MOSCOW Q1 2018 OFFICE MARKET Key market indicators Q1Q 2016 Q1Q 2017 Q1Q 2018 Completions, thousand sq m 274.4 95.7 94.5 Takeup, thousand sq m 809.2 789.2 972.6 Vacancy rate, % 1.7 11.2 9.2 Class A 18.5 15.9 1.0 Class В+/ 11.8 9.7 8.1 Weighted average rental rate, RUB/sq m/year* 17,9 17,587 17,494 Class A 26,565 26,470 25,058** Class В+/ 1,095 12,867 1,478** Supply 94,500 sq m of class A and B +/ office space has been completed in Moscow since the beginning of 2018, which is comparable to the level for the same period in 2017, although this is three and five times lower than the figures for 2016 and 2015 respectively. The total volume of office space expected to be commissioned in 2018 will amount to 292, sq m and this will be the lowest figure over the past 15 years. A new supply of office space in the near future will be formed by projects involving recovered construction and new ones which were previously unannounced. In addition, oversupply, which was characteristic for 2014 2016, contributed to the formation of a new type of office market supply buildtosuit. Today, the total volume of these projects is estimated at 700,000 sq m of office space. *The base rental rate excludes VAT (18%), operational expenses and utility bills **The correction of base rental rate is due to a change in the structure of vacant supply, as well as to the volatility of the ruble Completions thousand sq m 1600 1 1 1000 800 600 0 201 2014 2015 2016 2017 2018F 2019F Q1 Q2 Q Q4 PROPERTY TYPE CLASS ADDRESS GBA, SQ M GLA, SQ M VTB Arena Park (phase I) MFC A 6 bldg.,4,5 Leningradskiy Ave 1,021 24,686 Novion MFC A 1 Samarskaya St 76,082 22,000 Buildings completed in Q 2018 Gallery 76 MFC B+ 76 Profsoyuznaya St 22,100 8,450 Office market overview Q 2018 Moscow 1
Rental rates There was no widespread increase in rental rates in Class A and B +/ offices during the first three quarters of 2018. According to the results of Q 2018, the weighted average rental rate in Class A offices was 25,058 RUB/sq m/year*, and in B +/ class offices the rate was 1,478 RUB/sq m/year*. The decrease in the weighted average rental rate in some submarkets and the increase in others in Q is due to a change in the structure of vacant supply, as well as to the increased volatility of the ruble in this period. The weakening of the ruble in August and early September affected growth in average rental rates in business districts with a share more than 50% of vacant supply in dollars: the average rental rates denominated in dollars and converted to rubles increased by 6 8% in Beloruskiy, Paveletskiy business districts and in premium location. Dynamics of base rental rates* $/sq m/year RUB/sq m/year 900 5 000 800 700 0 000 600 25 000 500 20 000 00 15 000 100 10 000 Q1 Q2 Q Q4 Q1 Q2 Q Q4 Q1 Q2 Q Q4 Q1 Q2 Q Q4 Q1 Q2 Q Q4 Q1 Q2 Q 201 2014 2015 2016 2017 2018 *The base rental rate in roubles is calculated by recalculating rates denominated in dollars into roubles at the average US dollar to rouble exchange rate for the reporting period and at a rate fixed by a landlord where applicable. The base rental rate excludes VAT (18%), operational expenses and utility bills Rental rates (left scale) Rental rates (right scale) Class A Class B+ Class A Class B+ Demand 972,600 sq m were leased and purchased in the period from January to September 2018, which is 2% more than in the same period of 2017. The number of lease deals for large units measuring from 5,000 sq m to 10,000 sq m, increased 1.5 times compared to the same period of the previous year. Also, there were an increase in the number of transactions from 1,000 sq m to 5,000 sq m, which increased compared with the same period of the previous year by 5%. Takeup of office space was dominated in the first three quarters of 2018 by banking companies (2%), retail companies (14%) and IT companies (12%). The total volume of office space leased by IT companies has been increasing since 2015 and in the first three quarters of 2018 has reached to 49,900 sq m. The growing volume of transactions with IT companies is also due to the fact that IT companies are focused on the new generation of employees with high request on the quality of office space. New employees need a comfortable workplace and recreation areas. Space for additional options, including fitness, play space and recreation areas are also popular among IT companies. Compliance with these requirements means that IT companies are leasing large office spaces. According to the results of the first three quarters of 2018, the average size of office leased by an IT company was 2,09 sq m, which exceeds the previous year s value by 18% and two times more than in 2015. COMPANY PROPERTY ADRESS DEAL TYPE MTS Nagatino iland (Dekart) AREA, SQ M (GLA) 18 bldg. 9 Andropova Ave purchase 1,000* «AVANGARD» JSB 6 Lesnaya St 6 Lesnaya St purchase 14,000* WeWork Krasnaya Roza (Savin) 11 bldg 1 Timura Frunze St lease 4,290 SOK Pekin Gardens 5 bldg. 1 Bol. Sadovaya St lease,110 Key deals in Q 2018 Rocket Collider Factoria 27 bldg. 7 Vyatskaya St lease,000 OPTEC (Zeiss Group) Silver City 29 Serebryanicheskaya Emb lease 2,090 * GBA Office market overview Q 2018 Moscow 2
mln sq m % thousand RUB/sq m Office Sales Without including the sale deal in 2017 for the occupation of a largesized bank in one of the towers in the IQquarter complex total office space sales increased by 46% and reached 14,780 sq m. The quantity of sold office units measuring from 1,000 to 2,500 sq m increased 1.7 times, while the quantity of sold office units less than sq m increased almost two times compared to the previous year. Despite the limited volumes of new supply and raised demand sale prices remained stable. 500 00 100 280 Boulevard ring Garden Ring 250 180 Garden Ring Third Ring Road 160 90 MIBC MoscowCity Third Ring Road MKAD A B+ B 120 90 65 outside MKAD Average sale prices by distance from the centre in Q 2018 Office lease & sale markets forecast 14.2 1.9 16,0 12. 12.4 14,0 2 10.6 8.4 9.2 10.5 8.9 7,0 12,0 10,0 8,0 1 6,0 4,0 2,0 Key Indicators for classes А and B+/ 0 2010 2011 2012 201 2014 2015 2016 2017 2018F 2019F 0,0 Takeup Completions Vacancy rate, % PROPERTY CLASS ADDRESS DEVELOPER GLA, SQ M 1 Amaltea А Skolkovo, 40 Bolshoy blvd SAFMAR Group (BIN Group) 2,000 Top business centres expected for delivery by the end of 2018* 2 OKO (phase II) B+ Smolenskiy Passage II 21 bldg 2 1 st Krasnogvardeyskiy pas Capital Group 26,750 A 79 Smolenskaya Sq SAFMAR Group (BIN Group) 15,50 4 Bernikov B+ 11/2 Nikoloyamskaya St SAFMAR Group (BIN Group) 10,900 *Business centres are marked on the map, p. 4 5 Rassvet B+ Stolyarniy Ln KR Properties 15,80 Office market overview Q 2018 Moscow
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FOR MORE INFORMATION CORPORATE SOLUTIONS & OFFICE AGENCY DEPARTMENTS Vera Zimenkova Regional Vera.Zimenkova@colliers.com SALES & ACQUISITIONS OFFICE DEPARTMENT Kermen Mastiev Kermen.Mastiev@colliers.com OCCUPIER REPRESENTATION DEPARTMENT Francois Nonnenmacher Francois.Nonnenmacher@colliers.com ANALYTICAL DEPARTMENT Veronika Lezhneva Veronika.Lezhneva@colliers.com Ekaterina Gurova Analyst Ekaterina.Gurova@colliers.com MARKETING & PR DEPARTMENT Olga Bakulina Regional Olga.Bakulina@colliers.com 12112 Moscow 10 Presnenskaya Embankment BC Naberezhnaya Tower, Block C, 52 floor +7 495 258 51 51 www.colliers.ru Copyright 2018 Colliers International This information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.