MOSCOW OFFICE 25 Office market review Supply The total supply of high-quality business centers in Moscow has reached 6.4 million m² in 25. Since the beginning of 25, the volume of the existing premises has increased by 46, m² of office space, which is more than two times less than the volume delivered in the comparable period of 24. The pace of growth of completion has been reduced relative to 2-24 due to the general decline in economic activity, as well as the high cost and low availability of financing. The largest amount of office space since the beginning of the year, 24,2 m² was completed in 25, which is still less than during the same period last year. ccording to our expectations, the total volume of the new completions this year will be two times smaller. Key market figures INDEX - 24-25 Total stock, million m² 5.5 6.4 Grade А..7 Grade В 2.2 2.7 Completions, thousand m²,5.9 46. Take-up, thousand m² 77. 76. Net absorption, thousand m² 26. 48. Vacancy rate, % 2.8 5. Grade А 25.8 26.6 Grade В 9..6 Weighted average rental rates in CBD, $/m²/year 75 5 Grade А 84 66 Grade В 62 72 Completions, thousand m² of GL The share of Grade spaces in the structure of new completion for the three quarters amounts to 7%, while Grade makes up 27%. For comparison, during the same period of 24 distribution of new completions was more differentiated: Grade 54%, Grade %, Grade %. 6 4 2 8 6-5% Largest buildings completed in 25 PROPERTY GRDE DEVELOPER / OWNER Oruzheiny MFC А Sberbank Investments Limited, Megafon OFFICE RE, m² 9, Simonov Plaza А bsolut Realty 49,5 Kuntsevo Plaza А ENK 29,9 lgoritm BIN 28,76 Danilov Plaza MR Group 2,64 4 2 2 22 2 24 25 П Completions by the end of 25 (Colliers International expert forecasts) Completions by the end of 25 (developer s plan)
Despite the large number of new Grade facilities, the segmentation of the total supply has not changed seriously from the beginning of 25: Grade offices accounted for 2%, Grade and Grade accounted for 48% and 29%, respectively. Several quarters earlier a decline in growth rate of completions in the central part of Moscow was observed. This time, the largest amount of the new space (about 2% of the total volume of ) was completed exactly in the Central Business District (CBD) in the 25. The areas being most rapidly built outside the CBD are still the Western dministrative District and the MIBC Moscow City. These districts accounted for 8% and 7% of the total completion since the beginning of the year. In the next quarter, the territorial structure of completions will change: a large volume will be delivered in the South- West (52%) and South (2%), substantial part of which will be represented by Grade /- premises. Demand The total amount of take-up since the beginning of the year amounted to 76, m², which is comparable with the volume of transactions concluded in - of last year (77, m²). The large amount of available supply and currency fluctuations forced owners to review their lease terms and rental rates towards lower levels, which revived demand from the tenants. Since the beginning of 25, several new large transactions have been closed in the office segment, such as the leasing of 2, m² by the Moscow Region Government in the business center Orbita-2 located on Kulakova Street, the leasing of 2, m² by didas in a new building of Krylatskie Hills 2 Business Park (building 5), as well as the company Fesco occupying 5,6 m² in a detached building at 75 Sadovnicheskaya Street. Over the three last quarters, there has still been an increase in the share of renegotiation and renewal deals, which account for nearly 4% of the total of concluded transactions in (in - 25% in - 4%). However, we expect the share of such transactions to decline in the short term, as most tenants have already revised their lease terms for at least 2- years. Top- submarkets by new completion, thousand m² North Elektrozavodsky Sushevsky North-West Leningradsky South CBD South-West Moscow City West Top submarkets by areas expected for delivery in 25 in Moscow, thousand m² 2 Take-up, thousand m² 6 4 2 24 24 2 4 24 24 25 25 25 Completions (Colliers International expert prognosis) Completions (developer s plan) Source Colliers International Take-up distribution by type % 8% 6% 4% 2% % 29 2 2 22 2 24 25 New deals Renegotiation/Renewal 2 Office market overview 25 Moscow Colliers International
thousand, m² The largest volume of demand was presented by the companies of Manufacturing, Professional services and Production and distribution sectors - in total they account for 5% of all the realized areas. Vacant premises In 25, the total volume of vacant supply amount to 2,4 million m² of office space, 45% of which are in Grade premises and 4% in Grade. The current volume of vacant supply corresponds to a vacancy level of 5%. Changes in vacancies in one quarter amounted to.6 percentage points. The highest vacancy rate was observed in Grade office buildings, where the rate did not change from the previous quarter and amounted to 27.2%. Such a vacancy rate was a result of the majority of completions being in districts of business activity, where demand is traditionally higher. Further vacancy rate growth was prevented by partially occupied sites delivered to the market (for example Oruzheiny BC and lgorithm BC), and new demand for office premises. Grade B offices had a vacancy rate of,6% at the end of September (for Grade this was 4.%, while in Grade 7.%), which represented an increased from.9% at the beginning of the year. The largest concentration of vacant space in absolute terms is still in the west of Moscow, in the CBD, as well as in MIBC Moscow City. The lowest vacancy rate was observed in the central business district; 9.2% of space is free area according to the 25 results. The highest vacancy rate (6%) is still in Moscow City. bout 2% of offices are vacant outside the established business districts southwestern Moscow. Take-up distribution by sector 4% 4% 6% 6% % 4% 6% 7% 9% 25% 9% Manufacturing Professional services Energy industry Retail Banking and finance IT & Telecoms Public Life Sciences Vehicles, Transport & Logistics Other sectors Confidential Top- submarkets by take-up, thousand m² 24 8 2 6 Vacancy rate, % % 27.2% 25% 2% 5%.6% % 5% % Vacant space by submarkets, % 6 5 4 2 4% 5% % 25% 2% 5% % 5% % 27 28 29 2 2 22 2 24 25 Grade Grade B Vacant space, thousand m² Vacancy rate, % Office market overview 25 Moscow Colliers International
Rental Rates Owners are continuing to review rental rates and switching to rouble-denominated lease contracts. The average asking rental rate denominated in roubles for Grade office space decreased by 5% and amounted to RUB 22,562/m²/year in 25, for Grade B rental rate decreased by 4% to RUB,722/m²/year. The average asking rental rate denominated in dollars for Grade office space decreased by % to $575/m²/year, for Grade B it increased by 7% to $499/m²/year. The change in the asking base rental rates and specifically their moderate decline may signal they are approaching the minimal levels in a number of business centers, but owners remain flexible especially regarding the rent-free period. Owners of office buildings experiencing difficulties in filling vacant premises are ready to provide incentives, including moving to roubles, setting an exchange rate corridor and establishing an acceptable level of indexation at 8-%, which is below the official rouble inflation. New to the leasing terms is the opportunity to review rental rate in 2- years in the contract and a cancellation option if a compromise in terms of the rental rate is not reached. Sale prices The average market sale prices denominated in roubles has not changed for the last three months. In September, the average price for Grade offices was RUB 292,/m², Grade premises are offered for sale at an average price of RUB 5,/m² and the average asking price for Grade buildings was RUB 2,/m². Grade and offices located in the city center were offered at RUB 5,/m². For offices far more removed from the CBD, where the major share is formed by Grade B offices, the average asking price was at the level of RUB 8,/m² for Grade, and RUB 5,/m² for Grade. Most high-quality properties in the vicinity of the Moscow Ring Road (MKD) is currently being offered at an average of RUB 7,/m² for Grade and RUB,-,/m² for Grade B. The asking sale price in the towers of MIBC Moscow City remained at the same level as at the beginning of the year, at $6,-7,5/m². sking base rental rates for Grade offices* sking base rental rates for Grade B offices* 55 54 55 54 8 8 855 8 8 8 79 785 49 76 75 47 5 48 499 7 687 65 67 4 4 46 465 8 95 575 $/m²/year $/m²/year 22 22 22 22 2 2 2 2 24 24 24 24 25 25 25 22 22 22 22 2 2 2 2 24 24 24 24 25 25 25 RUB/m²/year RUB/m²/year 2 verage sale prices dynamics $/m² ** 247 27 2647 254 249 272 256 2565 275 2526 24782 252 255 2566 22562 29 26 297 57 524 422 992 78 4275 722 6 584 645 57 * Dollar rental rents before 24 were recalculated into roubles using RUB/USD average exchange rate in the relevant period, as the office market were mostly in dollars prior to that. Since 24 rental rates are presented in the currency of nomination. 9 8 7 6 5 4 2 Grade А Grade В+ Grade В- ** The exchange rate of USD = 66,77 roubles is used to calculate rouble prices 4 Office market overview 25 Moscow Colliers International
Vacancy and rental rates, key buildings expected to be completed in 25 GRDE VCNCY RTE -4 Central Business District 8.8% 6.4% $66** $45** 4.% $275** 5 MOSCOW CITY 2.8% $494* 29.5% $87* 6a-6c LENINGRDSKY 6с 7.%.% $48* $8* 6.7% $4** 7 SUSCHEVSKY 6b 7 2.2% 8.2% $* $6* 4.% $248** 8 ELEKTROZVODSKY 6a 4.6% $75* 9.% $24** 2.8% $75** 9a-9b TULSKY 8 9 % 5.5% $4* 6.7% $9** 2a-2b LENINSKY 8 7 5 2 4 4.7% $42* 4.% $287** 7.4% $26* NORTH 5 4 2 8.6% $8* 5.6% $5** NORTH-EST 6 9.5% % $69** NORTH-WEST 4 9a 2.% $98* 8.2% $85*.4% $6** WEST 2a 9b 49.9% $5* 29.% $259* 7.6% $28** EST 2 2b 25.% $75* 5.% $8** SOUTH 5 24.6% $5* 9.6% $292** SOUTH-EST 5.9% $8*.2% $4*.% $** SOUTH-WEST, 5, 9 PREMIUM LOCTION * Mainly for shell&core premises ** Mainly for fitted-out premises 5 Office market overview 25 Moscow Colliers International 6.% 28.% $25* $259* 2.% $66**
% Office space in Moscow City Trends and Forecast > Since the beginning of the year, many owners have postponed projects at an early stage of construction (-5% of works performed) to prevent financial losses. Most of these projects were supposed to be constructed in phases and owners will resume construction only after a customer is secured (built-to-suit format). bout 8% of the projects that were scheduled for delivery by end of 25 are frozen and about 2% have been deferred to later periods. > ccording to developers plans about 5, m² of office premises should be built and commissioned up to the end of 25; however, according to our forecasts, not more than 28, m² will be put into operation. The volume of office completions is expected of reach 7,-75, m². It will be significantly lower in the coming years: according to our expectations, about 5, m² will be delivered in 26, and about 4, m² in 27. > On the back of restrained development both by foreign and Russian companies, the office take-up volume in 25 will be 8% lower than in 24, at 8,-9, m². The volume of the demand will exceed the volume of new completion, which will positively influence the market and will limit the growth of the vacancy rate. We estimate the overall vacancy rate will be about 5% in Moscow by the-end of 25. > The base asking rental rate denominated in roubles will remain at the current level for both Grade and Grade B until the end of the year, and more likely the owners will find alternative methods for reducing the rental payment, such as extending the rent free period, fixing the dollar exchange rate or band for the first year of rent and etc. > Rental rates will continue to be converted from dollars into roubles. n opportunity to review rental rates or a cancellation option will still be offered after 2- years of leasing premises. million m 2 Vacancy rate, take-up and completions 2 4.2 5.5 6.5 2. Completions, million m² Take-up, million m² Vacancy rate, %.6 8.4 9.2 4.2 5. Top-5 business centers expected for delivery in Moscow in 25 PROPERTY GRDE DEVELOPER TYPE OF BUILDING Neo Geo, st and 2 nd phases NUMBER OF BUILDING OFFICE RE, M² Completed 855, Grade А 8 78,297 Grade В+ 6,8 Under construction 4 466,2 Grade А 65,2 Grade В+, Total 5,2, 8 5 2 9 6 OFFICE RE, m² В+ Stone Hedge 89,2 2 Sirius Park Plaza Development 62,75 Neopolis А -Store Estates 48,85 4 tlantic А M Development and Construction 47,2 5 G, st phase А ComStrin 6,57 6 Office market overview 25 Moscow Colliers International
52 offices in 67 countries on 6 continents United States: 4 Canada: Latin merica: 24 sia Pacific: 99 EME: 8 $2. billion in annual revenue 58 million m 2 under management 6, professionals and staff Nikolay Kazanskiy Managing Partner Nikolay.Kazanskiy@colliers.com Vladimir Sergunin Partner Vladimir.Sergunin@colliers.com Vera Zimenkova Director, Corporate Solutions Department Vera.Zimenkova@colliers.com Luban Davidovich ssociate director, Office gency Department Luban.Davidovich@colliers.com Kermen Mastiev Head of Division, Sales&cquisitions Office Department Kermen.Mastiev@colliers.com Francois Nonnenmacher Director, Occupier Representation Department Francois.Nonnenmacher@colliers.com Olesya Dzuba Head of nalitical Department Olesya.Dzuba@colliers.com Olga Kozlitina Regional Director, Marketing&PR Olga.Kozlitina@colliers.com Colliers International Group Inc. (Nasdaq:CIGI, TSX:CIG) is a global leader in commercial real estate services with more than 6, professionals operating from 52 offices in 67 countries. Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top outsourcing firms by the International ssociation of Outsourcing Professionals Global Outsourcing for consecutive years, more than any other real estate services firm. The Lipsey Company and National Real Estate Investor magazine ranked Colliers International among three most recognized commercial real estate brands. Colliers International opened its office in Russia in 994, today the offices in Moscow and St. Petersburg has more than 25 employees. Colliers International in Russia is a member of the Russian Guild of Property Managers and Developers (RGUD), Russian Council of Green Building and Russian Council of Shopping Centers (RCSC). Colliers International Russia Presnenskaya Embankment BC Naberezhnaya Tower, Block C, 52nd floor 27 Moscow, Russia +7 495 258 55 Volynsky Lane, th floor BC Northern Capital 986 St. Petersburg, Russia +7 82 78 68 colliers.ru Copyright 25 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 7material contained Office market in this report. overview H 25 Moscow Colliers International ccelerating success.