During Q1 2012 Moscow's office market saw a low volume of new supply, high tenant activity, falling vacancy rates and stabilization of rental rates, according to the latest research by CBRE.
A low volume of new supply was observed in Q1 2012. Just 111,300 m² of office space was delivered to the market (55,000 m² less than in Q4 2011). Analogous figure for Q1 2011 totaled to almost 190,000 m². According to announcements from developers, the total new supply in 2012 will be about 700,000 m².
The volume of deals closed during Q1 2012 was 274,000 m², half the level seen in Q4 2011. Nevertheless, falling vacancy was registered in all Moscow submarkets, declining by 1-2% compared with Q4 2011. The lowest level of vacant space was in the CBD (9%). The zone beyond MKAD had the highest vacancy (17%), due to the large number of lease options available to tenants inside MKAD.
According to an analysis of done deals in Q1, the most popular office size was from 100 m² up to 400 m² and from 500 up to 1,000 m². Such premises comprise more than half the total number of transactions.
There were few leases for more than 5,000 m²: just four large deals were closed in Q1, among which were: lease of 6,300 m² in Preo BC by BDO Unikon and lease of 3,100 m² in Olympia Park by Tinkoff Credit Systems.
During Q1 rental rates were stable: US $1,200 per m² for prime class-A buildings, $800 for class-A buildings and $450 for class-B buildings.
According to CBRE latest research, the trends seen in Q1 2012 will continue throughout 2012. We will see high tenants' activity due to increased confidence in the Russian economy.
Also recruitment data further lends credence to this: companies are reporting an increase in staff numbers, and indeed employment figures have reached pre-crisis levels. Due to the growing rents, low vacancy and limited new construction in CBD, geographical segmentation will continue throughout 2012.
Taking into account the above, we forecast further growth in rents for both class-A and class-B space, particularly in the best Moscow submarkets. According to CBRE research in 2012 the prime class-A rents will reach $1,300/m²/year net of VAT and OpEx, class-A - $850 and class-B - $500.
Claudia Chistova, Head of Office Research, CBRE in Russia comments the results of the report: "In Q1 2012 the major trends were low volume of new supply characterized for Moscow office market during last few years, stable volume of deals closed which is typical for this period, falling vacancy in both class-A and B buildings.
"In Q1 we registered high tenant activity which will influence on further increase of deals transacted. Stable demand combined with limited supply will cause the vacancy rates to fall and the rental rates to grow."