Subleasing is not a new practice in the Moscow office market. However, it has seen massively increased activity over the recent months. Attempting to minimize costs current tenants increasingly choose to sublease a part of their office, while new incumbents enjoy lower rents and flexible contract terms. As a result, subleasing has developed rapidly in Moscow.
For potential subtenants this provides opportunities to find an office characterized by:
fitted-out and ready to move in;
availability of small areas.
Despite its novelty as a serious alternative to direct leasing, subleasing has now become an integral part of the Moscow office market and an important factor for consideration by developers and landlords. It offers more flexibility to tenants in managing their portfolio and increases financial security of landlords. Although subleasing is a more complex arrangement for tenants, it is quite popular because of new alternatives it offers.
The sublease market in Moscow has recently entered a new phase. A key driver of the recent sublease popularity is the need to compensate the expenses on temporary unused premises. Potential subtenants can now choose from a number of modern fitted-out premises at attractive rents.
Subleasing already displays its counter-cyclical nature, gaining popularity during a market downturn. More importantly, one of the few remaining factors that used to set Moscow aside from developed cities has now been eliminated. The speed of this change has accelerated the maturity of the Moscow market, which now offers a much broader set of options to landlords and tenants.
There are several characteristics that distinguish subleasing from direct leasing practice in the Moscow market. It is important for both tenants and subtenants to understand these specifics in order to take the full advantage of the new opportunities.
Vladimir Pantyushin, Head of Economic and Strategic Research Group at Jones Lang LaSalle, said: "The explosive growth of subleasing is another illustration of the quick evolution that the Moscow office market has been known for. We expect the subleasing market to remain quite active and to reach up to 20% of the total available areas in Class A offices in Moscow. The key change that came with the explosion of subleasing is the variety of choices now available for tenants."