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News Release

Moscow

MKAD restrictions enforce warehouse decentralization

Jones Lang LaSalle announces the Q1 2013 results


Moscow, 22 April 2013 – New completion volume kept increasing: about 100,000 sq m was delivered to the market in Q1 2013, which is 100% growth on YoY basis. Despite increased completion the volume of vacant spaces did not rise considerably, as almost all new projects were pre-let or sold before completion. Total expected for 2013 projects account for 930,000 sq m it is more than 50% YoY growth, reported Jones Lang LaSalle experts.

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Source: Jones Lang LaSalle
 
 
Key trend in Moscow warehouse market is new projects decentralization. Majority of existing projects is located within a radius of 20km from Moscow Automobile Ring Road. Although recently established truck-weight restrictions force developers to locate projects on А-107 and upcoming Moscow Central Ring Road (20-40km from MKAD).
 
Distribution of warehouse by distance from Moscow Ring Road

 

Distribution Moscow Ring Road.png
Source: Jones Lang LaSalle

On the other hand pipeline is divided between two key directions, North and South. This is largely because of good transport access, existing in the south (M-4 – Kashirskoe Highway, M-2 – Semfiropolskoe Highway) and under construction in the north (new Moscow-St. Petersburg road).

Next phases of PNK-Chekhov (312,000 sq m) and South Gate (233,000 sq m) projects in the south are among the key projects of 2013-2014. There are several new big projects in the north, starting from Logopark Sever (110,000 sq m) planned to be delivered in Q2 2013, Nikolskoe LP (106,000 sq m) and Dmitrov LP II (63,000 sq m) – in Q1-Q2 2014, to Radumlya LP and PNK-North – during 2014-2015. This variety of projects gives a wide choice for potential tenants and encourages developers to pre-lease or pre-sell projects before start of construction, in order to minimize competition.

Demand for industrial real estate in Moscow region remained stable with take-up amounted to 190,000 sq m in Q1 2013 (12% YoY drop). Main drivers of the demand activity remained retailers and distribution companies (about 66% of total demand).

More than 30% of demand activity were carried up by e-commerce, multi-channel retailers and IT distributors.

There is still a deficit of warehouse space in the market and the vacancy rate remains negligible at 1.07%. Almost all new completions were fully let or sold before the end of construction, thereby not influencing availability. Occupiers requirements for large premises (more than 10,000 sq m) can only be fulfilled by pre-leases (usually 6-8 months before completion) or build-to-suit contracts. We expect the same situation over 2013, the vacancy rate could fluctuate slightly, yet not exceeding 2.5-3%.

We expect total demand of 1.5m sq m by the year end with the increasing sales share approaching 1/3 of annual take-up.  In 2012 it was about 26% and in 2011 only 10%.
Takeup.png
Source: Jones Lang LaSalle

Ilya Vydumkin, Head of Industrial Research, Jones Lang LaSalle, Russia and CIS, commented: «We estimate current prime rents on level of USD140/sq m/year. Anyway there is almost no available areas, the current market is a market of ‘future projects’ and average rent for BTS project or early prelease is lower, USD130-135/sq m/year. Large amount of projects are announced for 2013-2014, but developers prefer to wait occupiers in order to start construction, so supply is growing only in response of demand and we expect commercial terms to remain approximately the same by year end».
Market balance.png
Source: Jones Lang LaSalle

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 242 million square meters. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Aktau. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 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.jll.ru