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News Release

​Moscow

Growing warehouse supply in Moscow Region led to the increase in vacancy rate

JLL announces the H1 2014 results


​Moscow, 29 July, 2014 – According to JLL estimates, 630,000 sq m of new warehouse space were delivered in H1 2014 in Moscow Region, which turned out to be almost three times higher the volumes of new supply over the same period last year (222,000 sq m). By the end of Q2 2014 with new 378,000 sq m delivered, the total warehouse stock of Moscow Region reached the level of 10.3m sq m.  

Among the biggest deliveries in Q2 2014 there were Bykovo LP, Dmitrov II LP, and new industrial buildings in PNK-Severnoye Sheremetyevo and PNK-Chehov 2. 

Dynamics of New Warehouse Supply in Moscow Region

Dynamics-of-New-Warehouse-Supply-in-Moscow-Region_29072014.png

Source: JLL

The total volume of expected completions in warehouse space for the rest of 2014 is estimated at 0.97m sq m. According to JLL estimates, the amount of new supply in 2014 is likely to reach 1.6m sq m which is comparable to the record amount of 1.7m sq m commissioned to the market in 2007. Among the largest upcoming warehouse projects in 2014 there are new complexes in PNK-Chehov 3 (102,000 sq m), Synkovo LP (Phase I; 54,000 sq m), and also new warehouses in South Gate IP (101,000 sq m) in the South of Moscow while up North such objects as Nikolskoe LP (106,000 sq m), Radumlya LP (100,000 sq m) and Logopark Sever 2 (Phase I; 100,000 sq m) are expected to be commissioned by the year end. 

Petr Zaritskiy, Regional Director, Head of Warehouse and Industrial Department, JLL, Russia and CIS, commented: “Despite the strong annual dynamics of supply seen in Q2, the demand for warehouse space was rather weak for the same period in YoY terms. Take-up volumes for warehouse space turned out to be 162,000 sq m in Q2 2014 or 292,000 in total for the H1 2014, which represents a 47% YoY drop. Despite such lackluster dynamics of demand seen in the H1 2014, the situation may change in the second half of the year, given the slight improvements in macroeconomic environment happened in Q2, as well as the increase in tenants’ activity which historically takes place in the last quarters of a year. Total volume of take-up for 2014 is likely to be 0.95m sq m, implying a 28% YoY decrease.” 

Warehouse Take-Up and New Supply in Moscow Region

Warehouse-Take-Up-and-New-Supply-in-Moscow-Region_29072014.png 

Source: JLL

“The structure of demand for warehouse space has noticeable changed since 2013.” - Petr Zaritskiy added. -  “Russian companies were dominant with a 60% share in all transactions in H1 2014, whereas the average size of the deal amounted to 10,000 sq m compared to 14,000 sq m seen in H1 2013.  The average share of sales deals in a total amount of recorded deals stood approximately at 13% in H1 2014 while a year ago the sales deals comprised roughly 30% of all transactions. Despite the cautious behaviour of the market participants caused by unstable political situation as well as the rise in FX volatility in H1, we do see an actual deferred demand for the freehold driven mainly by retailers which could be met in H2.” 

In terms of geography, the major share of take-up for warehouse space was in the South and South-East of Moscow Region, comprising 48% of the total transaction volume, as well as in the North with the share of 26%. Retailers and logistic companies were the main drivers of demand in H1 2014, accounting for 38% and 29% respectively of all recorded transactions in H1 2014. 

According to Petr Zaritskiy, “the considerable volume of new supply seen in Q2 on the back of the sluggish dynamics of demand for warehouse space, led to increase in the vacancy rate to 4.36% from 2.5% seen in Q1 2014. By the end of Q2, there were approximately 448,000 sq m of warehouse space available for lease or sale on the market. Taking into account the current dynamics of demand and supply, we would not rule out the possibility of the further hike in the vacancy rate up to 6-7% by the year end.” 

The recent volatility in rouble coupled with the weak demand for warehouse space in Q2 2014 brought about the compression of the average rents to USD125/sq m/year from USD130 sq m/year seen at the beginning of the year. The prime rent has decreased as well and currently stood at USD135/sq m/year versus USD140/sq m/year seen at the beginning of Q1 2014. 

Warehouse Market Balance in Moscow Region

Warehouse-Market-Balance-in-Moscow-Region_29072014.png

Source: JLL

The growth in vacancy rate happened in the H1 2014 could be largely attributed to the increased volumes of new speculative supply – nonetheless, the demand for high quality warehouses remains stable with the vacancy rates in such objects are still at the relatively low levels compared to the market average.

“Due to the large number of projects announced for 2014–2015, particularly in the North and South-East of Moscow Region, the traditional lack of supply on these directions becomes more balanced bringing the rents down to the market average.” - Petr Zaritskiy resumed.


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 fee revenue of $4 billion, JLL has more than 200 corporate offices and operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $48.0 billion of real estate assets under management. JLL is the brand name of Jones Lang LaSalle Incorporated.

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 , 2013 and 2014 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