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News Release

Moscow

Volume of New Office Supply in Moscow for 9M 2013 Has Already Reached FY 2012 levels

Jones Lang LaSalle announces the Q3 2013 office market results


Moscow, 16 October 2013 – Around 244,500 sq m of new office space was completed in Q3 in Moscow which means that over the first three quarters of this year the level of new deliveries has equaled 2012’s total annual new supply and reflected a 45% increase on a YoY basis, according to Jones Lang LaSalle’s analysts.

For the rest of the year, completions are anticipated to be around 180,700 sq m. As a result, the total completion level in 2013 is estimated to appreciate by 32% compared to 2012, at approximately 750,000 sq m. 

Moscow New Completions Dynamics

Moscow New Completions Dynamics_16102013.png
Source: Jones Lang LaSalle

9 buildings were completed this quarter, more than 50% of which is Class A. New supply includes the following Class A developments: Mercury City Tower (office area ― 87,600 sq m) located in Moscow City, Domino Business House (6,200 sq m) in the CBD, Country Park (Phase III; 19,120 sq m) and Leninskiy 119 (15,400 sq m) in decentralized locations. The remaining delivered buildings were classified as Class B+: Smart Park (10,300 sq m), 9 Akrov BC (62,300 sq m) and Central Street (6,400 sq m).
 
In terms of location, the largest shares of new supply were the Moscow City financial district and areas outside TTR, each had about 40% of the total market share.
 
Maria Shpakova, Analyst of Office and Occupier Research, Jones Lang LaSalle, Russia and CIS, commented: “Out of 1.3m sq m of Class A space expected to be delivered by the end of 2015, 65% of which will be within decentralized locations. We predict that Class A stock will account for 50% of total completions expected by end-2015.”
 
New Completions Share by Submarket and Clasess_16102013.png
Source: Jones Lang LaSalle
 
Leasing activity was relatively solid in Q3 with take-up volume of 323,000 sq m. A total of 1m sq m was transacted in the first three quarters, which was up 18% over the same period last year. The main drivers were companies from the manufacturing sector, accounting for 27% across all deals recorded in Q3. Three other sectors; Business Services, Service Industries and Banking & Finance accounted for a sizeable share of activity with 21%, 16% and 16% respectively.
 
Moscow Total Take-up Dynamics
Moscow Total Take-up Dynamics_16102013.png
Source: Jones Lang LaSalle
 
The majority of demand was focused on smaller spaces less than 1,000 sq m (about 70%). The largest transactions in Q3 were the renewal of space in LeFort by Alcatel-Lucent (4,500 sq m), the leases in White Gardens Office Center by Dentons (4,000 sq m), in Nagatino i-Land by Russian Post (3,600 sq m) and in Lotte BC by Kimberly-Clark (3,000 sq m).
 
In terms of deals type, the sales share increased four times from Q2 to Q3 in all executed deals and reached 26%.
 
Corporates occupiers continued to show preference for decentralized locations with about 50% of total take-up. International tenants were slightly dominant, accounting for 55% of transacted space in Q3. With some larger requirements still in the market, total take-up for 2013 could still reach 1.6m sq m, Jones Lang LaSalle’s experts reported.
 
Demand by Business Sectors, Q3 2013
Demand by Business Sectors_16102013.png
Source: Jones Lang LaSalle
 
Despite the strong new supply in Q3, the overall vacancy rate remained stable and stands at 13.1%. Nevertheless, vacancy levels for Class A were particularly high at 18.9%. Several new high-quality developments added available spaces to the market. Historically, we see the largest Class A available premises to be found in Moscow City (130,000 sq m); CBD (190,000 sq m) and outside the TTR submarket (145,000 sq m).
 
Valentin Stobetsky, Regional Director, Head of Office Group, Jones Lang LaSalle, Russia and CIS, added: “During the period of more than two years, prime rents remained flat at USD1,000 to USD1,150 per sq m per year. Rental costs are expected to remain largely stable for the rest of the year with Class A rents ranging between USD600 and USD850, Class B+ ― USD350―600.”
 
 
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 and Kiev. 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