Brief market review of Moscow office real estate Q3, 2012 1
Moscow office real estate market In Q3 2012 126,1 thousand sq m of quality office premises (hereinafter class A, B+, B- business centers), that is almost equal to the similar period of the last year (140 thousand sq m of office space was commissioned in Q3 2011). In Q3 2012 absorption volume amounted to 140-150 thousand sq m of office premises and exceeded new supply volume by 10%, thereby the balance on the market remained. The vacancy rate has slightly decreased by 0,5 1%. Rental rates for office spaces are still stable on average on the market. Table 1. Main indicators of Moscow office real estate market, Q3 2012 Main indicators Class А Class В+ Class В- Volume of quality office space 3 888 4 700 3 400 according to the results of Q3 2012; thousand sq m Structure of the office real estate 33% 39% 28% market, Q3 2012. Commissioned in Q3 2012; thousand 104,5 21,6 0 sq m To be commissioned in Q4 2012; 260 231,1 thousand sq m Share of vacant premises, Q2 2012 11,7% 10% 12,5% Announced average rental rates, $/sq 750-1 250 650-750 m/year (excluding VAT and operational costs), Central business district 260-400 Announced average rental rates, $/sq 650-750 370-550 m/year (excluding VAT and operational costs), out of Central business district Announced average selling prices, 7 500-15 000 $/sq m (excluding VAT), Central 3 500-7 500 2 500-4 000 business district Announced average selling prices, 4 500-6 500 $/sq m (excluding VAT), out of Central business district Operational costs, $/sq m/year 110-140 80-115 60 85 2
Supply According to the results of Q3 2012 a total volume of the quality office real estate amounted to 12,0 million sq m on the market in Moscow. Availability of quality office premises for 1 000 residents of Moscow was 1 040 sq m. In Q3 2012 126,1 thousand sq m of office space were commissioned, 83% of a gross area referred to class A, 17% - class B+/B-. However, the maximum increase of new supply, commissioned during Q1-3 2012, was fixed in Nothern Administrative Okrug, that was 32% of total supply commissioned during this period (BC Sky Light, Business-park River City). The second place, according to the number of delivered premises, belongs to Central Administrative Okrug (22%). Chart 1. Volume of quality supply, class A, B+, B-; thousand sq m Market volume as of beginning of the period, thousand sq m New construction, thousand sq m Developers assert that 460 thousand sq m of office premises are planned to be commissioned till the year end (Table 2). However, according to GVA Sawyer no more than 250 thousand sq m of office space will be commissioned. At the same time the most part of new supply will be commissioned in Central Administrative Okrug, including major office projects in Moscow International Business Centre Moscow City. Table 2. New projects of office real estate in Moscow, 2012-2013 Name of BC Gross/office area, sq m Commissioned in Q1-3 2012 Commission ing/ status Light House 44 580 / 20 800 1Q2012 BC «Vorob`evsky» 16 000 / 14 400 1Q2012 Business-park River 12 400 / 9 500 1Q2012 City. «Grand Setun` 75 460/60 000* 2Q2012 Plaza» «Olimpic Hall» 23 107 / 11 000 2Q2012 «Dezhnev Plaza» 17 500/11 000 2Q2012 BC «Pyr`eva 2» Н.д. /16 400 2Q2012 Sky Light 111 240/77 500 3Q2012 MFC City Point 76 000 / 27 000 3Q2012 «Krasnogorsk 31400 /21 600 3Q2012 Plaza» Total, Q1-3 2012 269 200 To be commissioned in Q4 2012-Q1 2013 «Merkury City» 158 500/ 86 000 4Q2012 BC as part of HC 145 180/17 500 2013 Sky House BC as part of hotel 135 500/62 000 4Q2012 and business complex Park Pobedy «Alkon» 102 200/ 66 800 4Q2012 «Devyat` akrov», 90 700 /67 800 4Q2012 Phase 2 Office and hotel 76 950 /26 050 4Q2012 complex Radisson SAS Olympiysky Golden Gate 46 700 /18 000 2013 BC «Aerodom» 36 000 /33 000* 4Q2012 «Atmosphera», ess 20 700/20 000 4Q2012 quarter «Kantri Park 3» 27 800/22 000 4Q2012 BC «Nakhimovsky» 22 900 / 15 370 2013 BC «Leninsky pr, 22 650/16 200 4Q2012 119» Premium: West 20 000/ 18 800 4Q2012-2013 «Yusupov Dvor» Н.д. /10 000 4Q2012 MFC Technopark 112 000 /21 000 4Q2012 «Orbitа», Phase 2 BC «Mar`ina 17 500/14 500 4Q2012 3
Name of BC Gross/office area, sq m Commission ing/ status roshcha» Solutions, building Н.д. /9 500 4Q2012 2;3 «Domino» 7 800 / 6 900 2013 * - as estimated In Q3 2012 the vacancy rate decreased on average in the city and amounted to 11,7% in class A quality business centres, 10% - in class B+, 12,5% - in class B- (BC sample amounted to 67% of all BC of Moscow). Chart 2. Vacancy rates Among the main tendencies in Q3 2012, it is possible to single out: 1. Volume of new office space commissioning increases in comparison with the beginning of the year, but it is not at high level in comparison with the pre-crisis period. 2. Tendencies of the previous quarter, connected with the growth of developer`s activity on the market, were also in Q3. It will influence the increase in the volume of new supply in 2 2,5 years. In Q3 2012 10 large projects with a gross area of more than 500 thousand sq m (including projects which will be reconcepted) were announced (Table 3). Table 3. Large projects, announced to be built in Q3 2012 Facility Location Gross/offic e area, sq m Develo per Administrative Amin`evs 43 500 / N.a. and business koye N.a. centre (instead Highway of «Akvadrom») MFC «Bol`shoy N.a. / MR (reconcept) city» 88 000 Group BC «Lotos» Intersecti 150 000 / MR (реконцепция) on of 59 000 Group odesskay a Street and Nakhimo vsky Prospekt BC 2 nd 51 200 / AFI LLC «Parking Brestskay N.a. Develo Tverskaya a Street pment Zastava» MFC «Оkо» МIBC N.a./ Capital «Moscow City» 100 000 sq Group m MFC Generala 54 200- - Belova Street office space, 20 000 sq m of which Mosgorstat building Wall Street Valovaya 33 316 sq «Avgur Street, 37 m Estate» Business-park Nagatins 80 000 sq Clever kaya m of Estate Poyma commerci al real estate (redevelo pment) BC Grafsky, 9 75 000 / CJSC N.a. «Variant or», BC Marshala Biryuzova, building 1 100 000 / N.a. LLC «Favorit Technol ogy» 3. Market decentralization still remains. South-western, western and north- 4
western districts of the city are the most popular and in high demand among developers as well as among tenants. Demand Structure of demand for premises has remained stable during 2011-2012. Tenants usually demand an area of about 500 sq. m. Chart 3. Structure of demand for office premises 1 14% 24% 7% 22% 33% 0-150 150-300 300-500 500-1000 over 1000 Table 4. Major lease transactions in BCs announced in Q3 2012. Tenant Leasable BC area, sq. m. FBK Company 2 600 BC «Myasnitskaya Plaza» and BC «Sadovo- Spasskaya, 24» «Pronto-Moscow» 2 300 BC «South Port» «VTB Leasing» 2 100 BC «South Port» Richemont 2 000 BC «Naberezhnaya Tower» Continental Tyres 1 884 BC Lighthouse Rus Lafarge 1 715 BC«Vivaldi Plaza» CROC IT-Company 1 600 BC «Intergral» CBRE 1 600 BC«White Tenant Leasable BC area, sq. m. Square» «Security Code» 1 400 Office park «Semenovsky» «Center of Financial 1 300 BC «Kozhevniki» Technologies» «Energoprom Management» 1 300 BC «Dvintsev» Starlett prêt-a-porter 1 300 BC «Na Maloy Gruzinskoy Azimut Hotels 1 000 BC «Novospassky Dvor» SMEG 800 BC W-Plaza «Raiffeisen Capital» 760 BC «Concord» «Maxima Logistic» 550 Office park «Semenovsky» «Stroygazconsulting» 340 BC «Europe Building» In Q3 O1 Properties bought two BCs at once, see Table 5. Table 5. Major investment transactions inq3 2012. Purchaser O1 Properties O1 Properties Area (office), sq. m. BC Sum of transactio n 33 250 Ducat III $370 million 40 000 Silver City $333 million Constant tendencies of previous periods are as follow: As before many tenants focus on fit-out premises, while big companies consider Shell&Core premises. There is a stable demand for buying small office premises. A high demand for premises inside the Garden Ring Road still remains. Vacancy rates in this segment are practically the same as those during pre-crisis period, and they amount to no more than 5%. 1 According to GVA Sawyer clients requests for office premises 5
Financial conditions As GVA Sawyer specialists predicted, in Q1-Q3 2012 rental rates for office real estate remained stable on average in the market. Growth of rental rates was observed in several class A quality BCs, located mainly in the Central Administrative District. According to the results of Q3 2012, rental rates for class A BCs in the Central Business District amounted to $750 - $1 250 2 /sq. m./year (hereinafter triple net). Rental rates for class B+ total $650 - $750/sq. m./year within the Central Business District, $370 550/sq. m./year outside the Central Business District, rental rates for class are $250-400/sq. m./year. Volume of operational costs for class A offices amounted to $110-140/sq. m./year on average, for class В+ offices - $80-115 sq. m./year, for class В- offices $60-85/sq. m./year. Price range for office premises remains stable as well (class А $7 500-15 000/sq. m., excluding VAT, within CBD, $4 500-6 500/sq. m. outside CBD; class В+ $3 500-7 500/sq. m.; class В- $2 500-4 000/sq. m.). Chart 4. Average weighted rental rates, $/sq. m./year/triple net In Q4 2012 rental rates will be stable, and in the first half-year of 2013 one can expect a slight growth of rental rates by 5-7% in office real estate market. Rental rates within the Garden Ring Road will grow more rapidly than on the market in general. Next year rental rates may increase by 10-15%. 2 Weighted average value among projects put on the market 6
Аналитический документ по исследованию рынка недвижимости 2012 GVA Worldwide Australia Austria China Cyprus Denmark Estonia Finland Germany Great Britain Greece Hong Kong (PRC) Hungary Ireland Italy Lithuania Netherlands New Zealand Poland Russia Sweden Switzerland GVA Sawyer contacts Head office (Moscow): Bernikovskaya Embankment House Nikoloyamskaya Ul. 13, Str.17 109240 Moscow, Russia Тel: +7 (495) 797-4401 Fax: +7 (495) 797-4400 info@gvasawyer.com Office in St. Petrsburg: BC Mir, Elfimova Ul. 4а, office 330 190031 St. Petersburg, Russia Тel: +7 (812) 334-9392 info-spb@gvasawyer.com Ofice in Krasnoyarsk: Diktatura Proletariata Ul. 32 Office 4-4, 660017 Krasnoyarsk, Russia Тel: + 7 (391) 252-9982 info@gvasawyer.com Office in Krasnodar: 350010 Краснодар, Россия Zipovskaya Ul. 5, building 8, office 309 Тel: +7 (495) 797-4401 info@gvasawyer.com Подготовлено GVA Sawyer 2012 www.gvasawyer.ru 7