GVA Sawyer experts have prepared quarterly reports on the office space market in three Russian cities
About 100 square metres of office space (hereinafter business centers Class A, B +, B) were commissioned in the 2nd quarter of 2012, which is on the level of the same period last year, but is two times lower than in 2010. Instability in the European markets and Dollar exchange rate fluctuations led to long decision making processes with regard to new office transactions. In average, the process lasts for 2-3 months or more, due to tenants‘ stricter approach to financial planning when choosing a new office. The average rental rates in Moscow remained stable (class A: $ 650-750 per square metre/year, class B +: $ 370-550 per square metre/year).
Trends of the first 6 months of 2012
The volume of new commissioned objects is decreasing. Moscow‘s main problem remain traffic jams and the lack of parking lots. In the 2nd quarter of 2012, the construction of several projects was cancelled or put on ice, primarily due to the heavily congested transport infrastructure. The Urban and Land Development Commission has cancelled the construction of Business Centre “Legion VI“(Kulneva Street) with a total area of 85,000 square metres, located near Kutuzov Prospect. Office space of the project “Aviapark“ was reduced from 280,000 square metres to 11,200 square metres. And the construction of the high-rise building MFK on Altufyevskoe Shosse , blg. 2 (developer “Stroygazconsulting“) was also cancelled.
In the 2nd quarter of 2012 one could observe an increase in developers‘ activities in the market, which will affect the volume of new supply in 2 - 2.5 years. Major construction projects announced for the 2nd quarter of 2012 are Business Centre “Iskra“ (201.000 square metres), which will be located on the site of Engineering Office “Iskra“, and O1Properties, who bought the confectionery factory “Bolshevik“ on Leningradskij Prospekt, and plans to build a business centre on its place. The total area of the existing buildings is 55,000 square metres; the reconstruction of the first part (8,000 square metres) is planned for next year. Total investment in the project amounts to $ 111 million. The construction of the Business Centre on the 1st km of Rublevo - Uspenskoe Shosse Pallau-RB (55,0000/30,000 square metres office space) has been initiated. The Bank of Moscow has been granted premises for the construction of the commercial and office centre in Moscow downtown (Pyatnitskaya Street).
The largest number of transactions (in square metres) is concluded by finance and IT companies.
The biggest purchasing transactions for office space were made by banks in order to consolidate back-offices. ZAO Raiffeisenbank“ bought 24,945 square meters in the Business Centre “Menger“ (Nagatino i-Land), Alfa Bank bought 23,000 square metres in Business Centre Paskal“ (Nagatino i-Land). The strategy of drawing banking institutions to the business park Nagatino i-Land continues.
The total market volume of qualitative office space in St. Petersburg comprised about 1,820 square metres in the 2nd quarter of 2012. Commissioning of new facilities for the 2nd quarter of 2012 is minimal. The vacancy rate is gradually decreasing, rental rates have stabilized: class A average rent amounts to 15,110 Rubles per square metre/year, Class B comes to 11,780 Rubles per square metre/year. The main part of high-quality business centres has to be commissioned in the 3rd or 4th quarter of 2012. About 160,000 square meters of quality office space are expected to emerge on the St. Petersburg market in 2012.
The number of class A vacant space remained almost unchanged in the 2nd quarter of 2012, since the take-up is quite slow in business centers which have opened within the last six months. The high vacancy rate of class A spaces is due to unoccupied space in big projects such as “Saint Petersburg Plaza“, “Aeroplaza“, “Airport City“ or “Senator 17 Line“. The vacancy rate in class B + / B spaces has decreased to 5 - 6% to a balanced market situation.
7,400 square meters of qualitative office space were commissioned in Krasnodar during the 2nd quarter of 2012. One can say that the market has become more active compared to the first quarter. The trend of a gradual decrease of vacancy rates for high-quality business centres remained. More than 90% of class A and B + objects are taken. The average rental rate for class A space is 13,250 Rubles per square metres/year, for class B space it is 9,630 Rubles per square metres/year.
There are 16 high-quality office objects in the city, which are at various stages of construction. The total leasable area is approximately 100,000 square meters, which are to be commissioned within the next two years. At the moment, three major business centres in Krasnodar are for sale: Two class A centres - Business Centre “Development-Yug“ and International Business Centre “Kristall“- and one class B centre - Business Centre “Newton“.
Picture: Building works at Business Centre SKYLIGHT, by Dmitrij Zverev
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