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Russia, Ukraine and Kazakhstan office market comparison

Jones Lang LaSalle presents “Occupiers Guide” report

Moscow, 04 October 2012 – Jones Lang LaSalle has conducted a comparative analysis of office market in Russia, Ukraine and Kazakhstan. Objects of the research are 5 cities – Moscow, St. Petersburg, Kiev, Almaty, and Astana.

Key results of the research study are:
  • Prime rental rates in Moscow are almost three times higher than the similar indicators in other studied cities. At the time, average rates in St. Petersburg, Kiev, Almaty, and Astana are just at the same level.
  • Rental rates in Moscow are stated per sq. m per year while office buildings’ owners in other cities prefer to set monthly rent.
  • Typical lease term of office premises in the Russian capital is 5-7 years, in other cities it doesn’t exceed 5 years. Lease agreements for the shortest term (starting from 11 months) are still signed in St. Petersburg, Almaty, and Astana for Grade B offices.

Alexey Efimov, National Director, Head of Corporate Solutions Group, says: “One of the main indicators of the office market maturity and stability are the level of rental rates and standard lease term. In the Moscow office market rates are higher than in other cities, and this is largely due to the high standard and cost of living in the capital. Compared to other markets in Moscow there are more properties of investment interest which also maintain maximum rates at the high level. Meanwhile, business is concentrated in Moscow, and a great demand for quality properties accounts to rents’ level.”

Regarding rental rates, Moscow is an absolute leader among the other studied cities, and it is one of the cities in EMEA region with the maximum level of rates, conceding just to London.
St. Petersburg occupies the second place in the rents rating, Almaty and Astana have the third place, and Kiev closes this rating (see tab).
Rental rates for high-quality office buildings
Prime, US$ per sq. m​ Class A, US$ per sq. m​ Class B+, US$ per sq. m​
Moscow​ 1 000-1 200​ 625-850​ 400-600​
St. Petersburg​ 450-550​ 330-400​ 250-330​
Kiev​ 420​ 360-420​ 264-336​
Almaty/Astana​ 540​ 360-540​ 215-300​
Source: Jones Lang LaSalle

The typical lease term in Moscow significantly exceeds other cities’ indicators, and lasts for 5-7 years against maximum 5 years in St. Petersburg, Kiev, Almaty and Astana. Meanwhile, in the St. Petersburg and Kazakhstan cities tenants can sign lease agreements for unprecedentedly short terms for 11 months (for Grade B offices).
Alexey Efimov explains: “In Moscow developers and investors usually keep long-term strategy and prefer to have long agreements with tenants – sometimes up to 10 years. In St. Petersburg, Kiev, Almaty and Astana several office buildings’ owners still prefer to make short-term agreements – they try to ”catch the moment” and expect rates to grow in prospect. It is also worth noting that only in Moscow rates are set in sq. m per year, while in other cities they are stated per month. In St. Petersburg just in several Class A offices the rent is set in sq. m per year.”
Office lease conditions in different cities
Typical lease term​ Free rent​ Fit-out costs, US$ per sq. m​
Moscow​ 5-7 years​ 3-6 months​ 700-1 000​
St. Petersburg​ 11 months*-5 years 2 weeks - 3 months 350-700
Kiev​ 3-5 years 360-420​1-4 months 400-700​
Almaty/Astana​ 11 months*-5 years​ 2 weeks – 3 months​ 600-700​
*Common for several Class B offices
Source: Jones Lang LaSalle

Free rent period duration depends directly on the lease term: the longer it is, the longer is a free rent period. Payment for the office in Moscow can be frozen for 3-6 months, while in St. Petersburg and Kiev this term does not exceed 3 months. In Kazakhstan free rent period starts from 2 weeks and lasts up to 3 months.
Alexey Efimov remarks: “Free rent is both a commercial condition of the agreement and tenant’s technical request. On the one hand, this is a bonus for a long-term lease agreement, on the other hand, a company needs this period to complete fit-out works. Therefore the free rent period duration depends not only on the lease term, but on the occupied area, i.e. on fit-out works.”
In Moscow, premises are typically delivered to tenant in Shell & Core condition with finished common areas, heating, mechanical systems, elevators and fire safety system general distribution. Fit-out costs vary from US$700–1 000 per sq. m. In St. Petersburg partial compensation for anchor tenants is available. Typical fit-out costs usually do not exceed US$700 per sq. m.
Kiev differs from Russian cities as the premises are typically delivered to tenant with basic fit-out: open space lay out, perimeter wall finish and painted, electrical / HVAC systems installed, suspended ceilings. So that, tenant pays for all additional internal works, if required. Approximate fit-out costs are US$400-700 per sq. m.
In Kazakhstan landlords provide premises in Shell & Core condition or with basic fit-out. Internal works costs are US$600-700 per sq. m.
Other occupancy costs, particularly, maintenance, cleaning and security of common areas, are included in operating expenses, but security within office premises is paid by tenant. Secure parking is an additional expenditure part for tenants. Depending on the city, car space leasing may cost US$100-500 per sq. m.
Car space leasing cost in office buildings
Surface parking,
US$ per month​
Underground parking, US$ per month
Moscow​ 150-250 300-500
St. Petersburg​ 100-200 200-400
Kiev​ 150-250 250-400
Almaty/Astana​ 100-200​ 400-500

Source: Jones Lang LaSalle


Alexey Efimov summarizes: “Despite the fact that Moscow and St. Petersburg are two capitals of the same country, office markets in these cities are quite different. We see much more significant differences in other countries’ markets – in Ukraine and Kazakhstan. Each of studied cities has its own rules, work conditions, and there is no a single trend common for them.”
Full version of Jones Lang LaSalle “Occupiers Guide” report is available here.
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 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, 2011 and 2012 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.
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