According to CBRE’s latest office market report, the Moscow market was stable in Q1 2013 with the exception of the largest volume of new office space delivered to the market in Q1 2013 since 2011. New delivery in Q1 2013 was 259,544 m².
Significant events for the city’s office market in Q1 2013 included:
•Active office development both in Moscow-City and beyond the Third Transport Ring
•New supply growth compared with 2012 results
•First Prime class-A office building has been put into operation since 2011; first mixed-use complex has been delivered in Moscow-City since 2011
•Continuing decentralization: the zone between the Third Transport Ring and MKAD saw the highest volume of both new delivery (55%) and take-up (59%)
•84% of closed deals were done in class-B buildings, in class-A only – 16%
•The majority of deals were signed by Russian companies, 86% of the total
•The most popular office size demanded was blocks up to 1,000 sq m, 75% of the total number of deals
•The overall vacancy rate increased (from 11% in Q4 2012 up to 12% in Q1)
•Vacancy in class-B properties increased by 1% (to 11%)
•Stable level of vacancy in class-A buildings
In Q1 2013 the total Moscow office market take was 221,458 m² which is comparable to the volume of deals closed in Q1 2011 (219,000 m²), but is lower than the figure for Q1 2012 (about 274,000 m²) were leased in Q1 2012.
In Q1 the volume of class-A take-up was 34,846 m² (16% of the total). The lowest level of class-A share was registered in Q3 2012 (26,000 m²).
The majority of deals done in the class-B segment amounted to 186,612 m².
Russian companies made up a substantial part of the total (189,752 m² or 86% of the total).
Primarily tenants were from energy, oil and gas, banking and IT sectors.
Large-scale transactions in Q1 2013
The trend of decentralization continues in Q1 2013: maximum take-up volume falls in the area between TTR and MKAD (130,981 m² or 59% of the total). It is followed by the area between GR and TTR (51,980 m² or 23%), the third place is in the CBD (32,378 m² or 15%).
There were a few deals done beyond MKAD – the total volume was only 6,119 m² (3%). The largest deal beyond MKAD: Rusengineering leased 1,800 m² in RigaLand on Novorizhskoe HWY.
Q1 saw the record volume of new office space delivered to the market since 2011. The volume of new supply in Q1 2013 increased to more than twice the volume for Q1 2012 (111,300 m²). Newly built office space accounted for 55% of the total new delivery for 2012.
The overwhelming majority of all office units leased were blocks smaller than 500 m² (47%), followed by units of 501-1000 m² size (28%), and 1,001 m² to 2,000 m² (16%). Units from 2,001 m² to 5,000 m² comprised 7% of deals while only 4 deals with rentable area more than 5,000 m² were concluded in Q1 2013.
In Q1 2013 the overall vacancy rate stood at 12% (1% increase compared to Q4 2012). This increase was the result of substantial new deliveries in 1Q.
Vacancy rate in class-A segment has not changed relative to Q4 2012 remaining stable at 15%. The class-B segment demonstrated an increase in vacancy from 10% to 11%.
During Q1 2013 rental rates were stable: $1100 – $1200 for Prime class-A, $650 – $750 for Class А, $400 – $450 for Class В (per m² per year net of OpEx and VAT). Rental rates growth is not expected in 2013. Rents in both class-A and B as well as across Moscow submarkets are expected to remain flat.
During 2013 the main office real estate market indicators are expected to remain stable. Total take-up will amount to about 1.1 – 1.2 mln. m² The overall vacancy rate will be unchanged at around 10%, rental rates will remain constant.
Estimated new delivery, expected around 860,000 m², will exceed 2011 and 2012 indicators when 603,800 m² and 556,264 m² were delivered respectively.
Claudia Chistova, Head of Office Research, CBRE in Russia, said: “In Q1 the main office market indicators were stable as it was expected. Rental rates remained flat. Vacancy rate increased insignificantly. Russian companies made up a substantial part of the total take-up. Nevertheless, in Q1 the volume of new supply increased compared with 2012 results. First Prime Class A office building has been put into operation since 2011; first mixed-use complex has been delivered in Moscow-City since 2011. Currently, a number of large-scale projects are being actively developed with delivery targeted in 2014 -2015.”