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Moscow

Warehouse Market Saw the Record Completion Levels for Moscow Region in 2013


Moscow, 30 January 2014 – As of year end, the warehouse market in Moscow Region has shown rapid growth. New completion volume was the highest since 2009. About 855,000 sq m of warehouse space entered the market in 2013 and the total warehouse supply reached 9.65m sq m, according to the estimates of Jones Lang LaSalle analysts.

In Q4 2013 completion volumes reached 200,000 sq m, that is 62% higher compared to Q4 2012. The largest project delivered in Q4 was a new block in South Gate (33,000 sq m) built for Decathlon. Over the course of the year, the second phase of PNK-Chekhov (168,000 sq m), PNK-Vnukovo (114,000 sq m) and the first phase of Logopark Sever (110,000 sq m) represented the three largest warehouse completions.

Given that the volume of projected completions for 2014 warehouse space (1.9m sq m), is twice the 2013 completion levels, the market is likely to set a new record this year. However Jones Lang LaSalle analysts consider such estimates to be optimistic and assume that the new supply will not exceed 1.6m sq m by 2014 year end.

Petr Zaritskiy, National Director, Head of Warehouse and Industrial Department, Jones Lang LaSalle, Russia and CIS, commented: “Overall vacancy rate continues to fluctuate at a low level. Only 130,000 sq m are offered for lease in the beginning of 2014, that in percentage terms equals to 1.4% of total supply. Taking into account both growth of future supply and slight decrease in actual demand, we assume that the vacancy rate will reach 4% by 2014 year end.”

Among the major upcoming projects in 2014 are new developments in PNK-Chekhov (139,000 sq m) and South Gate IP (162,000 sq m) and Synkovo LP (120,000 sq m) in the South and PNK-Northern Sheremetievo (174,000 sq m), Nikolskoe LP (106,000 sq m), Radumlya LP (100,000 sq m) and the second phase of Logopark Sever (100,000 sq m) in the North.

Maria Lurye, Industrial Research analyst, Jones Lang LaSalle, Russia and CIS, commented: “The warehouse market in the Moscow Region is becoming more and more forward-looking. Developers offer under construction projects or built-to-suite (BTS) projects, as almost all new warehouse space is typically pre-let or sold before completion. The share of pre-let and pre-sold space reached 90% in 2013 whereas the share of BTS projects amounted to 35%. Next year such a tendency will intensify as 37% of 2014 completions were already contracted by the end of 2013.”

Dynamics of new warehouse supply in Moscow Region
Dynamics of new warehouse supply in Moscow Region_30012014.png
Source: Jones Lang LaSalle
 

On the back of this high volume of completions, take-up activity accelerated as well, amounting to 520,000 sq m in Q3 2013. That is 47% higher than in Q4 2012. According to Jones Lang LaSalle estimates, total demand reached 1.3m sq m in 2013, showing 4% YoY increase. Nevertheless Jones Lang LaSalle analysts expect that take-up activity will slightly slowdown next year, thus the volume of leased and sold warehouse space will amount to 1.1m sq m.

The average deal size continues to increase as well. In 2013, it reached 18,000 sq m, compare to 13,000 sq m in 2012 and 11,000 sq m in 2011. A series of record-breaking deals in terms of leased area started in mid-2013 with a lease of 72,000 sq m in Logopark North by Swedish retailer IKEA.. A large share of take-up in Q4 2013 comprised the following large built-to-suit transactions: 52,000 sq m sale in PNK-Chekhov, phase 2 by VolksWagen, 39,000 sq m long-term lease in Noginsk LP by Dixi and 21,000 sq m lease in South Gate IP by Kimberly-Clark. 43% of Q4 2013 and 35% of 2013 total demand is accounted for by BTS deals. The share of built-to-suit transactions reached 43% of Q4 total demand and 35% of total 2013 take-up.

 
Warehouse take-up and new supply in Moscow Region
Warehouse take-up and new supply in Moscow Region_30012014.png
Source: Jones Lang LaSalle
 

Prime rent remains stable at the level of USD140/sq m/year. Due to the large number of pre-leases average rent is lower, at USD130-135/sq m/year.

Petr Zaritskiy commented: “Due to transport limitations introduced in H1 2013 and the reconstruction of main highways in the Moscow Region, the differentiation of rents due to project location has become visible. Warehouses located near MKAD became are more expensive, as well as objects located near the newly reconstructed highways. This trend will intensify next year. A large number of projects announced for 2014-2015 particularly in the North of Moscow Region will lead to increased competition among warehouse projects. Thus, the traditional lack of supply in the North should become more balanced.” 

Warehouse market balance in Moscow Region
Warehouse market balance in Moscow Region_30012014.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 $4.0 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 279 million square meters. Its investment management business, LaSalle Investment Management, has $47.6 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