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News Release


33% of the Forecasted Annual New Office Supply Already Delivered in H1 2013 in Moscow

Jones Lang LaSalle announces the Q2 2013 office market results

Moscow, 17 July 2013 – New office completions in Q2 in Moscow reached only 81,500 sq m, which is the lowest level of new supply for one quarter during the last 7 years. Nevertheless, in H1 2013 around 340,000 sq m (a 50% increase to the same period last year) were added to the market which represents only 33% of the expected new completions for 2013, reported Jones Lang LaSalle’s experts. 

New Office Completions Dynamics
New Office Completions Dynamics_170713.png
Source: Jones Lang LaSalle
6 buildings were delivered this quarter. However only one was Class A: Wall Street (office area – 20,500 sq m) located in the CBD. The remaining 75% are Class B properties, all in decentralized submarkets. Examples include: Quadrum (24,650 sq m), Sinitsa Plaza (13,500 sq m), Park Mira (7,000 sq m).
The shift away from the CBD, driven by policy and market factors continues with almost 60% of new space in the first six months located outside TTR.
 H1 2013 New Office Completions Share by Submarkets_Classws 17072013.png
Source: Jones Lang LaSalle


The pipeline further reinforces this trend. The announced deliveries for H2 are double those of the first half. Out of 680,000 sq m scheduled to be completed by the end of the year, 65% is located in decentralized locations. Significant buildings include Mercury City Tower (87,000 sq m), Country Park, (Phase III, 22,000 sq m), Park Pobedy (80,000 sq m), 9 Akrov BC (60,000 sq m), Orbita (Phase II, 47,000 sq m), Golden Ring (46,000 sq m), Riga Land (Phase II, bl. A, 43,000 sq m).
In terms of occupier activity, 720,000 sq m (344,000 sq m in Q1 and 378,000 sq m in Q2) were transacted in H1, which represents an increase of around 16% compared to same period last year. Pre-commitments are back in the market with Publicis Groupe pre-let deal (11,000 sq m) in Bolshevik Factory being the biggest transaction of the quarter. Several pre-sale transactions were signed in high quality buildings expected to enter the market by the end of 2014 (BC Lotos and MFC Vodny). Liliana Stoianova, Head of Office and Occupier Research, Jones Lang LaSalle, Russia and CIS mentioned: “This is a positive sign and we expect this trend to continue in the following months, as several corporates are trying to secure good value-for-money opportunities well in advance.”
Two other transactions exceeded 5,000 sq m in Q2 including the renewal of space by IBM (8,700 sq m) in Naberezhnaya Tower and the lease of Stroytransgas (6,600 sq m) in SkyLight. Several new deals in the 2,000 to 3,000 range were signed this quarter: KIA Motors (2,800 sq m) leasing in Lighthouse; Pernord Ricard (2,980 sq m) in Imperial House; Renault (2,970 sq m) in Black & White; GazpromBank (2,200 sq m) in Riga Land.
Overall, business services, manufacturing and construction & mining tenants remained the three groups which have maintained the strongest level of demand in H1 2013. Interest came primarily from domestic companies (60%). In terms of location preferences, 50% of transacted space in H1 was in non-core submarkets where corporates could secure better space options at reasonable price. By end of 2013 take-up is expected to reach 1.6m sq m.
Demand by Business Sectors, H1 2013
Demand by Business Sectors, H1 2013, 17072013.png

Source: Jones Lang LaSalle
The overall vacancy rate in Q2 2013 decreased to 13.1% as opposed to 14.7% same period last year. At the end of Q2, out of all immediately available supply in Moscow 23% (450,000 sq m) was in Class A buildings. Largest high-quality available blocks are located in Moscow City (70,000 sq m); CBD (185,000 sq m) and outside the TTR submarket (140,000 sq m).
In terms of costs, the rental market is broadly unchanged with prime rents at USD1,000 to USD1,150 /sq m per year; while  Class A rent ranges between USD600 and USD850. “Rents for the remainder of the year are likely to remain stable across all Classes. However, long-term rents are forecasted to increase marginally in the CBD submarket due to limited supply and consistent demand from occupiers, which prefer the submarket for its proximity to the Kremlin area and its established business location”, added Liliana Stoianova.
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 and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 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.
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