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Moscow

Moscow warehouse market: completion levels keep well supported despite the economic slowdown

JLL announces the Q1 2014 results


​Moscow, 22 April 2014 – According to JLL estimates, 251,500 sq m of new warehouse space were delivered in Q1 2014 in the Moscow Region, which turned out to be almost two times higher than the volume of new supply over the same period last year (113,158 sq m). Despite the economic uncertainty seen in Q1 2014, the levels of new supply in warehouse space were well supported. By the end of Q1 2014, total warehouse supply reached a level of 10m sq m.

Among the key deliveries in Q1 2014 there were Technoprom Britovo (Phase I; 80,000 sq m), North Domodedovo LP (45,000 sq m) and a new warehouse complex in Tomilino LP (28,500 sq m).

Dynamics of New Warehouse Supply in Moscow Region


S
ource: JLL

The total volume of announced projects in warehouse space for 2014 is about 1.8m sq m, though JLL analysts estimate that the actual amount of new supply won’t exceed 1.6m sq m by 2014 year end.

Among the largest upcoming warehouse projects in 2014 there are South Gate IP (200,000 sq m), PNK-Chekhov (124,000 sq m) and Synkovo LP (119,000 sq m) in the South and PNK-Northern Sheremetievo (192,270 sq m), Nikolskoe LP (106,000 sq m), Radumlya LP (100,000 sq m) and Logopark Sever 2 (Phase I; 100,000 sq m) in the North.

Despite the increase in supply, the slowdown in the economic growth negatively affected the demand for warehouse space in Q1 2014. Take-up activity in the last quarter decelerated by 32% YoY with the volumes of take-up totalling to 130,178 sq m. According to JLL estimates, total volume of take-up for 2014 will reach 1.1m sq m, showing a 17% YoY decrease.

Warehouse Take-up and New supply in Moscow Region
Source: JLL

Retailers and logistic companies were the main drivers of demand in Q1 2014, accounting for 30% and 31% share of all recorded transactions in Q1 2014 respectively, despite the negative effects of rouble devaluation on the business of companies in these sectors and increased lease expenses in rouble terms.

The decrease in demand coupled with considerable volume of new supply in warehouse space seen in Q1 2014, has led to increase in the vacancy rate to 2.5% from the level of 1.4% seen in Q4 2013. Taking into account both growth of future supply and pressures on demand, JLL analysts estimate the vacancy rate at 5% by the year end with the significant downside risks to the forecast. 

Petr Zaritskiy, National Director, Head of Warehouse and Industrial Department, JLL, Russia and CIS, commented: “Throughout the last year, we saw the warehouse market in the Moscow Region becoming more and more forward-looking. Due to the lack of available space on the market, almost all new warehouse supply was typically pre-let or sold before completion. In some cases the share of delivered and already occupied warehouse space could reach 100%. In Q1 2014, however, due to the substantial level of new supply coupled with the moderate take-up activity, this ratio decreased to 57%: around 108,000 sq m of warehouse space out of 251,500 sq m of new deliveries are currently vacant and offered for lease.”

Prime rent remained stable at the level of USD140/sq m/year while the average rent slightly decreased QoQ and currently stood at USD130 versus USD135/sq m/year seen in the Q4 2013.

Warehouse Market Balance in Moscow Region


Source: JLL

The recent rouble devaluation resulted in increasing pressure on dollar denominated rents which are typical for high quality warehouse space. In an environment of rising ruble FX volatility, major developers are increasingly prepared to negotiate current lease terms with a fixed currency corridor while smaller developers are offering rouble denominated contracts.

“The trend of differentiation in rents due to geographical location of projects is becoming more and more visible – added Petr Zaritskiy. – A large number of projects announced for 2014–2015, particularly in the North and South-East of Moscow Region, will intensify the competition among warehouse projects in these directions. Thus, the traditional lack of supply in the North will become more balanced bringing the rents close to the market average.”


About JLL 

JLL (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, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 279 million square meters and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management.

In Russia and CIS JLL has offices in Moscow, St. Petersburg and Kiev. JLL, Russia & CIS was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg and The Best Real Estate Consultancy in Ukraine at the Ukrainian Property Awards in 2013. For further information, visit www.jll.ru