Skip Ribbon Commands
Skip to main content

News Release

Moscow

Jones Lang LaSalle shares Insider

The new format of the report reveals key Russian real estate market indicators


Moscow, 7 November 2011 – Jones Lang LaSalle is presenting a unique form of study of the current state of real estate market - Insider. 3Q 2011 report will provide you with information about the Russian economy and Rouble dynamics, as well as the investment attractiveness of Russian real estate market. "Moscow" and "St. Petersburg" sections coverage the quarterly trends and dynamics across all sectors, including offices, retail and industrial. Jones Lang LaSalle will disclose the Insider on a quarterly basis.

Charles Boudet, Managing Director, Jones Lang LaSalle, Russia & CIS, mentioned: “We can all appreciate that having a firm grasp on market dynamics is critical to most of our decision-making. Having a single resource, a single point of reference from which you may easily access this information is also important. We have combined these two necessities into our latest Research publication – ‘Insider’. As both a guide to market dynamics and quarterly data, our Insider also offers insight into key topics and issues facing market players today. We have endeavored to create a tool that will be of greatest use to you”.

Main Insider’s figures

Investment. What sector is winning the race?

• Historically, the office sector has been the most attractive for investors, as it was the most familiar and transparent. But this year has become unique in terms of the level of interest and volumes transacted in retail and warehouse sectors.

• In Q1-Q3 2011 retail and office segments attracted the bulk of investments – 40% of total investment volume each. Investment volumes in retail and office increased significantly in Q1-Q3 2011, 409% and 106% respectively compared to the same period in 2010.

• As a result, annual growth of investment volume for retail sector will reach 623% YoY and 15% YoY for offices. As for logistics, significant growth was recorded in 2010, after almost zero growth in 2009. This year should record 37% YoY increase.

• We expect further increases of Russian assets’ capital values as unlike European capital values, Russian indicators have yet to recover to pre-crisis levels. As for logistics assets capital values are at 80% of pre-crisis levels, office – 63% pre-crisis level, retail – 82% pre-crisis level. Growth is driven by rental rates that are still not the same as they were before the crisis. As a result Russia still has potential to bounce back even further, thus offering highly sought after investment opportunities.

Office

• New completions of 142,326sq m led the modern office stock in Moscow toreach 13.1m sq m in Q3 2011. From the beginning of this year the level of new office space that entered the market was almost 30% less compared to the same period last year.

• The development market in Q3 is still dominated by Russian developers – accounting for more than 80% of the completed new space.

• Currently, almost 2.5m sq m is under construction and scheduled to enter the market in the next 3 years.

• The take-up in Q3 2011 reached 444,600 sq m, which is 30% up YoY. During the first three quarters of 2011 the total take-up reached 1.2 m sq m. We forecast the level of take-up to reach 1.5 m sq m by the end of this year.
 
• Russian companies executed almost twice as many deals as opposed to foreign lessees. Sector wise, the most active companies in the market were those from the Banking& Finance industry with 32% share, a fact which confirms the recovery of the sector to pre-crisis levels of 2008. The IT sector came second with 26%, with the largest deal of this quarter (30,000 sq m) in this sector.

Retail

• Because of uncertainty with construction permits in Moscow, most of new supply is planned for Moscow Region. In fact, about 52% of new stock is being developed in Moscow Region compared to no more than 20% in 2010.

• Apart from the capital, developers continue delivering new shopping centres and announcing construction plans in other Russian cities. We expect stock distribution in Russia to shift toward regional cities. The share of stock in smaller regional cities will increase from 24% to 27% by end-2013.

• Overall, we estimate the Russian shopping centre pipeline for the remainder of 2011-2013 to be about 3.5 million sq m, of which 25% will be constructed in Moscow and Moscow Region.

• Vacancy rate decreased to 4% in Moscow and to 6% in St. Petersburg in Q3 2011. No new shopping centres were opened in Moscow and existing shopping centres were in high demand and have been rapidly populated with retailers. At the same time, we do not expect to see many shopping centres delivered to Russia’s two major retail markets, so the vacancy rate is expected to decline further.

Industrial

• In our opinion, total completion volume in 2011 will not exceed 430,000-470,000 sq m (the lowest level since 2005).

• In Q3 2011 the total stock of high quality warehouse increased to 8 mln sq m. Some 111,000 sq m of warehouse space were also completed (23% up QoQ). Total completions of the last three quarters accounted for 277,000 sq m. Meanwhile, the take-up for the same period reached 1,082,000 sq m. We expect this situation to change in the coming year, when several big projects are delivered to the market.

• From the beginning of 2010 a sharp decrease in available space is noticed. This quarter vacant space amounted to 120,000 sq m which represents a 50% drop QoQ. A further decline to 60,000-70,000 sq m is expected in the next quarter.

• Such a shortage of quality stock has led to the share of forward contracts and BTS deals to increase in Q3 2011, which accounted for 30% of the take-up. By the end of the year this share is expected to reach at least 50%.

• In Q3 2011 take-up decreased by 42% QoQ and reached 319,600 sq. m. The decline can be related to the lack of available space, increased rents and overall uncertainty on financial markets. For the first three quarters the take-up reached 1,081,000 sq m. By the end of 2011 we expect the executed deals to reach 1.3 mln sq m.

• Sector wise, companies from the retail sector were the most active, accounting for 40% of all deals. Manufacturing companies were second with 30% share.

• With a low level of available space, vacancy rates had fallen to 1.5%. In Class A it is less than 1%, whereas in Class B it is about 2.5%. In Q4 we expect the vacancy rate to reach lowest level since 2007. We also hope that in 2012 the situation will gradually improve and vacancy rates will stabilize around 1.5-3% range.

The Insider report is available at Jones Lang LaSalle web-site.


About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.9 billion of assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg and Kiev. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010 and 2011 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.For further information, please visit our web site www.joneslanglasalle.ru