Office. Moscow Key market figures, 214 Supply INDEX VLUE Total stock, million m 2 15. Grade 3. Grade B 12. Take-up, m 2 51, Net absorption, m 2 161, Vacancy rate, % 11.5 Grade 25. Grade B 8.2 Prime Headline Rent*, $/m 2 /year 8 Grade 9 Grade B 65 * The weighted average asking rental rate for vacant premises The total volume of high-quality office space in Moscow in exceeded 15 million m 2. lmost 2% of this space belongs to Grade, 49% is Grade, while the remaining space belongs to Grade. In 214, 532,84 m 2 in 27 buildings were delivered, which was 1.5 times more than for the same period last year, and was the highest figure since 21. This result was achieved thanks to the delivery of projects that were frozen during the recession of 28-29, such as the former objects of Mirax Group. More than a half of new premises were Grade, with most of them being concentrated in two buildings: Eurasia Tower in MIBC and President Plaza. nother 44% of the space belongs to Grade, while the remaining space is Grade. In terms of the geographical distribution of new construction, the western direction outside of the business districts was taking the lead. The main share of new facilities here was represented by President Plaza and the complex of buildings at 3 Poklonnaya Street. Moreover, almost 17% of space was built in the Central Business District (), another 16% of the total new construction stock falls within MIBC Moscow City, while only one building has been delivered Eurasia Tower. Top 5 largest buildings completed in 214 PROPERTY GRDE DEVELOPER RE, M 2 President Plaza А Stolitsa-Development/ 114,7 StroyGasConsulting Eurasia Tower А Tehinvest 86,8 3 Poklonnaya Str. В lpine-gas 79,5 rcus III А B Development 34,3 32G Kutuzovskiy ve. В StroyGasConsulting 33,7 Dynamics of take-up and completions, thousand m 2 1,2 9 6 3 21 21 211 211 212 212 213 213 214 214F Completions Take-up 1
Demand The total volume of commercial property transactions in 214 exceeded.5 million m 2, which amounts to 6% of the figure for the same period in 213. End-owner sale/purchase transactions amounted to 11% of the total space sold. Grade office complexes continue to enjoy steady demand. In total, 161, m 2 were sold in this segment, which is 31% of the total take-up. little less than half of the space sold (approximately 248,7 m 2 ) belongs to Grade, although this figure is two times smaller than that of the previous year. The remaining 2% of take-up are Grade premises. The companies from the industry, professional services and IT & telecommunications sectors constituted the main demand for office real estate in, together accounting for 64% of all premises sold. The net take-up trend in Q2 214 was positive: having grown almost 1.5 times compared to the beginning of the year, it amounted to 94,5 m 2. Thus, the total figure for the two quarters amounts to 161, m 2, which was approximately 4% of net takeup for the same period in 213. Vacancy rates The threefold excess of new construction volume over the net takeup affected the vacancy dynamics. By the end of, the average vacancy rate in Moscow was 11.5%. This figure ranges between 4% for Grade B offices in the and 39% for Grade in MIBC. The highest vacancy rate of 25% is observed in the Grade office segment, with most vacancies concentrated in, where new large office complexes are currently being built. The vacancy rate in other business districts is close to the Moscow average and was 28% at the end of June. 35% of office space is vacant outside the established areas of business activity, which is connected with the emergence of several large office buildings, as well as limited demand for high-quality premises in comparison with other districts. The lowest vacancy rate is traditionally observed in the, standing at 15% at the end of. While the vacancy rate in Grade buildings remains stable at 5%, for, it grew by 1% (mainly due to the delivery of large new projects) amounting to 1%. The lowest vacancy rates are observed in the (4% in Grades and ), as well as in established business areas (6% in buildings of Grade, and 4% in ), except for, where a high vacancy rate of Grade remains. Outside the established business activity zones, the vacancy rates are 19% for Grade and 6% for Grade. Top 1 submarkets by take-up, m 2 18, 12, 6, North- East Tulskiy Take-up distribution by economic sectors, % 4% 7% 23% 6% 9% 1% 22% 19% Manufacturing Professional services IT&Telecoms Banking, Insurance&Investment Energy/Industrial Life Sciences Construction/Development Other sectors Top 1 submarkets by vacant areas, m 2 4, 2, North- North 2
Rents sking rental rates for office space in Moscow in 214 was influenced by several factors. On the one hand, the increased volume of new construction has led to a growth in competition in Grade and buildings. On the other hand, sharp fluctuations in foreign currency exchange rates (in six months the ruble dropped by 4%, decreasing by almost 12% during the worst periods) also contributed to the increase in rental rates. Top 1 submarkets by asking rental rates, $/m 2 /year 8 4 Growth in competition in Grade offices resulted in a slight drop in rental rates. By the end of, the average asking rental rate amounted to $75/m 2 /year*. Meanwhile, the rental rates outside the established business districts have also dropped due to the growing competition in facilities located outside MKD, amounting to $49/m 2 /year for. In the and MIBC, asking rates remained stable: $9/m 2 /year and $76/m 2 /year respectively. slight drop in asking rental rates to $65/m 2 /year has also occurred in the rest of the business activity areas. Suschevskiy North-East Tulskiy By the end of 214, the average asking rental rate in Grade amounted to $485/m 2 /year slight growth in asking rates has occurred in MIBC and the : they amounted to $8/m 2 /year and $81/m 2 /year respectively by the end of. The average asking rental rate in other business districts remained unchanged at $545/m 2 /year. Nevertheless, emergence of a large volume of new facilities outside the established business districts has led to the reduction of rates by 6% to $38/m 2 /year. This has contributed to the reduction of rental rates on average in Moscow, since Grade business centers located outside the established business districts account for about 63% of available space in that Grade. In, average rental rates for Grade office space remained at $42/m 2 /year. In established business districts, average weighted asking rental rates remain at $42-45/m 2 /year, with $4/m 2 /year for areas outside the business districts territories. Meanwhile, at the beginning of the year, the asking prices for office facilities of all Grades demonstrated a positive trend. n average price for Grade premises in Moscow amounted to $8,3/m 2, Grade premises were offered for sale at $7,3/m 2, whereas in Grade buildings one could make a purchase at $5,3/m 2. Dynamics of asking rental rates, $/m 2 /year 9 6 3 61 63 7 39 4 42 21 21 Grade А 211 82 83 83 83 39 39 211 Grade В 212 43 212 785 75 75 47 48 47 49 213 213 214 214 sking rental rates by the distance from the center of Moscow, $/m 2 /year Outside MKD 33 From 4TR to MKD 47 From TTR to 4TR 51 From Garden Ring to TTR 69 From Boulevard Ring to Garden Ring 87 Inside Boulevard Ring 1,13 * Here and further in the text rental rates exclude operating expenses and VT 3 6 9 1,2 3
Vacancy and rental rates, major properties to be completed by the end of 214 North GRDE VCNCY North-East North- GRDE 14.1% $25* 2.4% $2** 16с VCNCY 2.4% $41* GRDE VCNCY 25.5% $74* 13.6% $33** 6.1% $58** 1.5% $3** 3.8% $32** GRDE VCNCY 2.6%.% $49** Suschevskiy GRDE 16b VCNCY 16.6% $575* 3.9% $5** 1.1% $45** 17 GRDE VCNCY 45.2% $5* 14.1% $51** 2.3% $45** 16a GRDE GRDE VCNCY 9 39.% $76* 35.6% $8** 8 BVCNCY 43.9% $65* 24.6% $45* 9.6% $43** VCNCY 11 15.3% $9** 4.% $81** 4.3% $42** 18 East 7 1 GRDE 15 13 12 1 GRDE Tulskiy 5 GRDE GRDE 2 6 VCNCY 41.7% $625* 3.9% $62* 12.% $54* VCNCY 14 $52** 3.7% $37** 19a $71* 43.4% $46* 9.7% $4** 8.5% $35 6.8% $31 -East GRDE VCNCY 74.8% 4 VCNCY % 3.5% 19b GRDE 3 2a VCNCY 8.1% $355*.2% $34** 2b GRDE VCNCY 1-14 15 16a-16c 17 Suschevskiy 18 19a-19b Tulskiy 2a-2b 4 19.5% $37* 9.2% $37** *Mainly for shell & core premises **Mainly for fitted-out premises
Prognosis ccording to statements made by developers, more than 1.2 million m 2 of high-quality office space, half of which belongs to Grade, are expected for delivery by the end of the year. However, considering the pace of construction, one should expect that in reality no more than 74, m 2 will be built. However, even this amount of new supply will exceed the figure of 213 1.4 times and 1.3 times that of 21, a year when the highest volume of office space for a post-recession period was delivered. Meanwhile, the demand for high-quality office space is characterised as moderate. One can observe the formation of delayed demand by companies, which, on the one hand, are preferring to wait out the period of political instability, while on the other hand, are hoping to get the best commercial terms from current or potential lessors taking advantage of the growth in competition among buildings. The increasing pace of Grade and B office space construction will stimulate growth in vacancy rates in this segment. This factor will have a particularly strong impact on Grade offices, where total supply can grow by 14% until the end of the year. However, the amount of space delivered in new buildings, as well as the current level of demand for existing facilities mean that the growth in vacancies will be significantly lower and will not exceed 3%. t the same time, the vacancy rate in Grade B may decline. further change in rental rates will also depend on foreign currency exchange rates. Stabilisation of the ruble will reduce the risks of increased competition between Grade office buildings and keep the average asking rental rate from dropping further. However, the weakening of the national currency may lead to a further decline in average rental rates, which will be particularly noticeable in the regions with the highest office construction rates. Top 1 submarkets by 214 pipeline, thousand m 2 4 2 North- Office Space in TYPE OF BUILDING NUMBER OF BUILDINGS Suschevskiy North RE, M 2 Completed 14 659, Grade А 11 542,2 Grade В+ 3 116,8 Under Construction 7 655,26 Grade А 6 554,26 Grade В+ 1 11, Total 21 1,314,26 Major business centers expected for delivery by the end of 214 in Moscow BUILDING DEVELOPER RE, M 2 Comcity, building lpha PPF Real Estate 126, OKO Capital Group 11, Lotos MR Group 79,5 Evolution Snegiri 79, Vereyskaya Plaza III Plaza Development 72, Port Plaza Plaza Development 62,5 Sirius Park Plaza Development 62,47 Vodniy MR Group 61,57 5
485 offices in 63 countries on 6 continents United States: 146 Canada: 46 Latin merica: 25 sia Pacific: 186 EME: 84 $2.1 billion in annual revenue 135.8 billion square feet under management 15,8 professionals and staff Nikolay Kazanskiy Managing Partner Nikolay.Kazanskiy@colliers.com Vladimir Sergunin Business Development Director Vladimir.Sergunin@colliers.com Vladislav Ryabov Partner, Regional Director: Industrial, Warehouses, Land Vladislav.Ryabov@colliers.com nna Nikandrova Regional Director, Retail Property nna.nikandrova@colliers.com Stanislav Bibik Executive Director, Capital Markets Stanislav.Bibik@colliers.com Sayan Tsyrenov Director, Capital Markets Sayan.Tsyrenov@colliers.com Eleonora Bogdanova Director, Office gency Eleonora.Bogdanova@colliers.com Vera Zimenkova Director, Corporate Solutions Vera.Zimenkova@colliers.com Francois Nonnenmacher Director, Occupier Representation Francois.Nonnenmacher@colliers.com Marina Tolstosheeva Regional Director, Head of Property Management Department Marina.Tolstosheeva@colliers.com Ekaterina Podlesnykh Head of Street retail, Retail Property Ekaterina.Podlesnykh@colliers.com Dmitry Romanov Director, Valuation Services Dmitry.Romanov@colliers.com Yulia Gorlova Director, Consulting Yulia.Gorlova@colliers.com Colliers International Russia BC Naberezhnaya Tower 1 Presnenskaya Embankment Moscow 123317 Tel. +7 495 258 51 51 3 Volynsky Lane St. Petersburg 191186 Tel. +7 812 718 3618 colliers.com Olga Kozlitina Director, Marketing & PR Olga.Kozlitina@colliers.com Vladislav Nikolaev Head of Retail Consulting, Retail Property Vladislav.Nikolaev@colliers.com Diana Reshetilova Head of nalitical Department Diana.Reshetilova@colliers.com ndrey Kosarev General Director, St. Petersburg ndrey.kosarev@colliers.com Copyright 214 Colliers International. The 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. ccelerating success.