sector prefers to cut salaries in order to keep jobs. Sanctions will be still a major threat for the Russian economy. Non tariff trade restrictions will not only affect imports of consumer goods, but also imports of technologies and equipment which is crucial for domestic production and imports substitution. The government will continue attempts to facilitate development through infrastructure projects and state programs. However this will be restricted by the lack of credit resources. As the result lobbying groups will compete for financing by offering more and more ambitious projects with questionable financial models. In real estate in coming years there will be large scale project with state participation and strong social function. While economy is shrinking the government regulation will become major factor for real estate business. #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 4

5 MACRO FORECAST BUDGET DEFICIT (% of GDP) % -3.7% -3.1% -1.4% RUB/USD EXCHANGE RATE MACROREVIEW PERSONAL CONSUMPTION % -0.9% 1.2% 2.2% Economy Recession will last until Consumer demand will be shrinking due to decrease in disposable income and imports restrictions. GDP GROWTH % -0.9% 1.1% 1.8% CPI % 7.5% 5.6% 5.2% REAL WAGES % 1.2% 3.5% 3.6% Source: Rosstat, Oxford Economics CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 5 #MARKETBEAT Q4 2015

6 SUMMARY CONSUMER MARKET CORPORATE MACRO SUMMARY IN 2016 ECONOMY WILL CONTINUE CONTRACTION 0% Average annual GDP growth outlook FOR % CPI IN 2015 Until 2018 the economy is expected to perform poorly. RUB will be weak. Economy isolation will restrict international trade and prevent Russia from integration into the world markets. Real estate will be under pressure from weak demand and lack of credit resources. GDP GROWTH 5,2% 4,5% 4,3% 3,4% 1,3% 0,6% -3,3% 0,7% -0,9% -3,8% 2,3% 2,4% 1,1% GDP Growth Рост ВВП, % 1,8% 2,0% 18% 16% 14% 12% 10% 8% After extreme RUB devaluation in 2015 inflation jumped up to 15%. In 2016 and on the government will try to put it under control. It may use also non fiscal measures like price control and foreign currency exchange restrictions. As the result b2b inflation may exceed consumer inflation. INFLATION CPI ИПЦ, % Oxford Economics 15/12/2015 Base case forecast Базовый прогноз, % -7,8% Base case forecast Базовый прогноз, % Oxford Economics 15/12/2015 6% F2015 F2016 F2017 F2018 F2019 4% F2015 F2016 F2017 F2018 #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 6

7 SUMMARY CONSUMER MARKET CORPORATE CONSUMER MARKET CONSUMER DEMAND IS SHRINKING AND RESHAPING For the first time in modern history Russia will experience contraction of consumer demand for two years in a row. 6 Years TO RETURN TO 2014 CONSUMPTION VOLUMES 16 Thousand RUB per month PER CAPITA RETAIL TRADE TURNOVER CONSUMER DEMAND Disposable income Раcполагаемые доходы 13,7% Retail trade Оборот розничной торговли 6,5% 7,1% 6,3% 3,9% 2,5% 1,2% 2,2% -0,9% -5,1% -9,7% F2015 F2016 F2017 F2018 End of Q will be turning point for retailers. New Year sales are supposed to help them to improve performance in However in January 2016 this resource will be exhausted. Consumers will have to pay back debts, income is seasonally low in January. Retailers will prepare themselves for long winter optimizing stocks, personnel and stores. Non food retail may start recovering in the second half of 2016, however this will be very slow recovery. Even the most optimistic forecasts predict retail trade growth at a rate less than 3% in 2017 and on. Which means that Russia may return to 2014 consumption volumes only by #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 7

8 SUMMARY CONSUMER MARKET CORPORATE CONSUMER MARKET URBAN CULTURE IS SUPPORTING MODERN RETAIL BUSINESS During last 10 years consumer market had been transformed radically. Even now in spite of the decrease in income many consumers in bigger cities will be holding on their consumption patterns. 6% In Moscow IS SPENT ON DINING OUT 23% In Moscow IS SPENT ON FOOD CONSUMPTION STRUCTURE IN MOSCOW 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Food Продукты Alcohol Алкоголь Dining out Питание вне дома Non Food ТНП Services I Услуги 0% Over last 10 years spending on food decreased significantly in bigger cities. While non food spending remain relatively stable there was extraordinary increase in services and dining out. The share of services had doubled over the last decade and dining out increased 6 fold, starting from 1% in 2000 to 6% in Even in 2009 Muscovites tried not to save on restaurants. It means that dining out for urban citizens became culturally important. In 2016 these consumers will be likely to sacrifice non food consumption in order to keep with their habits. #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 8

9 SUMMARY CONSUMER MARKET CORPORATE CREDIT MARKET CONSUMER CREDIT SLOWS DOWN. OVERDUE DEBT IS GROWING Share of overdue debt is growing even while total debt is shrinking. It means that households without financial problems are trying to repay debts while other household sink deeper into financial hole. 15.8% Average interest rate FOR LOANS OVER 1 YEAR In 2015 households were repaying debts and their overall credit load had decreased. However growing share of overdue debts suggests that quality of bank portfolios is decreasing. Overdue debts now account for 8% of total indebtedness. CONSUMER CREDITS IN RUSSIA Savings tend to increase mainly due to the large share of savings in foreign currencies that with each devaluation round gain in RUB value. December-January data will be very important - it will show how households are going to handle fall in income either by withdrawing savings or increasing debt. 170 THOUSAND RUB AVERAGE HOUSEHOLD DEBT Household debt m-o-m change 2,0% 1,5% 1,0% 0,5% 0,0% -0,5% -1,0% Total debt Share of overdue debt -1,5% #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT Personal savings, bn RUR Накопления, млрд. руб. Total Debt, bn RUB Задолженность, млрд. руб. 9% 8% 7% 6% 5% 4% 3%

10 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 SUMMARY CONSUMER MARKET CORPORATE CREDITS CONSTRUCTION IS SHORT OF FINANCING 16% Of construction debt IS OVERDUE 4.5% Of construction ARE NOMINATED IN FOREIGN CURRENCY In 2015 nominal corporate debt in RUB remained almost unchanged since the end of However with account of inflation real credit volumes decreased. Construction sector was the one that underperformed in comparison to other industries. Its share fell from 6.8% in 2014 to 5.8% by the end of CORPORATE AND CONSTRUCTION DEBT loans 5,0% Total Corporate debt (bn RUR) Все кредиты, млрд.руб Share of debt for construction Доля кредитов на строительство, % 7,0% 6,8% 6,6% 6,4% 6,2% 6,0% 5,8% 5,6% 5,4% 5,2% Generally overdue debt rate remains low slightly over 6%. Construction is the most risky business for banks with the rate of overdue debts over 16%. Notable underperformance of construction had started since spring 2014 and most likely is driven by the Olympic construction debt. OVERDUE DEBT 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% % of overdue debt Общая доля просроченных кредитов, % Overdue debt in construction Просроченные кредиты на строительство #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 10

11 ACTUAL INVESTMENT VOLUMES US$ bn CAPITAL MARKETS In 2015, the total volume invested in the Russian commercial real estate was US$ 2.8 bn. We believe the bottom will be reached soon and expect just US$ 2.8 bn of investments by the end of 2016 one of the lowest values for the past eleven years. EXPECTED TOTAL INVESTMENTS US$ bn PRIME CAPITALIZATION RATES OFFICES Q Q % 10.50% (-0.5 pp) SHOPPING CENTERS Q Q % 11.00% WAREHOUSES Q Q % 12.75% (-0.25 pp) Source: Cushman & Wakefield #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 11

12 INVESTMENT VOLUMES CAPITALIZATION RATES STRUCTURE OFFICES RETAIL WAREHOUSES DEALS INVESTMENT VOLUME 2016 FORECAST ONE OF THE LOWEST INVESTED VOLUMES FOR ELEVEN YEARS The bottom promises to be reached soon and a welcome revival may be at the end of 2016 the beginning of US$ bn 2016 FORECAST INVESTED VOLUMES, US$ MN OFFICE RETAIL INDUSTRIAL OTHER FORECAST In 2015, the total volume invested in the Russian commercial real estate was US$ 2.8 bn. The number was significantly less comparing to both 2014 (US$ 4.3 bn) and average for the last five years (US$ 6.3 bn). Almost double decrease ( 46%) of investments in the office segment is registered (US$ 1.2 bn). On top of that the hospitality and leisure segment was moderately interesting for investors (US$ 0.3 bn, 71%). At the same time both retail and industrial segments attracted more than in 2014 US$ 731 mn (+14%) and US$ 584 mn (+61%), accordingly. In 2016, we forecast US$ 2.8 bn of investments. It promises to be the record low value for the last eleven years. We believe the bottom will be soon and expect a revival at the end of 2016 the beginning of #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 12

13 INVESTMENT VOLUMES CAPITALIZATION RATES STRUCTURE OFFICES RETAIL WAREHOUSES DEALS CAPITALIZATION RATES A SMALL DECREASE OF CAPITALIZATION RATES IN OFFICE AND WAREHOUSE SEGMENTS 10.5% CAPITALIZATION RATE FOR OFFICE OBJECTS In Q4 2015, capitalization rates decreased for offices (10.50%, 0.50 p.p.) and warehouse objects (12.75%, 0.25 p.p.). At the same time prime retail capitalization rate keeps stable (11.00%). All the indicated capitalization rates are applicable to the objects with dollar cash-flow. We believe the tenants pressure will keep popping more and more objects into ruble zone. CAPITALIZATION RATES, % In December 2015, the Central Bank of the Russian Federation decided to keep the key rate at 11.00% per annum. The regulatory authority will revise the key rate as inflation slows down. The previous change took place in August 2015 the key rate was decreased from 11.50% to 11.00%. CBR KEY RATE, CBR REFINANCING RATE, % 16% 18% 11.0% CBR KEY RATE 14% 12% 10% 8% 6% 4% 16% 14% 12% 10% 8% 6% 4% 2% 0% Q1 Q2 Q3 Q4 2% 0% 11,00% 10,00% 13,00% 8,75% 7,75% 8,00% 8,25% 8,25% 17,00% 11,00% 11,00% 11,50% 14,00% Q1 Q2 Q3 Q OFFICES SHOPPING CENTERS WAREHOUSES CBR REFINANCING RATE CBR KEY RATE #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 13

14 INVESTMENT VOLUMES CAPITALIZATION RATES STRUCTURE OFFICES RETAIL WAREHOUSES DEALS INVESTMENT VOLUME BY ORIGIN FOREIGN INVESTMENTS ONE THIRD OF THE TOTAL INVESTMENT VOLUME The opposite changes of shares of domestic ( 44%) and foreign (+9%) investments in total volume are registered. 30% SHARE OF FOREIGN INVESTMENTS INVESTED VOLUMES, US$ MN % % % % % % % % 0 0% RUSSIA ASIA EUROPE NORTH AMERICA SHARE OF FOREIGN INVESTMENT Based on results of 2015 the share of foreign investments is still high 30%. In fact, the share varies from just 4% for retail segment to almost half (47%) for office one. The share is comparable to those in period. The European investors were the most active during the year. They spent US$ 644 mn (23%), that is much more than their average share in the last quinquennium. The American companies excluding Hines (US$ 180 mn, 6%) abstained from investing. The Asian investors confirmed their potential interest in investing in the Russian commercial real estate but spent just US$ 24 mn (1%). #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 14

15 INVESTMENT VOLUMES CAPITALIZATION RATES STRUCTURE OFFICES RETAIL WAREHOUSES DEALS OFFICES TRIPLE FALL OF DOMESTIC INVESTMENTS Almost half a money attracted by the office segment was invested by foreign companies. 1,198 US$ mn INVESTED VOLUME INVESTED VOLUMES, US$ MN Just US$ 1,198 mn (42% of the total volume) were invested in the office segment in The number shows the fall of investment volume comparing to both 2014 ( 46%) and average for the period ( 61%). The fall caused by triple decrease of domestic investments. At the same time foreign companies spent US$ 238 mn more (+74%). Comparable amounts US$ 637 mn and US$ 561 mn were spent by domestic and foreign investors, accordingly, unlike 2014 and the last quinquennium. The return of North-American money is remarkable RUSSIA ASIA EUROPE NORTH AMERICA #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 15

16 INVESTMENT VOLUMES CAPITALIZATION RATES STRUCTURE OFFICES RETAIL WAREHOUSES DEALS RETAIL RETAIL SEGMENT ALMOST NOT INTERESTING FOR FOREIGN INVESTORS Foreign investors spent moderate money during the second year at a run. 731 US$ mn INVESTED VOLUME INVESTED VOLUMES, US$ MN In 2015, the retail segment attracted US$ 731 mn one fourth of the total investment volume and 57% less than the average value for the last five years. While domestic investors spent slightly more comparing to Devaluation and common negative economic situation significantly affected Russian shoppers. 85% of them preferred not spending money for clothes, footwear, electronics but saving it. As a result the shake-up of tenants in a shopping center and vacancy rate staying high scare a potential investor making them to be prudent and wait. On the other hand under circumstances owner have undercharge their assets when selling. During the year foreign investors were almost not interested in Russian retail properties and spent 25 times less than the average value for the last quinquennium. RUSSIA ASIA EUROPE NORTH AMERICA #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 16

17 INVESTMENT VOLUMES CAPITALIZATION RATES STRUCTURE OFFICES RETAIL WAREHOUSES DEALS WAREHOUSES BRIGHT RETURN OF EUROPEAN MONEY The domestic investments were almost unchanged unlike the foreign ones increased seven times. 584 US$ mn INVESTED VOLUME INVESTED VOLUMES, US$ MN The warehouse segment of the Russian real estate attracted US$ 583 mn (one fifth of the total amount). The number is less than average for the last five years but 61% more than in On top of that, European companies returned to the market and spent almost seven times more than in All the foreign companies investments were US$ 100 mn more than average for the last five year. Experts believe the prices reached the bottom. Expected growth of prices make the current moment ideal for investors following their long-term strategies to enter the market. Half a volume (51%) was spent by domestic (US$ 91 mn) and foreign (US$ 205 mn) retailers. Retailers spent money for both owner occupation and investment purposes. Money was invested neither by Asian nor American companies. RUSSIA ASIA EUROPE NORTH AMERICA #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 17

18 INVESTMENT VOLUMES CAPITALIZATION RATES STRUCTURE OFFICES RETAIL WAREHOUSE DEALS THE BIGGEST DEALS US$ 100+ MN DEALS 59% OF TOTAL VOLUME 282 US$ mn THE BIGGEST DEAL SEGMENT QUARTER PROPERTY INVESTOR AMOUNT OFFICES Q4 ORUZHEYNY MEGAFON 282 OFFICES Q1 HERMITAGE PLAZA EASTERN PROPERTY HOLDINGS 195 OFFICES Q3 METROPOLIS C PPF GROUP / HINES 190 OFFICES Q1 METROPOLIS A PPF GROUP / HINES 170 RETAIL Q3 MODNYY SEZON KOMPLEKSNYE INVESTITSII 250 RETAIL Q4 RIGA MALL MELNICHENKO, VLADIMIR 125 RETAIL Q4 TSUM ARKADA KHOLDING 70 RETAIL Q2 OLIMP MAJOR 42 WAREHOUSES Q2 PNK CHEKHOV BIN GROUP > 200 WAREHOUSES Q1 SOUTH GATE LEROY MERLIN 110 WAREHOUSES Q3 PNK CHEKHOV 2 ADIDAS 95 WAREHOUSES Q1 PNK BEKASOVO DETSKIY MIR 71 НОТЕLS Q4 FOUR SEASONS HOTEL MOSCOW KOMPLEKSNYE INVESTICII 120 НОТЕLS Q4 SHERATON PALACE MOSCOW BIN GROUP 100 #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 18

19 OFFICES SHARE OF VACANT OFFICE SPACES 15.9 mn sq m TOTAL STOCK 3.1 mn sq m VACANT OFFICES 19.6 VACANCY RATE % Office market continues to suffer from negative economic factors starting from Q As a result by the end of 2015 the market experienced the strongest decline in the history. CONSTRUCTION 721,000 NET ABSORBTION 87,000 SQ M SQ M RENTAL RATES CLASS A CLASS B CLASS A&B $549 $282 $358 TAKE-UP 1.25 mn Source: Cushman & Wakefield SQ M #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 19

20 Thousands sq m SUMMARY ABSORPTION DEMAND NEW SUPPLY AVAILABILITY EXPOSITION RENTAL RATES ABSORPTION MINOR ABSORPTION IN 2015 Slightly increased demand for new quality offices in the second half of 2015 compensated negative absorption trend observed in the two first quarters of the year. ABSORPTION AND NEW CONSTRUCTION Despite negative values in the first and second quarters, 2015 net absorption* volume has returned to positive value comprising sq m in total. While absorption in class A is positive, class B figure is in the negative zone. Yearly absorption figures were sq m in class A against sq m in class B. ** Net absorption represents the change in the occupied stock within a market during the period. Calculation: X Y = Net Absorption. X = Current stock current vacancy Y = Previous stock (same quarter, previous year) previous vacancy (same quarter, previous year) New Supply Absorption #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 20

21 SUMMARY ABSORPTION DEMAND NEW SUPPLY AVAILABILITY EXPOSITION RENTAL RATES DEMAND TAKE-UP VOLUME SAME AS ,587 1, AVERAGE DEAL SIZE = 625 SQ M new lease deals mn sq m TAKE UP VOLUME. SAME AS 2014 DEMAND ALLOCATION MAJOR DEALS IN 2015 Downtown 18% Central 45% OTA 37% COMPANY AREA PROPERTY CLASS / SUBMARKET Transneft 79,053 sq m Evolution Tower A / Central Megafon 49,300 sq m Oruzheyny A / Central Government of Moscow Region 31,860 sq m Orbita B+/ OTA Adidas 20,045 sq m Krylatsky Hills A / OTA Yamal SPG 16,630 sq m Algoritm B+ / OTA Avtodor 12,278 sq m Pushkinsky Dom A / Downtown #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 21

22 Thousands sq m SUMMARY ABSORPTION DEMAND NEW SUPPLY AVAILABILITY EXPOSITION RENTAL RATES NEW SUPPLY SIGNIFICANT DECREASE IN CONSTRUCTION ACTIVITY New construction volume will remain low for upcoming two or three years. NEW CONSTRUCTION BY CLASSES f In 2015, 721,000 sq m were added to the market. This represents a half of new construction in Around one million sq m of quality offices are currently approaching completion, but only a handful is expected to be commissioned in Annual new construction volume in 2016 expected to reach around 300,000 sq m. The majority of planned developments as well as those at early stages of construction are either frozen or being conceptually re-considered. Overall construction activity is down due to challenging economic conditions and weakened leasing appetite of the market. Construction completion delays may exceed 2 years as anticipated deliveries of 2015 have been postponed to Class A Class B (B+&B-) #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 22

23 Thousands sq m SUMMARY ABSORPTION DEMAND NEW SUPPLY AVAILABILITY EXPOSITION RENTAL RATES AVAILABILITY EVERY FIFTH SQUARE METER OF THE EXISTING OFFICES IS VACANT 19.6 % VACANCY RATE AT THE END OF mn sq m EXISTING AVAILABILITY Vacancy rate on the Moscow office market is increasing every month starting from mid By the end of 2015 average level for quality office space rose up to almost 20%. It is the first time in history when the Moscow office market faces such high vacancy rate. VACANCY RATES 35% 30% 25% 20% 15% 10% 5% 0% 32,0% 14,4% Class A Class B (B+&B-) Considering low level of new construction we don t expect significant increase in vacancy volume next year. Average vacancy rate for the upcoming 2-3 years will remain stably high at the current level of around 20%. VACANT PREMISES Class A Class B (B+&B-) #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 23

24 SUMMARY ABSORPTION DEMAND NEW SUPPLY AVAILABILITY EXPOSITION RENTAL RATES EXPOSITION SOME PREMISES HAVE BEEN VACANT FOR 3 YEARS AND MORE ,5% % 18% % ,09% 12,48% 13,14% 14% ,29% 317 7,00% ,68% 4,17% 2,81% 1,95% Vacancies Exposition period, days Vacancy rate, % 12% 10% 8% 6% 4% 2% 0% #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 24

25 SUMMARY ABSORPTION DEMAND NEW SUPPLY AVAILABILITY EXPOSITION RENTAL RATES RENTAL RATES DEDOLLARIZATION USD Triple net OpEx+VAT US CPI indexation All inclusive Russian CPI ~ 12.5% Lease RUB USD at fixed rate Discount Exchange risk management Corridor RUB rate reverted to USD after fixed period Splits risk between landlord and tenant Splits risk over time Source: Cushman & Wakefield #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 25

26 SUMMARY ABSORPTION DEMAND NEW SUPPLY AVAILABILITY EXPOSITION RENTAL RATES RENTAL RATES RENTAL RATES IN US DOLLARS EQUIVALENT ARE AT HISTORICALLY LOW LEVEL 75 % SHARE OF RUSSIAN ROUBLE DEALS In Q rental rates in dollar equivalent showed the historically lowest figures. Both rouble and dollar rates dropped down. Due to the weakening rouble, rates quoted in dollars are dropping faster than those quoted in roubles. RENTAL RATES IN US DOLLARS VALUE $1 200 $1 000 $800 $600 $400 $200 $- $282 $549 RENTAL RATES IN RUSSIAN ROUBLES VALUE rub rub rub rub rub rub rub rub. - rub rub rub. Class A Class B (B+&B-) Class A Class B (B+&B-) #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 26

27 SUMMARY ABSORPTION DEMAND NEW SUPPLY AVAILABILITY EXPOSITION RENTAL RATES DOLLARS VS ROUBLES IS ROUBLE RENT OUR NEW REALITY? RENTAL USD per sq m per annum RENTAL RATE IN USD LEASE CONTRACTS IN CLASS A PROPERTIES RATE IN RUB LEASE CONTRACTS IN CLASS B RUB per sq m per PROPERTIES annum CLASS A CLASS B 15% 36% 64% 85% RUB per sq m per annum - average rental rate for class A rouble deals $565 per sq m per annum - average rental rate for class B US dollar deals #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 27

28 Rental rate, USD/sq m $2 000 $1 800 $1 600 $ DEALS Moscow office lease deals by rent and transaction date bubble size reflects deal size ( = sq m) Class B / Класс B Class A / Класс А $1 200 $1 000 $800 $600 $400 $200 $0 Deal date #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 28

29 $1 300 CLASS A CLASS B+ MKAD Log. (CLASS A) Log. (CLASS B+) Log. (CLASS B- and C) Quality premium $500 $700 $900 MOSCOW CITY $1 100 CLASS B- and C $300 $100 Rental rate USD/sq.m (3 year average) MOSCOW OFFICE MARKET LOCATION AND QUALITY PREMIUMS CBD 0 #MARKETBEAT Q Distance from city center, km CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 29

30 RETAIL 2016 trends: construction volumes are comparable to 2015, vacancy rate in prime shopping centres will remain low, new shopping centres will have soft openings, favorable rental terms will support retailers activity Source: Cushman & Wakefield Research 2 % VACANCY RATE (selected shopping centers *, Moscow) 2500 PRIME RENTAL RATE INDICATOR (prime shopping center retail gallery, Moscow) 18.4 US$ mn sq m TOTAL QUALITY STOCK, RUSSIA (Quality shopping malls, mixed-use buildings, outlets, and retail parks) 456 QUALITY PROJECTS TOTAL QUALITY STOCK, RUSSIA (Quality shopping malls, mixed-use buildings, outlets, and retail parks) * Cushman & Wakefield quarterly monitoring of 9 selected quality shopping centres (total GLA 0,5 sq m). The monitoring has been conducted since #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 30

31 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS SUMMARY NEW REALITY ON THE RETAIL MARKET FROM ACTIVE GROWTH TO FINE TUNING In the mid-term unique properties providing comfort social space additionally to traditional scope of goods and services will be the most demanded and successful on the market. Construction volume decreased in comparison to the record values in New approaches are used in lease term structures. Moderate activity is registered on the market. The retail market has passed through noticeable structural changes in The current new reality is formed by two main factors changing economical and political situation in the country and maturity of the market. The market has experienced active development - quality retail supply has grown by almost two times for the past five years with appreciable competition as a result. Currently we move from active growth to fine tuning, from largescale projects with standard concepts to middle and small-scale schemes with well thought-out commercial and social functions providing unique experience helping to single out the project and attracting potential customers. The essential point of the on-going changes is that tenants and owners are in the constant process of negotiations. Actually the market was switched to the manual managing process. Every aspect is negotiated individually discounts, new commercial terms, space optimization and relocation. The most popular payment scheme are percentage of turnover or compound rent, which also includes a minimum fixed payment. Due to the unstable economic situation, consumer behavior has changed and people prefer to save money now goods with lower prices are of high priority, people cut spending on particular types of goods. As for the retailers, they are looking for new approaches, formats, ways of communication with customers and are trying to support the demand. #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 31

32 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS RETAILERS RETAILERS EXPERIMENT WITH FORMATS. NEW RUSSIAN BRANDS ARE ON THE MARKET In 2015 the majority of the retailers followed the strategy of business optimization and reorganization. Retailers announce new openings, but follow conservative strategy. NEW ENTRANTS LEFT THE MARKET During the first half of the year the market was characterized by suspension of expansion programs. Retailers were busy with renegotiation of the current commercial terms and business optimization process. By the mid-year announcements of new openings resumed. Looking for new opportunities to attract customers on the changing market retailers experimented with new forms and formats - X5 Retail Group plans to open newspaper kiosks inside Pyaterochka supermarkets and announced opening of economy class cafes in Karusel hypermarkets, Ginza Project holding invested in the new format of fast food catering chain of food trucks under GinzaTruck brand, Melon Fashion Group will develop befree fashion brand in the format of fashionhypermarket. Retail operators follow conservative strategy planning expansion they choose the projects with established target audience and stable footfall. Nevertheless, new shops keep opening. Several retail chains announced the entrance to the market in Among them there were new Russian brands (Mast, Brosco Jewelry, Ферма.рф, Это у нас семейное, Goood s House, Take away) as well as new international chains (John Varvatos, Tallinder, Rokkie, Euroshop). New formats of Auchan (Kazhdy den ), Atak (V shage ot vas), Metro Cash&Carry (Fasol) continue expansion. Food retailers (X5, Magnit, Auchan, Metro Cash & Carry) as well as retailers of other categories (Detskiy mir, KupiVIP, Intersport) and luxury brands (Furla, Hugo Boss) announce their expansion plans in #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 32

33 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS SHOPPING CENTRES. RUSSIA 23 SHOPPING CENTRES WERE OPENED IN Q IN RUSSIA Construction activity was high in Comparable construction volumes are expected in mn sq m QUALITY RETAIL SPACE IN SHOPPING CENTRES NEW CONSTRUCTION IN RUSSIA, 000 SQ M 48 shopping centres, with total GLA of 1,723,727 sq m were opened in 34 Russian cities in The quantity of the shopping centres corresponds to the last years average. Total GLA of new shopping centres delivered to the market in Q4 is around 1,5 times higher than in the period of Q1- Q The majority of the shopping centres which were announced to be opened in Q did open on schedule - the developers are traditionally aimed at opening of shopping centres before the New Year holidays. The shopping centres had soft openings during the year 2015 (launch of anchor tenants and low occupancy rate of the retail gallery). We expect this trend to continue in Despite the fact that in 2016 construction volumes will remain at the same level as in 2015, we forecast the decline in construction volumes starting from #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 33

34 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS SHOPPING CENTRES. RUSSIA SHOPPING CENTRES DELIVERED TO THE MARKET IN 2015 The table and the graph include all quality projects completed in 2015 (excluding Moscow and Moscow region projects, which are presented on another slide). NEW CONSTRUCTION IN THE REGIONS OF RUSSIA, 000 SQ M LOCATION PROPERTY NAME RETAIL GLA, SQ M DELIVERY Perm SpeshiLove 43,700 Q Izhevsk Italmas 40,000 Q Tumen Ostrov 30,000 Q Murmansk Murmansk Mall 45,000 Q Ekaterinburg Maksidom (phase 1) 28,000 Q Magnitogorsk Tetris 22,000 Q Barnaul Volna 18,000 Q Ozersk Festival 15,000 Q Saratov Tay Gallery 44,000 Q Orel MegaGRINN (phase 3) 37,000 Q Tver RIO 20,000 Q Vladikavkaz Alaniya Mall 20,000 Q Smolensk Galaktika (phase 2) 15,800 Q St. Petersburg Au Pont Rouge (Y krasnogo mosta) 11,200 Q Krasnoyarsk Galereya Enisey (phase 1) 9,000 Q Chita Novocity (phase 1) 8,500 Q Rostov-On-Don Megacentr Gorizont (phase 2) 5,000 Q Ulan-Ude Pioner (phase 2) 3,500 Q Chelyabinsk Almaz 85,000 Q Tula Maxi 85,000 Q Nizhnyi Novgorod Zhar-Ptitsa 75,000 Q Nakhodka Nakhodka Mega 72,000 Q Nizhnyi Novgorod Nebo 69,650 Q Irkutsk Silver Mall 53,000 Q Bryansk Aero Park (phase 2) 40,000 Q Ekaterinburg Passage 38,000 Q Saransk City Park 35,000 Q St. Petersburg Piter-Raduga (phase 2) 32,000 Q Velykyi Novgorod Marmelad 30,300 Q Magnitogorsk Semeynyi Park 30,000 Q Kostroma Gallery (Phase 1) 22,000 Q Orenburg Voskhod (phase 2) 21,600 Q Gatchina Cubus 19,900 Q St. Petersburg Outlet Village Pulkovo 15,400 Q Novosibirsk Lukse 3,000 Q Total GLA Russia (without Moscow and Moscow region), ,142,550 #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 34

35 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS SHOPPING CENTRES. RUSSIA SHOPPING CENTRES PLANNED FOR THE DELIVERY TO THE MARKET IN 2016 The table includes the largest (GLA 40,000 + sq. m ) projects announced for delivery by the end of 2016 in Russia. The table excludes Moscow and Moscow region projects, which are presented on another slide. LOCATION PROPERTY NAME RETAIL GLA, SQ M DELIVERY Kursk MegaGRINN Q Vladivostok Sedanka-City Q Novosibirsk Evropeyskiy Q Samara Good'Ok Q St. Petersburg Okhta Mall Q Lipetsk Riviera Q Voronezh Chizhov Gallery (phase 3) Q Tumen Star City Mall Q Orenburg Armada Capital Q Arkhangelsk Maxi Q Nizhny Tagil Retail Park Depo Q Kursk Evropa (phase 2) Q Barnaul Galaktika Q Ekaterinburg Greenvich (phase 5) Q In 2016 we expect construction volumes to remain at the level of The reason for this is that construction of the projects that are planned to be opened in 2016 was started before crisis and currently the projects are on the final stage of construction. Only several projects have been recently announced by the developers, so construction volumes decline can be expected after Total GLA Russia (without Moscow and Moscow region), Announced development plans ,875,308 #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 35

36 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS SHOPPING CENTRES. MOSCOW AND MOSCOW REGION 4 SHOPPING CENTRES WERE OPENED IN MOSCOW IN Q New shopping centers continue to open with high vacancy rate 4.7 mn sq m QUALITY RETAIL SPACE IN SHOPPING CENTRES NEW CONSTRUCTION IN MOSCOW AND MOSCOW REGION, 000 SQ M 9 shopping centres, with total GLA of 526,000 sq m were opened in Moscow in The largest shopping center opened in Russia in 2015 was Columbus (GLA 136,000 sq m). Also the opening of Zelenopark shopping centre (GLA 110,000 sq m) was one of the most significant events. It is planned to launch a new food-court concept in the mall food-parking Basquiata. Despite the low occupancy of the new shopping centres, construction activity remains high in Moscow and in the Moscow region. We expect construction volumes in 2016 to be at the same level as in Several large-scale projects (with GLA of more than 40,000 sq m) are announced to be delivered in 2016: MoreMall Moscow, Polezhaevskaya, Riviera, Butovo Mall and the second phase of Metropolis shopping centre. All of the projects are on the final stage of construction. Some large shopping centres are also excepted to be opened in the Moscow region. #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 36

37 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS SHOPPING CENTRES. MOSCOW AND MOSCOW REGION SHOPPING CENTRES DELIVERED TO THE MARKET IN PIPELINE FOR 2016 The table includes all quality projects completed in 2015 and selected projects planned for delivery in LOCATION PROPERTY NAME RETAIL GLA, SQ M DELIVERY LOCATION PROPERTY NAME RETAIL GLA, SQ M DELIVERY Moscow Columbus 136,000 Q Moscow Kuntsevo Plaza 65,000 Q Moscow Centralnyi Detskiy Magazin 34,000 Q Moscow Mari 50,000 Q Moscow Klen 21,000 Q Moscow Zelenopark 110,000 Q Moscow RIO Kievskoe highway 45,000 Q Moscow Avenue South-West 40,000 Q Moscow Kalita 22,000 Q Total GLA Moscow, ,000 Krasnogorsk June (Phase 2) 13,000 Q Odintsovo Atlas 15,000 Q Lyubertsy Vykhodnoi 27,177 Q Total GLA Moscow Region, ,177 Москва Riviera 100,000 Q Москва MoreMall Moskva 60,000 Q Москва Butovo Mall 57,000 Q Москва Polezhaevskaya 50,000 Q Москва Kosino Park 39,000 Q Москва Metropolis (phase 2) 40,000 Q Москва Proletarskiy 14,877 Q Москва Fashion House Outlet (Phase 2) 4,500 Q Total GLA Moscow, ,235 Zhukovsky Torgovy Park 1 45,488 Q Balashikha Vostochniy veter 10,000 Q Krasnogorsk Riga Mall 80,000 Q Mytischi 4Daily 25,000 Q Pushkino Pushkinskiy 32,000 Q Vidnoe Retail park Vidnoe 30,000 Q Total GLA Moscow Region, ,488 Total GLA Moscow and Moscow Region, ,177 Total GLA Moscow and Moscow Region, ,723 #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 37

38 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS SHOPPING CENTRES. MOSCOW SHOPPING CENTRES DELIVERED TO THE MARKET IN MOSCOW IN 2015 Zelenopark Klen Kuntsevo Plaza Centralny Detskiy Magazin Zelenopark Kuntsevo Plaza Avenue South-West Mari RIO Kievskoe highway Kalita Columbus Columbus Centralny Detskiy Magazin #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 38

39 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS SHOPPING CENTRES. MARKET INDICATORS THE OCCUPANCY RATE OF SELECTED SHOPPING CENTRES* SHOWED SLIGHT FLUCTUATIONS IN % SELECTED MOSCOW SHOPPING MALLS* VACANCY RATE 6.5% MOSCOW SHOPPING MALLS VACANCY RATE, WATCOM DATA (NOVEMBER 2015) Despite the noticeable decline in the beginning of the year, the foot flow indicator showed one of the highest values in Q compared to the previous periods. After such a significant burst of activity, we expect the indicator to decline in the beginning of FOOT FLOW, SELECTED* SHOPPING MALLS, MOSCOW 120% 110% 100% 90% 80% 70% 60% Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q Vacancy rate according to the monitoring* results decreased slightly, which is typical for Q4 traditionally tenants are trying to cover high consumer activity before the New Year holidays. Taking into account the consumption decrease in 2015, this trend has become more popular. VACANCY RATE, SELECTED* SHOPPING MALLS, MOSCOW 3,5% 3,0% 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% Q1Q2Q3 Q4Q1Q2 Q3Q4Q1Q2 Q3Q4Q1Q2Q3 Q4Q1Q2 Q3Q4Q1Q2 Q3Q * Cushman & Wakefield quarterly monitoring of 9 selected quality shopping centres (total GLA 0,5 sq m). The monitoring has been conducted since #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 39

40 SUMMARY RETAILERS SHOPPING CENTRES COMMERCIAL TERMS COMMERCIAL TERMS NEW APPROACHES IN STRUTURING OF RETAL PAYMENTS The majority of lease deals are nominated in rubles which is a noticeable change on the market. Only a limited number of properties offer fixed rental rates USD per sq m per year PRIME SHOPPING MALL INDICATOR*, MOSCOW, Q USD per sq m per year PRIME SHOPPING MALL INDICATOR*, MOSCOW, Q (FORECAST) Generally the market has moved to a ruble zone - rental rates in shopping centres and in street retail are mostly nominated in rubles. New lease agreements are nominated in local currency. As for existing contracts that are nominated in foreign currency, temporary fixation of exchange rate or corridor for payment are applied. In the changing conditions these terms are often used in a short-term period (3-6 months) with a renewal option. Fixed rents are generally used only in the most successful shopping centres and retail corridors. In other cases (about 80% of the market) various approaches of structuring of rental payments are applied. The most popular forms of rental payments are percentage of turnover or combination of a small fixed rent and percentage of turnover. In the cases when the landlord offers a discount on a fixed rent, there is usually an option that in 1-2 years perspective the rental rate will be reviewed in correspondence with the retailer s turnover. Retail market is strongly influenced by political and economic situation. Retailers have already noticed the impact of relations deterioration between Russia and Turkey. Turkish operators negotiate new terms in the lease agreements, i.e. including to force majeure situations when the delivery of Turkish goods is delayed because of the customs barriers. * Prime shopping mall indicator - base asking rental rate for a 100 sq m gallery unit on the ground floor of prime shopping centers(us$ per sq m per annum, triple net) #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 40

41 NEW CONSTRUCTION 2015 (CLASS A AND B) RUSSIA 1.52 mn sq m MOSCOW 0.87 mn sq m REGIONS 0.65 mn sq m TAKE UP 2015 (CLASS A AND B) WAREHOUSE & INDUSTRIAL Full transition to ruble rental rates. Decline of new construction. Vacancy rate increase. Demand is based on food retail chains. Big share of deals are relocations in order to improve lease terms. Tenants are active in lease terms renegotiation. RUSSIA 1.57 mn sq m MOSCOW 1.1 mn sq m FORECAST 2016 NEW CONSTRUCTION (CLASS A AND B) RUSSIA 1.3 mn sq m 0.7 TAKE UP (CLASS A AND B) RUSSIA 1.2 mn sq m MOSCOW mn sq m MOSCOW 0.8 mn sq m REGIONS 0.47 mn sq m REGIONS 0.6 mn sq m 0.4 REGIONS mn sq m Source: Cushman & Wakefield CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 41 #MARKETBEAT Q4 2015

42 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS TRENDS FULL TRANSITION TO RUBLE RENTAL RATES. VACANCY RATE CONTINUES TO GROW The warehouse real estate segment is influenced by the situation in the consumer sector of the Russian economy. 1, sq m TAKE UP, sq m NEW CONSTRUCTION, 2015 VACANCY RATE, CLASS A 14% 12% 10% 8% 6% 4% 2% 0% 13.5% 10.0% 10.5% 7.0% 3.9% 1.5% 2.0% 1.0%1.0% F Transition to RUB and decrease in rental rates allowed major retailers trading in food and household goods to implement a pent-up demand in Due to this factor vacancy rate and rental rates stabilized at the end of the year in spite of the difficult economic situation. As shown by the fourth quarter of 2015 the interest of retail chains in the Moscow region has decreased and in the mid-term demand for warehouse space in the region will depend on the situation in the consumer sector of the Russian economy and will be lower than 2015 levels. At the same time rental rates in rubles and vacancy rate will remain at year-end levels of 2015 due to lower real estate development activity. Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 42 #MARKETBEAT Q4 2015

43 '000 sq m TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION NEW CONSTRUCTION (1/3) NEW CONSTRUCTION DYNAMICS FALL After the peak of development activity in 2014, the volume of construction decreased twice in Downward trend in activity retains in sq m NEW CONSTRUCTION, sq m NEW CONSTRUCTION, 2016 NEW CONSTRUCTION, CLASSES A AND B F Actual Construction Forecast Compared to 2014, new construction volume in 2015 decreased twofold and comprises 876,000 sq m. Total stock increased by 7% and comprises 11.7 mn sq m. New projects are not announced. Developers continue to develop projects announced earlier (in 2014), but often postpone delivery dates of the projects under development, in some cases the delay is more than a year. According to the preliminary estimates the supply will increase by 700, ,000 square meters in 2016, the construction of speculative projects on final stages of development will be completed and mostly built-to-suite projects will be started. Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 43 #MARKETBEAT Q4 2015

44 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION NEW CONSTRUCTION (2/3) THE DISTRIBUTION OF WAREHOUSE SPACE IN THE REGION DID NOT CHANGE IN % OF WAREHOUSE SPACE IS LOCATED ON THE SIMFEROPOLSKOE HIGHWAY 46% OF WAREHOUSE SPACE IS LOCATED AT A DISTANCE OF 10 TO 30 KM FROM MOSCOW New warehouse projects delivered in 2015 generally did not change the distribution of warehouse space in the Moscow region. The biggest share of warehouse premises is located on Simferopolskoe highway (17% of the total in the region), 15% on Novoryazanskoye, 14% on Kashirskoe highway. GEOGRAPHICAL DISTRIBUTION OF NEW QUALITY WAREHOUSE SPACE DELIVERED IN 2015 ( 000 SQ M) Novorizhskoe (M9) Minskoe (M1) Leningradskoe (M10) Kievskoe (MЗ) Kaluzhskoe (A101) Dmitrovskoe (A104) 100 Source: Cushman & Wakefield Research 0 Simferopolskoe (M2) Yaroslavskoe (M8) Kashirskoe (M4) 30+ km km 0-10 km Moscow Shelkovskoe (A103) Gorkovskoe (M7) Novoryazansko e (M5) Least of all warehouse premises are located on Kaluzhskoe and Minskoe highway. Major part (46%) of warehouse space is located at a distance of 10 to 30 km from Moscow. GEOGRAPHICAL DISTRIBUTION OF EXISTING QUALITY WAREHOUSE SPACE BY HIGHWAY ( 000 SQ M) Novorizhskoe (M9) Minskoe (M1) Leningradskoe (M10) Kievskoe (MЗ) Kaluzhskoe (A101) Dmitrovskoe (A104) Simferopolskoe (M2) Yaroslavskoe (M8) Kashirskoe (M4) 30+ km km 0-10 km Moscow Shelkovskoe (A103) Gorkovskoe (M7) Novoryazanskoe (M5) CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 44 #MARKETBEAT Q4 2015

45 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION NEW CONSTRUCTION (3/3) THE BIGGEST WAREHOUSE PROJECTS IN THE MOSCOW REGION COMPLETED IN sq m NEW CONSTRUCTION, 2015 PROJECT HIGHWAY DISTANCE FROM MKAD, KM TOTAL AREA, 000 SQ M Kievskoye 22 Logopark Kievskoe Q1 Sofyino Logopark Novoryazanskoe Q1 DELIVERY Logopark Sever 2 Leningradskoe Q1, Q3 Synkovo logistic park Simferopolskoe Q1, Q4 PNK - Chekhov III Simferopolskoe Q2 PNK - Bekasovo Kievskoe Q2, Q3 Kholmogory industrial park Yaroslavskoe Q2 PNK - Chekhov II Simferopolskoe Q2 Sherrizon - Nord Leningradskoe Q4. PNK - Severnoe Sheremetyevo Rogachevskoe Q4 CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 45 #MARKETBEAT Q4 2015

46 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION DEMAND (1/4) TAKE-UP IN 2015 EXCEEDED INDICATORS OF 2014 BY 23% Demand is mostly supported by retail chains specializing in food and household goods. 1, sq m TAKE UP, % OF SPACE IS ABSORBED BY THE RETAIL CHAINS IN 2015 TAKE UP, CLASSES A AND B F Actual take up Forecast The volume of lease and purchase transactions in 2015 exceeds the indicator of 2014 by 23% and comprises 1.1 million square meters. The increase of take-up was supported by food and household goods retail companies, realizing their pent-up demand. The purchase deals comprised 21% of the total deals volume, which is lower than the same indicator in 2014 by 7 p.p. We see an increase in the tenants activity for the renegotiation of existing lease contracts. A lot of current lease agreements are still nominated in USD and we expect the tenants to be active in lease renegotiations in Furthermore the companies continue to abandon the excess space, consolidate warehouse premises and relocate to warehouse complexes of higher classs. Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 46 #MARKETBEAT Q4 2015

47 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION DEMAND (2/4) MORE THAN 50% OF DEALS IN 2015 WERE ENSURED BY RETAILERS OF FOOD AND HOUSEHOLD GOODS Due to the realization of pent-up demand by large retail companies, their share in the structure of demand increased from 31% to 54%. TAKE UP STRUCTURE 54% OF SPACE IS ABSORBED BY THE RETAIL CHAINS IN 2015 Distributor % Logistic % Other - 3.6% Producer % 15.7% - Distributor 10.2% - Logistic 2.8% - Other 16.8% - Producer 54,4% - Retailer As we forecasted in 2014, the structure of take-up dramatically changed in The share of retail chains has increased from 31% to 54%, with decline in the shares of all others. The share of logistics companies reduced the most: their share reduced twofold compared to The size of the average transaction in 2015 in the majority of the segments decreased by 20-25% compared to The exception is retail segment, where the rate doubled in 2015 and comprised square meters. Retailer % Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 47 #MARKETBEAT Q4 2015

48 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION DEMAND (3/4) IN 2015 DEMAND WAS BASED ON COMPANIES OPERATING IN THE SEGMENTS OF FOOD AND HOUSEHOLD GOODS. The share of "clothes and shoes", "autocomponents", "electronics", "logistics" segments declined sharply. 37% OF SPACE IS ABSORBED BY FOOD AND DRINK SEGMENT COMPANIES 23% OF SPACE IS ABSORBED BY HOUSEHOLD GOODS SEGMENT COMPANIES TAKE UP STRUCTURE Alcohol - 1.3% Car parts - 8.3% Children's goods % Clothes and shoes - 8.7% Electronic - 2.3% Food and beverages - 9.0% Furniture - 3.9% Housewares - 3.2% Industrial equipment - 2.6% Logistic space % Other % Parfumery and cosmetic - 0.0% Pharmaceuticals - 5.4% % - Alcohol 1.2% - Car parts 4.7% - Children's goods 3.5% - Clothes and shoes 0.9% - Electronic 37.0% - Food and beverages 0.0% - Furniture 23.7% - Housewares 3.7% - Industrial equipment 10.2% - Logistic space 3.9% - Other 0.5% - Parfumery and cosmetic 4.5% - Pharmaceuticals In 2015 demand structure by sector has undergone great changes. The share of "food and drink" and "household goods" companies increased sharply - the growth is by 4 and 7 times respectively in comparison to The increase was both in terms of transactions volume and the number of them. At the same time there was a sharp decrease in "autocomponents", "electronics", "clothes and shoes", "logistics segments due to the crisis in these sectors. Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 48 #MARKETBEAT Q4 2015

49 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION DEMAND (4/4) KEY TRANSACTIONS IN , sq m TAKE UP, 2015 TENANT/BUYER PROJECT DEAL TYPE X5 Retail Group Logopark Sof ino Lease 65.7 Dixi PNK - Severnoe Sheremetyevo Buy 55.1 Dixi A - Terminal Lease 54.3 Dochki-Synochki Logopark Bykovo Lease 42.2 Globus Kholmogory industrial park Lease 40.1 OBI Logopark Sever 2 Lease 35.8 Puls МЛП Leningradskiy terminal Lease 31.7 Lenta PNK Chehov III Buy 31.0 Krasnoe I Beloe Synkovo logistic park Lease 30.3 Nature Foods Synkovo logistic park Buy 28.0 TOTAL AREA, 000 SQ M Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 49 #MARKETBEAT Q4 2015

50 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION RENTAL RATES RUBLE RENTAL RATES STABILIZED IN THE SECOND HALF OF THE YEAR Since middle of 2015, all rental rates for vacant warehouse space in the Moscow region are nominated in rubles. Return to dollar equivalent of rental rate is not expected. In the first half of 2015 triple net rental rates decreased by 8% and stabilized at the level of rubles per sq m per year. In the second half of the year, rates have not changed. Given that the market situation is difficult, the owners optimize their costs. Operating expenses in 2015 remained in the range of rubles per sq m per year, depending on the project. 000 RUB / sq m / year CURRENT RENTAL RATE, EXCLUDING OPERATIONAL EXPENCES, UTILITY COSTS AND VAT NET RENTAL RATE IN RUBLES (RUB/ SQ M / YEAR) 4 500р р р р р р р р р. NET RENTAL RATE IN US DOLLARS (USD / SQ M / YEAR)* $ 140 $ 120 $ 100 $ 130 $ 140 $ 105 $ 130 $ 110 $ 135 $ 135 $ р р р р р р. $ 80 $ 60 $ р $ Source: Cushman & Wakefield Research *Rental Rate is calculated according to average RUB/USD exchange rate as of Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 50 #MARKETBEAT Q4 2015

51 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS MOSCOW REGION INTERNATIONAL COMPARISONS VACANCY RATES IN MOSCOW ARE COMPARABLE TO THOSE IN THE LARGEST EUROPEAN CITIES 10% VACANCY RATE, MOSCOW REGION 9% 10% vacancy rate is deemed high for the Moscow region but not for the most of the European warehouse markets. In the markets of Madrid, Barcelona, Milan vacancy rate varies from 7% to 12% over the past few years. VACANCY RATE 11% 10% 9% 8% Despite the complexity of the situation, the warehouse market in Moscow retains its potential for growth - current supply in the region is lower than in the major European cities. QUALITY WAREHOUSE STOCK, SQ M PER 1 CITIZEN VACANCY RATE, IL DE FRANCE 7% 6% % Madrid Milan Moscow Paris Warsaw 0.00 Madrid Milan Moscow Paris Warsaw CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 51 #MARKETBEAT Q4 2015

52 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS REGIONS NEW CONSTRUCTION (1/2) NEW CONSTRUCTION IN REGIONS DECREASES After the peak of development activity in 2014, the volume of construction decreased by two times in Downward trend in activity will retain in sq m NEW CONSTRUCTION, sq m NEW CONSTRUCTION, 2016 (FORECAST) NEW CONSTRUCTION, CLASSES A AND B St. Peterburg sq m Chelabinsk sq m Perm sq m Samara sq m Novosibirsk sq m Other sq m Overall, new construction volume in regions decreased by 50% in Developers adjust their pipeline in accordance with current demand. Construction dynamics slow down was due to the contraction on large regional markets. For example, in St. Petersburg there were delivered four times less warehouses premises in 2015 than in Meanwhile the developers interest in underdeveloped regional markets, such as Perm and Primorsky Krai, remains high. We expect the same trends to continue next year. New construction will be lower than in 2015 (about sq m). Developers will start projects only on condition that pre-lease or pre-purchase contracts are signed. Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 52 #MARKETBEAT Q4 2015

53 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS REGIONS NEW CONSTRUCTION (2/2) THE BIGGEST WAREHOUSE PROJECTS COMPLETED IN THE REGIONS IN sq m NEW CONSTRUCTION, 2015 PROJECT Logocentr-Kuban REGION Krasnodar TOTAL AREA, 000 SQ M PNK - Togliatti Samara 26.0 Q1 TLK Yuzhnouralsky Chelyabinsk 82.3 Q DELIVERY Q1, Q4 Direct Logistics Voronezh 39.5 Q2 Yankovskiy Vladivostok 26.3 Q2, Q3 A2logistic Rostov-on-Don Rostov-on-Don 33.0 Q3 SamaraTransAvto Samara Q3 A Plus Park Shushary St. Petersburg 33.5 Q4 PNK - Kosulino Ekaterinburg 29.7 Q4 CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 53 #MARKETBEAT Q4 2015

54 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS REGIONS DEMAND (1/3) THE VOLUME OF TRANSACTIONS IN REGIONS DECREASED IN 2015 After the peak in 2014, the volume of lease and sale-purchase transactions decreased by 14% sq m TAKE UP, sq m TAKE UP, 2016 (FORECAST) NEW CONSTRUCTION, CLASSES A AND B F Actual take up Forecast Unlike the Moscow region the volume of transactions in the regions in 2015 was 14% lower than in The sale-purchase transactions comprise 10% in the total deals volume, which is two times lower than in The demand in the regions in 2015 is based on retailers, as well as in Retailers share in the deals structure is always above 50%. The same as in the Moscow region, food and drink segment covers 50%, which is lower than in 2014 by 6,4 p.p. We do not expect the structure of demand in the regions to change much next year, while the volume of leased and purchased space will decrease to 400,000 sq m. Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 54 #MARKETBEAT Q4 2015

55 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS REGIONS DEMAND (2/3) THE DEMAND IS BASED ON FOOD RETAILERS 53% RETAIL CHAINS SHARE IN TAKE-UP STRUCTURE TAKE UP STRUCTURE Distributor - 0.3% Logistic % Other - 0.6% Producer % 10.1% - Distributor 17.6% - Logistic 0.0% - Other 19.3% - Producer Alcohol - 0.0% Car parts % Clothes and shoes - 5.9% Electronic - 0.8% Food and beverages % 1.3% - Alcohol 0.0% - Car parts 0.8% - Clothes and shoes 7.9% - Electronic 50.0% - Food and beverages 50% FOOD AND DRINK SEGMENT S SHARE Retailer % ,0% - Retailer Housewares - 3.2% Industrial equipment - 2.6% Logistic space % Other - 2.4% Pharmaceuticals - 0.0% % - Housewares 4.4% - Industrial equipment 18.7% - Logistic space 2.5% - Other 3.5% - Pharmaceuticals CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 55 #MARKETBEAT Q4 2015

56 TRENDS NEW CONSTRUCTION DEMAND RENTAL RATE INTERNATIONAL COMPARISON REGIONS REGIONS DEMAND (3/3) KEY TRANSACTIONS IN sq m TAKE UP, 2015 TENANT/BUYER PROJECT REGION DEAL TYPE X5 Retail Group Romeks-Kuban Krasnodar Lease 47.0 X5 Retail Group Freight Villadge Vorsino Kaluga Lease 38.7 SSP-Consult Scania St. Petersburg Buy 28 X5 Retail Group A Plus Park Perm Perm Lease 26.4 O Key PNK - KAD St. Petersburg Lease 24 Lenta PNK - Kosulino Ekaterinburg Buy 20.9 Mars PNK - Tolmachevo Novosibirsk Lease 21.2 Leroy Merlin SLK Samara Lease 19.9 Delovye Linii Terminal Chkalovskiy Ekaterinburg Lease 19.5 Garghner Oriom logistic St. Petersburg Lease 18.0 TOTAL AREA, 000 SQ M Source: Cushman & Wakefield Research CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 56 #MARKETBEAT Q4 2015

57 Market indicators Standard lease terms Interactive services APPENDIX Cushman & Wakefield Research Department provides clients with the most detailed information on the market indicators, including average rental and vacancy rates split by metro stations, administrative districts and submarkets in Moscow, as well as data on planned projects and projects under construction in Russia. If you need more detailed information please contact the Research Department. #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 57 #

58 APPENDIX INDICATORS STANDARD COMMERCIAL LEASE TERMS INTERACTIVE SERVICES COMMERCIAL REAL ESTATE MARKET INDICATORS (1) OFFICES AND SHOPPING CENTRES The forecast is based on the conservative macroeconomic scenario. MOSCOW REAL ESTATE MARKET INDICATORS FORECAST/ПРОГНОЗ Q1 Q2 Q3 Q4 MOSCOW OFFICES Stock class A, EOP '000 sq m Stock class B (B+ and B-), EOP '000 sq m New construction, A, '000 sq m New construction, B (B+ and B-), '000 sq m Vacancy rate class A 3,9% 4,8% 12,8% 23,6% 22,5% 16,8% 14,6% 17,6% 23,8% 31,2% 31,4% 30,9% 32,4% 31,8% 33,0% 32,2% Vacancy rate class B (B+ and B-) 2,7% 4,1% 6,1% 11,1% 10,4% 8,9% 9,1% 9,8% 10,8% 13,5% 14,7% 15,4% 15,7% 16,2% 16,5% 16,4% Take up class A, '000 sq m Take up class B (B+ and B-), '000 sq m Rental rates class A, USD/sq m pa $714 $934 $1 092 $729 $645 $733 $790 $867 $772 $611 $645 $528 $445 $450 $470 $500 Rental rates class B (B+ and B-), USD/sq m pa $528 $645 $814 $508 $417 $455 $471 $534 $484 $285 $281 $298 $236 $250 $260 $300 Prime capitalization rate 8,25% 7,25% 12,00% 13,00% 9,00% 8,50% 8,75% 8,50% 11,00% 11,00% 11,00% 11,00% 10,50% 10,50% 10,50% 9,50% MOSCOW QUALITY SHOPPING CENTERS Total stock, EOP, '000 sq m New construction, '000 sq m Vacancy rate, EOP 0,7% 1,0% 3,0% 5,0% 2,1% 0,4% 0,5% 1,2% 1,5% 2,0% 2,2% 2,4% 2,0% 3,5% 2,5% 2,0% Prime rental rate indicator*,eop $3 000 $3 125 $3 750 $2 500 $2 600 $2 700 $3 800 $3 900 $3 500 $3 200 $3 200 $2 800 $2 500 $2 200 $2 700 $3 000 Prime capitalization rate 9,50% 9,00% 12,00% 13,00% 10,00% 9,25% 9,50% 9,00% 11,00% 11,00% 11,00% 11,00% 11,00% 11,00% 11,00% 10,50% #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 58

59 APPENDIX INDICATORS STANDARD COMMERCIAL LEASE TERMS INTERACTIVE SERVICES COMMERCIAL REAL ESTATE MARKET INDICATORS (2) WAREHOUSE AND INDUSTRIAL, INVESTMENTS The forecast is based on the conservative macroeconomic scenario. MOSCOW REAL ESTATE MARKET INDICATORS FORECAST/ПРОГНОЗ Q1 Q2 Q3 Q4 WAREHOUSES, MOSCOW REGION Stock, class A, EOP '000 sq m Stock, class B, EOP '000 sq m New construction, class A, '000 sq m New construction, class B, '000 sq m Vacancy rate class A 2,0% 2,0% 2,0% 10,5% 8,0% 1,0% 1,0% 1,5% 7,0% 9,5% 9,5% 10,0% 10,0% 10,5% 9,0% 8,0% Vacancy rate class B 2,0% 2,0% 2,0% 5,9% 6,1% 1,5% 1,5% 2,0% 5,0% 6,0% 7,0% 7,0% 9,0% 9,0% 8,0% 6,0% Net Absorption Class A, '000 sq m Net Absorption Class B, '000 sq m Rental rates class A $136 $130 $140 $105 $110 $135 $135 $135 $100 $71 $75 $66 $63 $63 $70 $75 Rental rates class B $121 $117 $125 $90 $92 $130 $130 $130 $90 $65 $65 $65 $62 $62 $65 $70 Prime capitalization rate 10,50% 9,25% 13,00% 14,00% 10,50% 10,50% 11,50% 11,00% 13,00% 13,00% 13,00% 13,00% 12,75% 12,75% 12,75% 12,25% INVESTMENTS TOTAL, MN US$ Office, US$ mn Retail, US$ mn Warehouse, US$ mn Other, US$ mn * Base rental rate for sq m unit on the ground floor of retail gallery of prime shopping mall for fashion retailer #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 59

60 APPENDIX INDICATORS STANDARD COMMERCIAL LEASE TERMS INTERACTIVE SERVICES STANDARD COMMERCIAL LEASE TERMS LEASE TERMS DURATION OF LEASE Office: 5 years Industrial: either short-term (1-3 years) or long-term (5+ years) Retail: 3-5 years, anchor tenants years. BREAK OPTIONS Offices: Possible after 3 years with deposit withdrawal as penalty. After crises has become very popular. Notice period is 6-9 months. When there is an option to review the rent after the third year, contract can be terminated from both sides. Retail: a standard lease agreement is not supposed to include break option. RENTAL PAYMENTS RENT PAYMENT AND FREQUENCY Offices and retail: RUB or US$ per square meter per year, payable due monthly or quarterly in advance. Industrial: Rubles. RENT DEPOSIT Offices: 1-3 months rent equivalent (bank guarantee optional, very seldom however). Retail: 1-2 months rent equivalent (bank guarantee optional). Industrial: 1-3 months rent equivalent (bank guarantee optional, very seldom however as landlords as landlords prefer the deposit) RENT REVIEWS After crises have become more popular, negotiable. INDEXATION Offices: 7-10% for RUB agreements; 3-5% or at the level of USA / EU CPI. Retail: if rents in US$ US CPI or 5%; if rents are in RUB Russia CPI or 8-9%. Industrial: 8-10% ENTRANCE FEE It is possible to pay extra-fee to enter the project applicable only for prime projects. Turnover rents (only in Retail): Compound rental rates (fixed rent and a percentage of turnover) are almost always used in shopping centers. Normally, the percentage of turnover varies between 10 %- 15% (fashion), 2-5% for anchors. DISPOSAL OF LEASES ASSIGNMENT AND SUB-LETTING Offices & Industrial: Usually possible, but subject to negotiation. Retail: Not common. SERVICE CHARGES, REPAIRS & INSURANCE REPAIRS Tenant: Internal repairs and maintenance. Landlord: Structural repairs, common areas. INSURANCE Tenant: Contents insurance. Landlord: Building insurance which is normally charged back to tenant via the service charge. SERVICE CHARGES Service charge is payable by the tenant at either an open book basis or as a fixed cost. UTILITY EXPENSES Often included to service charges, but depends on landlord and different types of projects. TAXATION REAL ESTATE TAX Tenant: None. Landlord: For office and industrial the amount of tax depends on the region. In Moscow: 1.2% of cadastral value in 2015, 1.3% in 2016, 1.4% in 2017 and 1.5% in VAT: 18% MEASUREMENT PRACTICE Space is measured generally on the BOMA system. Some Landlords have apply BTI (Bureau of Technical Inventory) measurements. #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 60

61 APPENDIX INDICATORS STANDARD COMMERCIAL LEASE TERMS INTERACTIVE SERVICES CUSHMAN & WAKEFIELD IN RUSSIA CUSHMAN & WAKEFIELD MOBILE APPS CUSHMAN AND WAKEFIELD The only commercial real estate app in Russia C&W INTERACTIVE MAPS Commercial real estate and infrastructure interactive maps Moscow offices Shopping centers in Russia Warehouses Hotels Infrastructure development #MARKETBEAT Q CUSHMAN & WAKEFIELD RESEARCH DEPARTMENT 61