JLL: Vacancy rates in existing warehouse complexes in Moscow at record low (RU)

New completions in Q4 reached 124,000 m², which is a 40% y-o-y drop for new supply. Demand remains strong, with vacancy rates falling to 0.65%, the lowest they have been for the last five years, reported Jones Lang LaSalle experts.

With robust demand continuing, the majority of new supply reaching the market is fully leased or sold prior to the end of construction. Total new supply for 2012 in Moscow Region, measured slightly more than 592,000 m². Availability remains largely unaffected

Ilya Vydumkin, Head of Industrial Research, Jones Lang LaSalle, Russia and CIS, commented: "A notable deficit of standing warehouses continued for 2012. While we expect new completions in 2013 to exceed the 2012 level by 50% (900,000 - 950,000 m²), we do not expect demand to subside or the supply deficit to be resolved. We are informally calling it a 'market of future projects'. Key projects expected in 2013 include: PNK-Chekhov (213,000 m²), IP South Gate (200,000 m²), LP Nikolskoe (106,000 m²) and Logopark Sever (110,000 m²)."

Total take-up for 2012 measured 1.29 mln m². In Q4 2012 take-up exceeded 355,000 m², demonstrating 90% y-o-y growth. Key demand trends for 2012 were a growing popularity of purchasing deals, with their share of total demand growing from 10% in 2011 to 26% in 2012. This is largely due to lack of available existing areas, the evolution of built-to-suit transactions and the appearance of convenient three-sided financial schemes involving developer, creditor (bank) and occupier.

Demand was significantly influenced by growth in e-commerce. Its share in total demand increased from near 0% in 2011 to 13% in 2012.

The primary drivers of demand, accounting for 68% of take up, remained retailers and distributors. Notable transactions in 2012 include: two leasing deals – Adidas and Enter in PNK-Chekhov (65,000 m² and 61,000 m² respectively); four sales deals – PRV-Group (33,000 m²) and NKK (58,300 m²) in PNK-Vnukovo, Lenta (42,000 m²) in PNK-Chekhov and Decathlon (33,000 m²) in South Gate.

Vacancy rate on the industrial property market now measured 0.65%, a clear indication of the demand/supply imbalance on the market. This is the lowest level recorded on the market since 2007, when the warehouse market in Moscow Region was still in its early development stages, and few modern complexes were present. According to Jones Lang LaSalle forecasts, this supply deficit will remain throughout 2013. Some quarters could demonstrate temporary fluctuations in vacancy rates, as very large completions enter the market, however by year end we still see overall vacancy under 3%.

Prime rents in existing premises are stable. Average rental rates of USD $135/m²/year are being recorded. Projects under-construction can offer a discount of US $5-10. Sublease contracts and smaller (2,000-3,000 m²) areas could achieve rental rates of US $140-145/m²/year.

Source: Jones Lang LaSalle

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