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Moscow

Q1 2012 Warehouse New Completion Fell Two-Fold Compared to Q1 2011

Jones Lang LaSalle summarizes first quarter results on the industrial real estate market


Moscow, 16 April 2012 – The volume of new warehouse completions in the Moscow Region in Q1 2012 reached 43,405 sq m. This is nearly half of the value recorded for Q1 2011 (76,200 sq m) and 5 times less than Q4 2011 (208,600 sq m), according to estimates by Jones Lang LaSalle analysts.

Ilya Vydumkin, Head of Industrial Research, Jones Lang LaSalle, Russia and CIS, commented: “Indicators in the first quarters are traditionally low, there is a seasonality in construction. On the other hand we actually observe a supply deficit on the market and do not expect any alleviation in the next two quarters.”

Although total new construction in 2012 is expected to reach 700,000 sq m (44% YoY growth), the majority of these premises has been already preleased. Growth of demand in 2011 coincided with the lowest delivery and has led to overshadowing of demand from 2011 to 2012. In such conditions potential tenants have to plan expansion beforehand and built-to-suit schemes became extremely popular.

Take-up volume in Q1 2012 increased to 212,000 sq m. Total demand for 2012 is expected to reach 1m sq m (22% less than in 2011).

Reduced demand activity is a result of several factors, chief among them are: rental growth, lack of vacant space, and overall uncertainty of the macroeconomic situation. In 2011 rents have grown quite rapidly and increased by 17% YoY. In the beginning of 2012 this growth continues, but the level of $140/sq/m has not been reached. We expect this to occur by the midyear. During the 2012 we forecast moderate rent growth by 3-5%.

Under such conditions, Q1 vacancy rate remain low (1.45%). Over the next 6 months we expect intensification of the supply deficit and further reduction of vacancy rate (to 0.8-1%).

Ilya Vydumkin, Head of Industrial Research, Jones Lang LaSalle, Russia and CIS, also added: "There is a unique situation on the industrial market. The current supply deficit(constructed premises) suggest that tenants are faced with in fact few options for expansion, chief of them is built-to-suit. On the other hand with increasing cost of capital, developers prefer built-to-suit schemes and preleases during the initial stages. Such contracts decrease overall risk for the project and can lower cost of capital. There are now many proposals from developers with plots for potential built-to-suit. In Q1 2012 share of BTS/prelet deals of total demand reached 82%.”

By year end, with delivery of new projects, we expect moderate abatement of the deficit on the market. According to Jones Lang LaSalle‘s forecasts, vacancy rate will increase to 1.5-3% by the end of the year.


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 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from 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 195 million square meters worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.7 `billion of assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Almaty. 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 website www.joneslanglasalle.ru