thousand Key Market Indicators Total Stock 2.88 million Vacancy rate 8.7% Class А 1.13 million Class В 1.75 million Completions volume 2017 116,100 Class А 6.3%, Class В 10.3% Weighted average rental rate, Class A RUB//month* 1,353 Net absorption volume 2017 123,215 Weighted average rental rate, Class B RUB//month* 984 * Hereinafter rental rate includes OPEX and exclude VAT. Supply The key trend of the office market in 2017 was reconstruction of existing outdated buildings, the share of which in speculative supply has returned to growth (4 in the total volume of new office spaces available in the market). Moreover, this figure is expected to grow in the upcoming year. The reconstruction primarily affected Class B office spaces in areas within the city centre. The total volume of speculative supply during the year was 116,100 which is 2 less than this figure a year before when we observed a large volume of new non-speculative (end-user) construction. Business centres commissioned after reconstruction in 2017 NAME DISTRICT CLASS GLA, SQ M Petrovsky Dvor Petrogradskiy B 2,354 MFK NEVKA Vyborgskiy B 3,100 Senator, Bolshaya Morskaya, 15 Admiralteyskiy A 4,508 Ponomarev-Center Admiralteyskiy A 8,600 ReForma Staroderevenskaya Primorskiy B 12,900 Chkalovskiy 50 Petrogradskiy B 13,300 Total volume of completions this year has achieved a ten-year minimum. Herewith, all new supply that entered the market in 2017 was intended for rent. Office space completions 400 350 300 250 200 150 100 376 304 143 43 171 New supply by purpose 2017 2016 2015 50 0 Speculative completions 5 29 121 84% 12 44 206 183 28 118 151 144 144 116 102 Non-speculative completions 6% Rent Sale Owner occupied 39% 11% 1
Demand Net absorption in 2017 fell to a fresh 8-year minimum accounting for 123,215. The main volume of absorption took place in 2017, when quality office blocks with occupancy were commissioned (BC Graffiti). In 2017, the share of companies operating in the IT sector gained an advantage over the energy sector for the first time in six years, having made up 42% of the total demand volume against 16% that relates to the five-years-leaders energy sector companies. The largest leased deals (over 2,500 ) in the office segment were negotiated in Graffiti, Chkalovskiy 50, Moskovskiy 151 and Moskovskiy 94 (around 14,000 in total). The leadership position of the IT sector in the total volume of closed transactions as well as the decrease in net absorption can partly be explained by the low activity on the part of energy companies in the office market in 2017. Financial companies and banks enhanced their activity year-on-year. Companies operating in the consulting and professional service sector were effective in terms of expansion, relocation and new leases. Basically, 4 of demand in 2017 was made up of Сlass A offices. On the back of the high volume of business centres under reconstruction and the reduction of available new supply, 6 of all deals closed in 2017 accounted for reconstructed office buildings. Deals breakdown by segment (GLA) Deals breakdown by the city district (GLA) 2% 7% 11% 14% 21% 3 As last year, the office space most in demand was that varying from 100 to 500 and companies operating in professional services were the most active in obtaining it. Despite the IT cluster leasing large office blocks, the largest deal in 2017 (over 8,000 ) went to the energy sector. The volume of large office leasing transactions (> 5,000 ) has a downward trend due to the shortage of available space for lease. Deals breakdown by leased area (GLA) Centralniy Moskovskiy Petrogradskiy Admiralteyskiy Vyborgskiy Primorskiy Kalininskiy Vasileostrovskiy Other 8 6 9 8 7 4 2 42% 6 5 4 Other Public authorities Manufacturing Retail 3 2 1 Development, engineering Financial companies and banks IT&T Pharmacy and life science Professional services Energy and resources <100 100-250 250-500 500-1,000-2,000- >5,000 1,000 2,000 5,000 2
2 Обзор рынка офисной недвижимости III квартал 2017 Санкт-Петербург Colliers International
RUB//month Vacancy rate and commercial terms The volume of quality business centres commissioning in 2017 was the lowest in the last 10 years. The average market vacancy rates are also showing a downward trend, particularly in Class A. Recently commissioned properties showed the occupancy rate of not less than 6. The largest ones Renaissance Business Park (GLA 20,940 ) and Graffiti (GLA 13,970 ) entered the market fully occupied already. Moskovskiy district registered the lowest vacancy rate (4%) by the end of 2017 due to the high demand of this business district. The increase of weighted average rental rates in 2017 was no more than 2%. However, this indicator does not provide an insight into the real situation in particular districts and quality business centres. Despite a slight increase in average requested rental rates, the situation in particular business districts and quality business centres is quite different. Class B offices prevailed among the leaders of rate growth in 2017. As for districts, Moskovskiy and Centralniy are in the lead followed by Petrogradskiy and Admiralteyskiy. In certain quality business centres, the growth in rental rates reached 1, while the average growth in high quality business centres is on average 1 from the beginning of the year. Rent rates 1 500 1 400 1 300 1 200 1 100 1 000 900 800 700 600 1 353 2010 2011 Class A Class B Although this year was marked by minimum absorption, the vacancy rate remains low on the back of decreasing new supply delivered to the market. Modest grow of vacancies in Class B offices at the end of the year was due to new supply in the market in the second half of this year. 984 Vacancy in Class A and B business centres 2 2 1 1 Class A Trends and forecast Class B 10,3% 6,3% In the upcoming year, there will be a well-preserved low volume of speculative development (around 102,000 GLA announced without Lahkta Center). In new supply, the share of reconstruction projects will remain stable and is likely to grow further. An increasing demand for large office blocks and its shortage in the market will create a trend for office space revision. The re-conception of offices is likely to be associated with organising special areas for company s business processes. Rental relationships will move towards a more flexible approach: tenants will take a leading role in the whole process, particularly in terms of the redevelopment of working spaces. We can expect increasing interest in co-working spaces, agile-offices and open-space offices together with the growing share of the IT-cluster in the volume of demand. New projects will be announced, especially within either redevelopment areas or as a part of multifunctional complexes. Several companies have already announced the development of new projects. Amongst the announcements are the following: Adamant Holding (mixed used complex Varshavskiy Express-2), Tesla (business centre on 24th line V.O,15/2) and CJSC «Avielen A.G.» (new business centre as a part of AIRPORTCITY St. Petersburg). 4
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