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News Release

Moscow

New Office Completions in Moscow increased by 24% on a YoY Basis

Jones Lang LaSalle announces the Q3 2012 results


Moscow, 17 October 2012 – New completions in Q3 amounted to 176,500 sq m (24% up YoY) increasing total stock to 14.5m sq m, reported Jones Lang LaSalle.

This new supply consisted of 11 buildings: with two of them being Class A (Aquamarine III – office area – 55,400 sq m and Olympic Hall – office area – 12,500 sq m). The remaining 62% was formed by nine Class B office buildings (the biggest included: Riga Land, Phase II, bl. B – office area – 22,800 sq m, building on Novoryazanskaya 24 – office area – 25,700 sq m).

Sample_of_New_Completions_Q3_2012.png
Source: Jones Lang LaSalle

Around 400,000 sq m were completed in Q1-Q3 2012. Of this only 23% was located in the Central Business District (CBD) submarket, as opposed to decentralized areas that received a significant part of the new completions - around 77%.

Q1-Q3_2012_New_Completion_by_Location.png
Source: Jones Lang LaSalle

By the end of 2012 some 12 office buildings will have entered to enter the market, contributing to total new office space delivered in 2012 of another 313,000 sq m. Class A buildings that are scheduled be completed over the next 3 months are: ALCON, Country Park, Phase III, CityPoint. As a result the annual new completion in 2012 will total around 713,000 sq m (a 18% increase as compared to 2011).

Take-up activity in Q3 reached approximately 265,000 sq m, which is 60,000 sq m less the compared to previous quarterr. This can be explained as low activity for the season during summer. Largest deals included the leases of VEB Leasing (3,823 sq m) in Integral BC; Barkli (2,727 sq m) in Gorky Park Tower; Syngenta (2,320 sq m) in Vivaldi Plaza; ABS Electro (2,385 sq m) in Silver City; BASF (1,930 sq m) in Naberezhnaya Tower. Construction, Mining and Exploration (ex: Castrol, Trasneft Energo) companies together with Manufacturing (ex: Nokia, BASF, Continental Tires) companies had a 64% share from total demand.
 
In terms of availability, the overall vacancy rate decreased to 13.2%, down by 1.4% on a QoQ basis. In contrast, vacancy rate for Class A increased by 0.9% and reached 17.2%, mainly because of the new Class A completions that entered in Q3.
 
Vacancy_Rate_Dynamics.png
Source: Jones Lang LaSalle
 
In Q2 prime rents range remained at the level of USD1,000-USD1,200/sq m/year; Class A - USD625-USD850/sq m/year; Class B+ - USD400-USD600/sq m/year, all excluding operational expenses and VAT (see graph below). Operational expenses reached up to USD200 for prime assets, USD110-USD150 for Class A buildings and USD100-USD120 for Class B+.
 
Rents_Dynamics.png
Source: Jones Lang LaSalle
 
In terms of location costs for Class A buildings the most expensive areas are buildings located in CBD (USD650-USD1,200/sq m/year) and Moscow City financial district (USD650-USD1,000/sq m/year). Rents in Class A office schemes located between Garden Ring (GR) to Third Transport Ring (TTR) range between USD550-USD750 and USD450-USD750 for buildings located between TTR to MKAD (see below details on other Classes).
 
Rents range levels by submarket, USD/sq m/year*
Rents_Range_Levels_by_Submarket.png
Source: Jones Lang LaSalle
 
In Q3 sales prices (excluding VAT) in Moscow ranged between USD3,000 to 12,000USD for sq m (total area) (see below more details on other Classes).
 
Sale prices range in Moscow, USD/sq m*
Sale_Prices_Range_in_Moscow.png
Source: Jones Lang LaSalle
 
Liliana Stoianova, Head of Office and Occupier Research, Jones Lang LaSalle, Russia and CIS, mentioned: “In Q3 2012, 68% of the demand activity was mainly driven by Russian companies. Overall, around 80 deals were executed on the market. Around 15 of these were in the 2,000 sq m to 4,500 sq m category. Location-wise, office space was transacted both in CBD and decentralized locations with a 50% share each. In terms of Classes – the trend of quality continues with 85% of the executed deals being in Class A and B+. Overall in Q1-Q3 total take-up reached almost 900,000 sq m. We expect the demand activity to intensify further in the next quarter with the annual take-up to reach a total of 1.4m sq m 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 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. For further information, please visit www.joneslanglasalle.ru