Review of the commercial real estate market 3rd quarter. Demand for warehouses in the capital region
The RRG company conducted a study of the commercial real estate market in the capital region in the third quarter of 2017. Information for the study was obtained from more than 30 specialized and thematic sources dedicated to the Moscow commercial real estate market. Sources include electronic real estate databases, print and electronic media, real estate agencies and consulting companies.
Office, industrial and warehouse premises (ISP) and free commercial premises (PSN) worth from 36 million rubles, as well as retail premises worth from 26 million rubles or premises with a total area of at least 100 sq. m.
Objects offered in open sources were selected as objects for research of the commercial real estate rental market - retail, office, industrial and warehouse premises (PSP) with a total area of at least 50 square meters. m.
The volume of supply of real estate in both segments – sales and rental – decreased.
Sale
Market as a whole
Supply volume
In 3 sq. In 2017, supply volume decreased by 1% in quantity and by 4% in total area. For the year, compared to 3Q. 2016, supply decreased by 5% in quantity and decreased by 28% in total area.
In total, in the 3rd quarter, 2,164 objects with a total area of 2,960 thousand sq.m. were put up for sale.
Price indicators
Weighted average price in 3 sq. 2017 decreased by 1% and amounted to 176,936 rubles/sq.m. Taking into account the fact that the dollar exchange rate increased by 3% over the quarter and decreased by 9% over the year, the price in dollar equivalent for the quarter increased by 2%, and over the year decreased by 19% and amounted to $2,998/sq.m. The total cost of commercial real estate for the quarter decreased by 5%, and for the year - by 35% and amounted to 523 billion rubles.
The decline in prices both in rubles and dollars over the year indicates a decrease in demand. At the same time, the decrease in the supply of vacant space and their withdrawal from the market gives hope that a new equilibrium point in the market will soon be found.
| All segments | Quantity | Total cost, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | |
| meaning | 2 164 | 523 699 | 2 960 | 1,37 | 176 936 |
| by Q2 2017 | − 1% | − 5% | − 4% | − 3% | − 1% |
| by the third quarter 2016 | − 5% | − 35% | − 28% | − 24% | − 10% |
Supply volume
The volume of supply in terms of total area in the 3rd quarter compared to the second quarter for retail real estate decreased by 14%, for office space - by 5%, for industrial and warehouse premises - by 5%, and for free-use premises - increased by 14%.
The volume of supply by total area for the year compared to 3 sq. 2016, for retail real estate decreased by 29%, for office real estate - by 35%, for industrial and warehouse real estate - increased by 17%, and for free-use premises decreased by 35%.
There have been changes in the structure of segments by area. The share of office properties was 59%. Next come premises for free use (21%), production and warehouse (13%) and retail premises (7%).
Price indicators
In the 3rd quarter of 2017, the price for retail real estate increased by 2% to 245,510 rubles/sq.m, for office real estate it decreased by 4% and amounted to 202,521 rubles/sq.m, for industrial and warehouse properties it increased by 4% and amounted to 63,439 rub./sq.m., and for free-use premises - by 5% to 210,068 rub./sq.m.
Compared to the 3rd quarter of 2016, the weighted average price decreased by 9% for retail, by 4% for office, by 17% for industrial and warehouse real estate and increased by 1% for vacant premises.
The only segment where prices decreased in the 3rd quarter of 2017 was office real estate, but the price increase in other segments was insignificant, and over the year prices decreased in all segments except industrial and warehouse premises.
| Trading | Quantity | Total cost, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Weighted average price, rub./sq.m |
| meaning | 348 | 45 738 | 186 | 0,54 | 245 510 |
| by Q2 2017 | − 15% | − 12% | − 14% | + 1% | + 2% |
| by the third quarter 2016 | − 7% | − 35% | − 29% | − 23% | − 9% |
| Office | Quantity | Total cost, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Weighted average price, rub./sq.m |
| meaning | 1 341 | 347 182 | 1 714 | 1,28 | 202 521 |
| by Q2 2017 | + 4% | − 9% | − 5% | − 9% | − 4% |
| by the third quarter 2016 | − 3% | − 38% | − 35% | − 33% | − 4% |
| PSP | Quantity | Total cost, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Weighted average price, rub./sq.m |
| Meaning | 160 | 39 688 | 626 | 3,91 | 63 439 |
| by Q2 2017 | − 18% | − 2% | − 5% | + 16% | + 4% |
| by the third quarter 2016 | − 15% | − 3% | + 17% | + 38% | − 17% |
| PSN | Quantity | Total cost, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Weighted average price, rub./sq.m |
| meaning | 315 | 91 091 | 434 | 1,38 | 210 068 |
| by Q2 2017 | + 11% | + 20% | + 14% | + 2% | + 5% |
| by the third quarter 2016 | − 4% | − 35% | − 35% | − 32% | + 1% |
Retail real estate
Supply volume
In the 3rd quarter, 348 retail objects with a total area of 186 thousand square meters were exhibited, of which 32 objects were inside the Garden Ring and 316 objects were outside it.
During the quarter, the supply of retail properties in the center decreased by 9% in terms of quantity, but remained unchanged in terms of total area. The supply of retail properties outside the center decreased by 16% in quantity and by 15% in total area.
Price indicators
The weighted average price for retail properties in the center for the 3rd quarter of 2017 decreased by 16% and amounted to 824,912 rubles/sq.m., which was due to the end of exposure in the 2nd quarter of a large and cheap facility on Khoromny lane. (2586 sq.m., 2,200,000 rub./sq.m.), and by entering the market of cheap properties on Raushskaya embankment. (398 sq.m., 282,518 rub./sq.m.), Tolmachevsky lane. (680 sq.m., 262,500 rub./sq.m.), Kazarmenny lane. (720 sq.m., RUB 305,556/sq.m.).
The weighted average price for retail premises outside the center increased by 4% to RUB 219,283/sq.m. The price increase was associated with the entry into the market in the 3rd quarter of an expensive retail facility on Ryazansky Prospekt (9,747 sq.m., 359,064 rubles/sq.m.).
Despite the fact that prices for premises in the center decreased over the quarter, and prices outside, on the contrary, increased, over the year the situation is the opposite, so in the medium term we can say that there is higher demand for premises in the center, but until recently such premises were somewhat overrated.
| Trading | Quantity | Total cost, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Weighted average price, rub./sq.m |
| meaning | 348 | 45 738 | 186 | 0,54 | 245 510 |
| by Q2 2017 | − 15% | − 12% | − 14% | + 1% | + 2% |
| by the third quarter 2016 | − 7% | − 35% | − 29% | − 23% | − 9% |
| Trading inside the UK | Quantity | Total cost, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Weighted average price, rub./sq.m |
| meaning | 32 | 6 655 | 8 | 0,25 | 824 912 |
| by Q2 2017 | − 9% | − 16% | 0% | + 9% | − 16% |
| by the third quarter 2016 | − 22% | − 41% | − 48% | − 33% | + 14% |
| Trading outside the UK | Quantity | Total cost, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Weighted average price, rub./sq.m |
| meaning | 316 | 39 083 | 178 | 0,56 | 219 283 |
| by Q2 2017 | − 16% | − 12% | − 15% | + 1% | + 4% |
| by the third quarter 2016 | − 5% | − 34% | − 27% | − 24% | − 9% |
Street-retail
Supply volume
In the 3rd quarter of 2017, 107 street-retail objects with a total area of 29 thousand sq.m. were put up for sale, of which 10 objects were inside the Garden Ring and 97 objects were outside it.
The volume of supply for retail facilities in the center decreased by 9% in terms of quantity and by 10% in total area. The volume of supply for retail properties outside the center decreased by 14% in quantity and by 20% in total area.
Price indicators
The weighted average price for street-retail properties in the center increased by 8% to RUB 960,183/sq.m, while for older properties the price decreased by 10%. The price increase was due to the entry into the market of an expensive property on M. Kozikhinsky Lane. (100 sq.m., RUB 1,459,550/sq.m.).
Outside the center, the weighted average price increased by 2% and amounted to 275,718 rubles/sq.m., which was due to a 5% increase in prices for objects that have been exhibited for a long time.
| Street-retail | Quantity | Total cost, million rubles. | Total area, thousand m2 | Average area, thousand m2 | |
| meaning | 107 | 9 934 | 29 | 0,27 | 343 396 |
| by Q2 2017 | − 14% | − 15% | − 19% | − 6% | + 5% |
| by the third quarter 2016 | + 1% | − 22% | − 2% | − 3% | − 21% |
| Street-retail inside SK | Quantity | Total cost, million rubles. | Total area, thousand m2 | Average area, thousand m2 | Weighted average price, rub./m2 |
| meaning | 10 | 2 747 | 3 | 0,29 | 960 183 |
| by Q2 2017 | − 9% | − 3% | − 10% | − 1% | + 8% |
| by the third quarter 2016 | − 41% | − 42% | − 38% | + 6% | − 7% |
| Street-retail outside the UK | Quantity | Total cost, million rubles. | Total area, thousand m2 | Average area, thousand m2 | Weighted average price, rub./m2 |
| meaning | 97 | 7 188 | 26 | 0,27 | 275 718 |
| by Q2 2017 | − 14% | − 18% | − 20% | − 6% | + 2% |
| by the third quarter 2016 | + 9% | − 10% | + 5% | − 4% | − 15% |
Rent
Market as a whole
Supply volume
The volume of supply on the rental market in the 3rd quarter. 2017 decreased by 7% in quantity and by 10% in total area. In general, over 4 quarters, supply volume increased by 19% in terms of quantity, and by 3% in terms of total area.
In total, 4,452 objects with a total area of 2,260 thousand sq.m. were exhibited in the 3rd quarter.
Price indicators
The average rate both for the quarter and for the last 4 quarters decreased by 3% and amounted to 17,969 rubles/sq.m/year. Taking into account that the dollar exchange rate increased by 3% in the third quarter, the price in dollar terms for the quarter did not change and amounted to $304/sq.m/year. Annual rent for the quarter decreased by 12% and amounted to RUB 32.4 billion.
The decrease in the average rental rate in both dollars and rubles over the year indicates that negative factors still prevail in the real estate market.
| All segments | Quantity | Total gap, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | |
| meaning | 4 452 | 32 416 | 2 260 | 0,51 | 17 969 |
| by Q2 2017 | − 7% | − 13% | − 10% | − 3% | − 3% |
| by the third quarter 2016 | + 19% | − 0% | + 3% | − 13% | − 3% |
Comparative analysis by segments
Supply volume
The volume of supply in terms of total area for the 3rd quarter of 2017 compared to the second decreased by 19% for retail, 11% for office and 4% for industrial and warehouse real estate.
The volume of supply for the total area of retail real estate over the year decreased by 5%, for office real estate - by 4%, and for industrial and warehouse real estate - increased by 17%.
The leader in supply in terms of total area remains office space, the share of which was 50%. Next come industrial and warehouse (38%) and retail premises (12%).
Price indicators
The average rental rate for the 3rd quarter of 2017 for retail real estate decreased by 2% and amounted to 30,808 rub./sq.m./year, for office real estate - also decreased by 2% to 17,327 rub./sq.m./year, and for production and warehouse – increased by 2% and amounted to 6,656 rubles/sq.m/year.
Compared to the 3rd quarter of 2016, the change in rental rate was -3% for retail, +1% for office, and the rate for industrial and warehouse real estate did not change.
Changes in rates both for the quarter and for the year continue to remain insignificant, which is typical for the stage of market stagnation.
| Trading | Quantity | Total gap, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Average rate, rub./sq.m./year |
| meaning | 922 | 6 660 | 254 | 0,28 | 30 808 |
| by Q2 2017 | − 10% | − 17% | − 19% | − 10% | − 2% |
| by the third quarter 2016 | + 11% | − 3% | − 5% | − 14% | − 3% |
| Office | Quantity | Total gap, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Average rate, rub./sq.m./year |
| meaning | 2 633 | 19 984 | 1 090 | 0,41 | 17 327 |
| by Q2 2017 | − 7% | − 14% | − 11% | − 4% | − 2% |
| by the third quarter 2016 | + 18% | − 3% | − 4% | − 19% | + 1% |
| PSP | Quantity | Total gap, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Average rate, rub./sq.m./year |
| Meaning | 897 | 5 772 | 916 | 1,02 | 6 656 |
| by Q2 2017 | − 2% | − 3% | − 4% | − 3% | + 2% |
| by the third quarter 2016 | + 31% | + 15% | + 17% | − 11% | 0% |
Retail real estate
Supply volume
The volume of supply of retail real estate in the 3rd quarter decreased by 10% in terms of quantity, and decreased by 19% in terms of total area. The volume of supply over the year increased by 11% in terms of quantity, and in terms of the total area decreased by 5%.
In total, in the 3rd quarter, 922 objects with an area of 254 thousand square meters were exhibited, of which 51 objects were in the center and 871 premises were outside it.
The volume of supply by total area in the 3rd quarter decreased by 18% in the center and by 19% outside it.
Price indicators
The average rental rate for retail properties inside the Garden Ring is 3 sq. 2017 decreased by 1% and amounted to 58,889 rubles/sq.m/year.
The average rental rate for retail properties outside the Garden Ring did not change and amounted to RUB 29,164/sq.m./year.
The insignificance of changes in rates for retail facilities indicates stagnation in the market in the context of a decrease in supply.
| Trading inside the UK | Quantity | Total gap, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Average rate, rub./sq.m./year |
| meaning | 51 | 658 | 13 | 0,26 | 58 889 |
| by Q2 2017 | − 30% | − 24% | − 18% | + 17% | − 1% |
| by the third quarter 2016 | − 39% | − 29% | − 26% | + 22% | − 3% |
| Trading outside the UK | Quantity | Total gap, million rubles. | Total area, thousand sq.m | Average area, thousand sq.m. | Average rate, rub./sq.m./year |
| meaning | 871 | 6 001 | 241 | 0,28 | 29 164 |
| by Q2 2017 | − 9% | − 17% | − 19% | − 11% | 0% |
| by the third quarter 2016 | + 16% | + 1% | − 3% | − 17% | + 2% |
Street-retail
Supply volume
The volume of supply of street-retail format objects in the 3rd quarter of 2017 decreased by 10% in quantity and by 19% in total area. Over the year, the volume of supply in terms of quantity increased by 13%, and in terms of total area - by 4%. In total, in the 3rd quarter, 353 objects with an area of 76 thousand square meters were exhibited, of which 17 objects were offered in the center and 336 objects outside it.
| Street-retail inside SK | Quantity | Total gap, million rubles. | Total area, thousand m2 | Average area, thousand m2 | Average rate, rub./sq.m./year |
| meaning | 17 | 255 | 5 | 0,29 | 67 263 |
| by Q2 2017 | − 32% | − 28% | − 6% | + 38% | − 13% |
| by the third quarter 2016 | − 51% | − 38% | − 29% | + 47% | − 3% |
| Street-retail outside the UK | Quantity | Total gap, million rubles. | Total area, thousand m2 | Average area, thousand m2 | Average rate, rub./sq.m./year |
| meaning | 336 | 2 097 | 71 | 0,21 | 33 343 |
| by Q2 2017 | − 9% | − 19% | − 20% | − 12% | − 2% |
| by the third quarter 2016 | + 21% | + 9% | + 8% | − 11% | − 3% |
Analysts from Colliers International conducted a study of the Moscow commercial real estate market and identified key trends in the office market, street-retail market, as well as in the warehouse market of the capital region.
Office real estate in Moscow
Offer on the capital office market
The volume of existing supply at the end of the third quarter amounted to 17.23 million sq.m., of which 3.96 million sq.m. are class “A”. In the third quarter, the market added 75,000 sq.m., which is almost 3.5 times more than in the first half of the year. Two of the four objects that appeared belong to class “A”, the rest - to the segment “B+”/“B-”. At the same time, since the beginning of the year, the volume of commissioning turned out to be a record low (95,000 sq.m.) value for the commissioning of office supply for the first three quarters of the year over the past five years.
In fact, the final growth rate will depend on the commissioning of two towers as part of the Moscow City International Business Center, since they form 70% of the planned input volume by the end of the year.
If documentation on commissioning is received for all objects announced by the end of 2017, the total annual increase could be 450-465 thousand sq.m.
Demand for offices in Moscow
Despite the weak first half of the year, the dynamics and quality of deals concluded in the third quarter suggest a revival in demand.
In the first three quarters, the total volume of leased and purchased office space amounted to 826,000 sq.m., which is 30% higher than the figure for the same period in 2016.
The total number of rental and purchase transactions increased by 2 times: activity in terms of rental and purchase was demonstrated by both small companies renting offices of less than 200 sq.m., and large ones, which require more than 10,000 sq.m. to accommodate them.
The share of transactions involving renegotiation and revision of lease terms continues to decline. More than 80% of the total volume relates to company relocations.
Among the largest transactions in the third quarter of 2017 were the lease by Eksmo of 23,000 sq.m in the Poklonka Place business center, the lease by Tele2 of an office with an area of 13,100 sq.m in the Comcity office park, the lease by Technoserv of 12,000 sq.m. m in the Novospassky Dvor business district, lease by Deutsche Bank of 8,200 sq. m in the Aquamarine III business center and preliminary lease by Europlan of 8,000 sq. m in the Oasis business center.
Vacant office space in Moscow
The average vacancy rate for the market has not undergone significant changes. The volume of free supply introduced was offset by moderate net absorption. The market average vacancy rate was 11.2%. In absolute terms, 1.9 million sq.m. are offered for rent and sale. In the structure of free supply, 32% formed class “A”, 50% - “B+” and 17% - “B-”.
Due to the shortage of large office blocks (more than 10,000 sq.m.) in high-quality buildings with convenient locations, large companies have established the practice of concluding preliminary lease agreements in facilities under construction: about 30% of office space in business centers commissioned since the beginning of the year and planned for commissioning before the end of the year is no longer offered on the market. At the same time, the owners of some properties continue to postpone the commissioning date until the Pre-lease is signed with the anchor tenant.
The existing volume of available office space is unevenly distributed, and some submarkets are characterized by a shortage of quality supply.
Selling prices for offices in the capital
In the sales segment, the trends from the beginning of the year continue: the volume of free quality supply remains small, exhibited sales prices are stable. At the same time, since the middle of the year, the conversion of existing interest into real transactions has already been observed - the number of transactions for the purchase of office space less than 200 sq.m has increased compared to the same period in 2016.
Cost indicators in areas remote from the Central District, near the Third Transport Ring, are 180,000 rubles/sq.m for class “A” and 150,000 rubles/sq.m for class “B+”. Properties located at a distance from the Third Transport Ring towards the Moscow Ring Road are offered today at an average of 170,000 rubles/sq.m in class “A” and 115,000 - 130,000 rubles/sq.m in class “B+”/“B” -".
Expensive offices are offered in the central areas of the city at an average cost of 315,000 rubles/sq.m for class “A” and 265,000 - 275,000 rubles/sq.m for classes “B+”/“B-”. In the towers of the MIBC Moscow City, offers vary in the range of 245,000 - 450,000 rubles/sq.m.
Rental rates for office space in Moscow
The third quarter of 2017 was characterized by stable rental rates. Traditionally, fluctuations have been observed in the given rate indicator due to the volatility of exchange rates. The market still remains in rubles.
There was a slight local change in the requested ruble rental rates by area and class, but this slightly increased the average market level - within 1-3%. In the Central District, the given rental rates for class “A” offices amounted to 30,785 rubles/sq.m/year, for class “B+” - 20,240 rubles/sq.m/year.
The given base office rental rate in US dollars for class “A” is $440/sq.m/year, in rubles - 25,831 rub./sq.m/year. The given base rental rate in US dollars for class “B+”/“B-” is $219/sq.m/year, in rubles - 12,817 rub./sq.m/year.
Trends and forecasts for the development of the Moscow office market
Developers announced 370,000 sq.m. for commissioning in the fourth quarter, of which 340,000 sq.m. correspond to class “A”. If the stated plans are implemented, the annual volume of new construction in 2017 will increase by 50% compared to 2016.
Main facilities announced for commissioning in the fourth quarter of 2017
| Name | Class | Developer | Area (thousand sq.m.) |
| "Federation Tower East" | "A" | AEON Corporation | 146,5 |
| IQ Quarter | "A" | CiTerInvest B.V., Hals Development | 123 |
| Business district Neopolis | "A" | A-Store Estates | 63,2 |
| "Quarter Park of Legends", bldg. 3 | "A" | GC "TEN" | 11 |
| "Square" | "B+" | LenhartGlobal | 9,5 |
The appearance of Class A objects will not have a significant impact on the volume of free supply in this segment, due to the fact that already today in three out of four Class A business centers there is on average no more than 10% free.
If the commissioning of the Moscow-City International Children's Center facilities is postponed to 2018, the increase in new supply, on the contrary, will be 40% lower than last year's figure (i.e. 197,000 sq.m.), which will also be reflected in an increase in the vacancy rate from the expected 10% up to 11.5%.
Taking into account that in the last two quarters the increase in the volume of transactions was 65% and 75%, and at the end of the year a significant amount of space is usually closed, the total volume of demand may amount to 1.0-1.1 million sq.m. Despite the fact that the expected volume of demand may be higher than the values of 2014-2016, it is still less than the pre-crisis values.
At the end of the year, the market will experience a significant decrease in vacant space and a gradual increase in rental rates.
The reduction in the volume of quality supply, especially in the segment of large blocks, against the backdrop of positive demand dynamics, will gradually push up rates in classes “A” and “B+”, which, however, will be most noticeable in 2018.
Street-retail premises in Moscow
Trends in the street retail market in Moscow
The main event of the third quarter of 2017 in the street retail market was the completion of the next stage of the Moscow street renovation program. Construction and installation work was completed on more than 80 city streets and territories, including the Garden Ring, Boulevard Ring, Tverskaya (from Nastasinsky Lane to Triumfalnaya Square), 1st Tverskaya-Yamskaya, etc.
In the summer, during the period of construction work, the average vacancy level of the Garden Ring increased to 13%, and the vacancy of some of its sections reached 30%. Traffic and the average bill of many catering establishments located in reconstruction zones have decreased by two or more times. At the end of the third quarter, the average level of vacant retail space on the highway decreased to 12%, although the vacancy rate of some sections of the Garden Ring still remains quite high (20-25%).
The largest percentage of rotation during the quarter occurred on Tverskaya - about 5% of the street's retail space changed its tenants. Following Tverskaya is Pyatnitskaya Street with a rotation rate of 4%. On Arbat and Myasnitskaya Street, only 3% of premises changed their tenants. Next comes the street. Kuznetsky Most (2%) and st. New Arbat (1%). Neglinnaya Street showed a zero percentage of rotation - not a single tenant has changed here.
In the third quarter of 2017, the average vacancy rate in central shopping corridors continued to decline and amounted to 6.5%.
The most active process of rotation of retailers in the third quarter was observed on Tverskaya, Pyatnitskaya and Arbat, where 5%, 4% and 3% of the areas changed tenants, respectively. The previous tenants are being replaced primarily by retailers with a similar trading profile. For example, on Arbat, the Georgian cuisine cafe “eZo” replaced the “Ural dumplings” cafe, and on Pyatnitskaya, the Leonidas restaurant replaced the “Shardane” restaurant.
Also, one of the trends of the past quarter is worth noting the opening of consumer electronics stores on the central streets of Moscow. Yes, on the street. Tverskaya, 27, stores of two chains opened at once: the Chinese Xiaomi and the re:Store chain, which moved from another premises and increased its area. These discoveries are noteworthy because these networks are developing mainly in shopping centers: for Xiaomi this is the first store in the street retail format in Moscow, and for re:Store it is the seventh.
Demand and commercial conditions for street-retail rental in the capital
In the third quarter, the greatest demand was for premises on Pyatnitskaya, Pokrovka, Maroseyka, Myasnitskaya, Neglinnaya, and Petrovka streets. For example, the jewelry chain Tiffany & Co chose Petrovka to open a boutique with an area of 490 sq.m., which became the brand’s second store since the company’s transition to independent development in Russia.
Among the new chains and formats that are actively developing in street retail, one can highlight the Modi household goods chain, the first store of which opened on Arbat. The chain plans to open new stores on the central streets of Moscow in the near future. Also noteworthy is the opening of the first Auchan supermarket in the street retail format on the street. Tverskaya. A special feature of the new format is that a significant area of the supermarket is allocated for gastronomy and its own cafe.
The Moskhoztorg chain continues to actively develop, which opened eight new stores in the third quarter, including points on Smolensky Boulevard and st. Novokuznetskaya.
In the third quarter of 2017, the largest number of applications came from catering operators - 85%.
Rental rates on central shopping streets in the third quarter of 2017 did not change compared to the second quarter.
Traditionally, Ginza Project, Tanuki, Crocus Group’s restaurant division, and Novikov Group have active plans for expansion. The latter, for example, opened several establishments in different price categories in the third quarter: #Farsh burger shop on the street. Lesnaya, cafe of pan-Asian cuisine Hoshi on the street. Kuznetsky Most, 15/17 and Bar & Grill on Novocherkassky Lane.
The past quarter was rich in the opening of non-chain cafes and restaurants. The restaurant 23Tolstoy opened in Khamovniki, the Chinese restaurant Jimmy Lee opened its doors on Prospekt Mira, the restaurant Pirog Myasnika opened its doors on Novy Arbat, and others.
Key openings on the central trade corridors of Moscow in the third quarter of 2017
| Name | Street | Profile |
| Tiffany & Co | Petrovka st. | Jewelry |
| Ladurée | Nikolskaya st. | Cafes and restaurants |
| Villa Pasta | New Arbat st. | Cafes and restaurants |
| Auchan | Tverskaya st. | Products |
| Burger Heroes | Kamergersky lane | Cafes and restaurants |
| #Farsh | Lesnaya st. | Cafes and restaurants |
| Butcher's Pie | New Arbat st. | Cafes and restaurants |
| Moskhoztorg | Novokuznetskaya st. | Household products |
| Modi | Arbat st. | Household products |
| Alfa Bank | Pyatnitskaya st. | Banks |
Forecasts for the development of the Moscow retail space market
By the end of the year, a further reduction in the vacancy rate of the central shopping streets of Moscow is expected within 1 percentage point. This will be facilitated, first of all, by the further development of the public catering segment.
Also, against the backdrop of news about the sale of the Perekrestok-Express chain, which has more than 30 stores within the Garden Ring, active development of new and existing grocery chains on the central streets of the capital is possible.
Warehouse real estate in Moscow
Offer on the Moscow warehouse market
At the end of the third quarter of 2017, the total supply of high-quality warehouse facilities in the Moscow region reached 13.16 million sq.m., the volume of commissioning in the third quarter amounted to 191,000 sq.m., and since the beginning of the year - 386,000 sq.m. Thus, the volume of completed construction in the first nine months of this year was similar to the results of last year, when 385,000 sq.m. were commissioned in the first and third quarters.
The largest warehouse facilities put into operation in the third quarter were Technopark Uspensky (area - 42,000 sq.m), Orientir "North 2" (43,100 sq.m), Logopark "Dmitrov" (25,600 sq.m) , as well as PSK Kozhukhovo (47,715 sq.m.). It should be noted that the overwhelming majority of the total volume of warehouse space commissioned in the first and third quarters of 2017 is located in the north and east of the Moscow region.
Based on the results of the first nine months of 2017, the volume of demand exceeded the volume of input by more than twice.
Demand for warehouses in the capital region
Based on the results of the first three quarters of 2017, about 840,000 sq.m of warehouse space were rented and purchased in the Moscow region, which is 38% higher than the same figure in 2016.
The third quarter of 2017 accounted for 348,000 sq.m., while a significant volume of demand was generated by several large transactions: the purchase of a warehouse complex with an area of 68,700 sq.m. by the Utkonos company, as well as the transaction for the acquisition of a future warehouse with an area of 146,000 sq.m. by the company Wildberries. Both complexes will be implemented according to the built-to-suit scheme. As a result of the closure of these transactions, purchases accounted for 34% of the total volume of transactions in three quarters, although a quarter earlier this proportion was 15% to 85% of leases.
Retail, and in particular online retail, took a dominant position in the total volume of transactions closed since the beginning of the year in the Moscow region.
Rental rates for warehouse premises in Moscow
Based on the results of the third quarter of 2017, the requested rental rate for class “A” facilities in the Moscow region has not undergone major changes and is in the range of 3,400 - 4,000 rubles/sq.m./year, depending on the location of the warehouse complex and the volume of the leased block.
The average asking rental rate in the Moscow region is 3,800 rubles/sq.m./year.
Trends and forecasts for the development of the capital's warehouse real estate market
Against the backdrop of low commissioning volumes and continued demand for high-quality existing warehouse complexes, a further decrease in the share of vacant space is expected by the end of this year - to the level of 7%. However, even with the current dynamics of vacancy decline, the volume of warehouse space available for rent remains high. In addition to the existing ready-made offer, developers are ready to offer the implementation of objects according to the built-to-suit scheme, which slows down the process of absorption of ready-made space. Pressure from vacant competing warehouse properties is reducing the potential for rate increases at least until the end of this year and the first few months of next year.
Among the largest warehouse complexes planned for commissioning by the end of 2017 are blocks 2, 6.1 and 7 in PNK-Valischevo (developer - PNK Group, area - 51,080 sq.m) and phase 2 of Vnukovo II phase 2 ( developer - Logistic Partners, area - 49,000 sq.m).
Review prepared by Colliers International
General market situation
In the 3rd quarter of 2017, the Bank of Russia continued to reduce the key rate to 8.5% per annum (September 2017).
The average dollar exchange rate for the 3rd quarter of 2017 was 58.9 rubles, an increase of 3.0% compared to the average for the 2nd quarter. 2017
In the first half of 2017, the total volume of the Moscow office space market grew by 0.3%, amounting to almost 16.0 million sq.m., of which 14.8 million sq.m. are segments A, B+ and B.
Offers
Input volume is 3 sq. 2017 amounted to 48.2 thousand sq.m (GLA), which is 23% lower than the previous quarter and 3 times less than the result of the same period in 2016. In total, over 3 quarters supply increased by 163.0 thousand sq.m.
In 3 sq. 2017 new objects appeared within the boundaries of “old” Moscow; the entire introduced volume relates to class A. The structure of the total supply volume by class has not changed.
Demand
At the end of Q3 In 2017, the average vacancy level in classes A, B+, B did not change compared to the previous period, amounting to 15.9%. However, the dynamics of the indicator are multidirectional depending on the class:
Increase in the level of vacancies in class A by 0.5 percentage points. - up to 21.5%, incl. due to the introduction of new objects. There has been an increase in the number of vacant spaces in facilities inside the Third Transport Ring, the vacancy of business centers outside the Third Transport Ring decreased slightly (by 0.1 percentage points)
In classes B+ and B, the vacancy rate decreased by 0.4 percentage points. (on average and in each class) - up to 13.4% and 8.8%, respectively. At the same time, occupancy increased regardless of location. The average vacancy rate in classes B+/B reached 12.2%.
Class C showed a slight decrease in vacancies (by 0.1 percentage points).
In general, over the 9 months of 2017, vacancies in all classes decreased: in class A - by 1.1 percentage points, in class B+ - by 2.9 percentage points, in class B - by 1.2 percentage points .p, class C - by 0.9 p.p.
3 sq. 2017 was marked by major rental transactions. The top 3 deals of the quarter belong to companies in the telecommunications and IT technology sectors. The volume of large transactions (from 1 thousand sq.m.) amounted to 53 thousand sq.m., of which 62% are class A.
Taking into account the increase in the duration of exposure of office premises, new formats focused on the needs of small businesses are becoming relevant: mini-offices of 15-80 sq.m (including with ready-made workstations) and actively developing coworking spaces.
Commercial offer
Based on the results of the 3rd quarter of 2017, there were no significant changes in commercial conditions; in general, we can talk about stabilization of rental rates.
During the reporting period, fluctuations in rental rates in classes B+, B, C were recorded within the range of 0.9-2.2%; in class A the average rental rate has not changed.
At the end of the 3rd quarter of 2017, the average rental rates are: in class A - 1980 rubles/sq.m./monthⁱ; in class B+ - 1350 rub./sq.m./month; in class B - 1110 rub./sq.m./month; in class C - 930 rub./sq.m./month.
The weighted average rental rate in class B+/B decreased slightly (by 0.8%) and amounted to 1,260 rubles/sq.m./month.
As a result of price dynamics, the distance between classes B+ and A increased from 30% to 32%; between B and B+ - decreased from 20% to 18%; between C and B - remained at the same level.
Conclusions and development forecasts
In the 3rd quarter, the market was replenished with two class A objects with a total area of 48.2 thousand sq.m GLA, which is 3 times less than the volumes of the same period in 2016.
The launch of new premises had an impact on the level of vacancies in class A (an increase of 0.5 percentage points at the end of the quarter), but overall since the beginning of the year the vacancy rate has decreased by 1.1 percentage points.
According to the results of the quarter, in classes B+, B and C there is an increase in the occupancy of facilities, however, the rate of decrease in vacancy is lower than in the 1st quarter of 2017.
There was no significant change in rental rates compared to the 2nd quarter of 2017.
By the end of the year, we should expect the commissioning of about 275 thousand sq.m of office space, of which 72% will be in Moscow City towers. It is not excluded that the commissioning of some of the planned facilities will be postponed until 2018.
With the release of new facilities, an increase in vacancies in class A is possible, however, since some facilities are partially filled during the construction stage, there will not be a significant increase in vacancies in class A.
In classes B+/B, vacancies will continue to decline against the backdrop of a low volume of promising supply.
In the 4th quarter of 2017, no significant changes in average rental rates are expected.
1 Until 4Q2015 - rental rates are indicated in USD/sq.m/year, dynamics were also calculated in USD. In 3Q2015, the dynamics value in RUВ is indicated in parentheses. Since 4Q2015, due to the market transition to rubles, rental rates and their dynamics are calculated in RUВ, the value in brackets is in terms of USD/sq.m/year - at the current rate.
Analysts from Colliers International conducted a study of the Moscow commercial real estate market and identified key trends in the office market.
Offer on the capital office market
The volume of existing supply at the end of the third quarter amounted to 17.23 million sq.m., of which 3.96 million sq.m. are class “A”. In the third quarter, the market added 75,000 sq.m., which is almost 3.5 times more than in the first half of the year. Two of the four objects that appeared belong to class “A”, the rest – to the segment “B+”/“B-”. At the same time, since the beginning of the year, the volume of commissioning turned out to be a record low (95,000 sq.m.) value for the commissioning of office supply for the first three quarters of the year over the past five years.
In fact, the final growth rate will depend on the commissioning of two towers as part of the Moscow City International Business Center, since they form 70% of the planned input volume by the end of the year.
If documentation on commissioning is received for all objects announced by the end of 2017, the total annual increase could be 450-465 thousand sq.m.
Demand for offices in Moscow
Despite the weak first half of the year, the dynamics and quality of deals concluded in the third quarter suggest a revival in demand.
In the first three quarters, the total volume of leased and purchased office space amounted to 826,000 sq.m., which is 30% higher than the figure for the same period in 2016.
The total number of rental and purchase transactions increased by 2 times: activity in terms of rental and purchase was demonstrated by both small companies renting offices of less than 200 sq.m., and large ones, which require more than 10,000 sq.m. to accommodate them.
The share of transactions involving renegotiation and revision of lease terms continues to decline. More than 80% of the total volume relates to company relocations.
Among the largest transactions in the third quarter of 2017 were the lease by Eksmo of 23,000 sq.m in the Poklonka Place business center, the lease by Tele2 of an office with an area of 13,100 sq.m in the Comcity office park, the lease by Technoserv of 12,000 sq.m. m in the Novospassky Dvor business district, lease by Deutsche Bank of 8,200 sq. m in the Aquamarine III business center and preliminary lease by Europlan of 8,000 sq. m in the Oasis business center.
Vacant office space in Moscow
The average vacancy rate for the market has not undergone significant changes. The volume of free supply introduced was offset by moderate net absorption. The market average vacancy rate was 11.2%. In absolute terms, 1.9 million sq.m. are offered for rent and sale. In the structure of free supply, 32% formed class “A”, 50% – “B+” and 17% – “B-”.
Due to the shortage of large office blocks (more than 10,000 sq.m.) in high-quality buildings with convenient locations, large companies have established the practice of concluding preliminary lease agreements in facilities under construction: about 30% of office space in business centers commissioned since the beginning of the year and planned for commissioning before the end of the year is no longer offered on the market. At the same time, the owners of some properties continue to postpone the commissioning date until the Pre-lease is signed with the anchor tenant.
The existing volume of available office space is unevenly distributed, and some submarkets are characterized by a shortage of quality supply.
Selling prices for offices in the capital
In the sales segment, the trends from the beginning of the year continue: the volume of free quality supply remains small, exhibited sales prices are stable. At the same time, since the middle of the year, there has already been a conversion of existing interest into real transactions - the number of transactions for the purchase of office space less than 200 sq.m has increased compared to the same period in 2016.
Cost indicators in areas remote from the Central District, near the Third Transport Ring, are 180,000 rubles/sq.m for class “A” and 150,000 rubles/sq.m for class “B+”. Properties located at a distance from the Third Transport Ring towards the Moscow Ring Road are offered today at an average of 170,000 rubles/sq.m in class “A” and 115,000 – 130,000 rubles/sq.m in class “B+”/“B” -".
Expensive offices are offered in the central areas of the city at an average cost of 315,000 rubles/sq.m for class “A” and 265,000 – 275,000 rubles/sq.m for classes “B+”/“B-”. In the towers of the MIBC Moscow City, offers vary in the range of 245,000 - 450,000 rubles/sq.m.
Rental rates for office space in Moscow
The third quarter of 2017 was characterized by stable rental rates. Traditionally, fluctuations have been observed in the given rate indicator due to the volatility of exchange rates. The market still remains in rubles.
There was a slight local change in the requested ruble rental rates by area and class, but this slightly increased the average market level - within 1-3%. In the Central District, the given rental rates for class “A” offices amounted to 30,785 rubles/sq.m./year, for class “B+” offices – 20,240 rubles/sq.m./year.
The given base office rental rate in US dollars for class “A” is $440/sq.m/year, in rubles – 25,831 rub./sq.m/year. The given base rental rate in US dollars for class “B+”/“B-” is $219/sq.m/year, in rubles – 12,817 rubles/sq.m/year.
Trends and forecasts for the development of the Moscow office market
Developers announced 370,000 sq.m. for commissioning in the fourth quarter, of which 340,000 sq.m. correspond to class “A”. If the stated plans are implemented, the annual volume of new construction in 2017 will increase by 50% compared to 2016.
Main facilities announced for commissioning in the fourth quarter of 2017
The appearance of Class A objects will not have a significant impact on the volume of free supply in this segment, due to the fact that already today in three out of four Class A business centers there is on average no more than 10% free.
If the commissioning of the Moscow-City International Children's Center facilities is postponed to 2018, the increase in new supply, on the contrary, will be 40% lower than last year's figure (i.e. 197,000 sq.m.), which will also be reflected in an increase in the vacancy rate from the expected 10% up to 11.5%.
Taking into account that in the last two quarters the increase in the volume of transactions was 65% and 75%, and at the end of the year a significant amount of space is usually closed, the total volume of demand may amount to 1.0-1.1 million sq.m. Despite the fact that the expected volume of demand may be higher than the values of 2014-2016, it is still less than the pre-crisis values.
At the end of the year, the market will experience a significant decrease in vacant space and a gradual increase in rental rates.
The reduction in the volume of quality supply, especially in the segment of large blocks, against the backdrop of positive demand dynamics, will gradually push up rates in classes “A” and “B+”, which, however, will be most noticeable in 2018.
