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Moscow

Forecast for demand has been lowered to 0.75m sq m as the pressure on Moscow warehouse market persists

​JLL announces the Q3 2014 Moscow warehouse market results


​Moscow, 16 October, 2014 – According to JLL estimates, 259,000 sq m of new warehouse space was delivered in Q3 in Moscow Region, which was 32% lower than the level seen in the previous quarter. At the same time, the total amount of new supply of warehouse space for the first nine months of 2014 was close to 0.9m sq m which was higher than the total amount delivered in 2013. By the end of Q3, the total warehouse stock of Moscow region reached the level of 10.5m sq m.

Among the biggest deliveries in Q3 there were PNK – Northern Sheremetyevo (bldg. 8, with a total area of 43,372 sq m), new warehouse space in South Gate (81,000 sq m) as well as new premises in Logopark Sever - 2 (49,645 sq m). As far as the location of new supply is concerned, the biggest proportion of new supply was in the South (43% of total volume) and in the North (33% of total volume) of Moscow region.

Dynamics of New Warehouse Supply in Moscow Region

dynamics-of-new-warehouse-supply-in-moscow-region_16102014.png

Source: JLL

The total volume of expected completions in the warehouse sector for the rest of 2014 is estimated at 0.67m sq m – among the largest upcoming warehouse projects in 2014 we expect new complexes in PNK – Chekhov 2 (bldg. 5; 52,259 sq m), Synkovo LP (Phase I; 54,000 sq m) in the South of Moscow, Novaya Riga LP (67,385 sq m) in the West and Nikolskoe LP (106,000 sq m) in the North of Moscow region.

Petr Zaritskiy, Regional Director, Head of Warehouse and Industrial Department, JLL, Russia and CIS, commented: “The total volume of completions in the warehouse sector for 2014 could reach 1.6m sq m, which is amongst the highest levels seen over the past several years. In terms of location of new supply this year, the largest volumes are seen in the North and in the South of the Moscow region. Nevertheless, despite the record amount of new deliveries in the warehouse sector this year, macroeconomic uncertainty forces many developers to revise their construction plans for the next year. According to JLL forecasts, the amount of new supply in 2015 will be unlikely to exceed the level of 900,000 sq m which would represent almost 40% decline YoY.”

Unlike the strong dynamics of supply seen in Q3, demand for warehouse space has been rather weak in YoY terms. Take-up volumes for warehouse space were 209,000 sq m in Q3, which represents a 22% YoY drop. Overall, for the first nine months of 2014 volumes of total transactions of warehouse space amounted to 501,000 sq m which represents a 39% decline compared to the same period of 2013. Due to the lack of obvious catalysts for improvements of the current economic situation, demand for warehouse space is likely stay under pressure till the end of the year. Taking into account this fact, JLL analysts have lowered the forecast for take-up volumes for 2014 from 0.95m sq m to 0.75m sq m which represents a 44% drop compared to the levels seen in 2013. The forecasted volume of demand this year is twice as low as the forecasted volumes of new supply.

Warehouse Take-up and New Supply in Moscow Region

warehouse-take-up-and-new-supply-in-moscow-region_16102014.png

Source: JLL

In terms of geographical location, the major share of demand for warehouse space in Q3 was in the North and South-East of Moscow region. Manufacturing companies outpaced retailers in terms of the share in demand for warehouse space with roughly 35% of all recorded transactions in Q3 compared to 18% share of retailers. Nevertheless, retail companies are likely to remain the key drivers of demand for warehouse space due to the actual deferred demand for warehouse space which could be met by the end of 2014.

According to Petr Zaritskiy, “Due to several large transactions in Q3 done by international companies, the average deal size returned to pre-crisis levels and stood at 14,800 sq m. Moreover, as compared to the first half of the year, the number of sale deals grew considerably and accounted for approximately a half of the total amount of all deals done in Q3. Therefore, despite the worsening macroeconomic situation as well as elevated risks, many companies are using the current conditions to lease warehouse space on more beneficial terms.”

High volumes of new deliveries of warehouse space coupled with the negative influence of external factors on demand this year led to the increase in vacancy rates. At the end of Q3 the overall vacancy rate grew up to 5% in comparison with the 4.4% seen in Q2 2014. Taking into account the current dynamics of demand and supply, JLL analysts do not rule out the possibility of further growth in vacancy rates to 6–7% by the end of 2014.

Warehouse Market Balance in Moscow Region

warehouse-market-balance-in-moscow-region_16102014.png 

Source: JLL

Average market rents remained at the level of 125 USD/sq m/year in Q3, though the Prime rents declined to 132 USD/sq m/year from 135 USD/sq m/year over the quarter. The most pressure on rents is currently seen in the North and in the South of Moscow region in view of the considerable volume of new supply of warehouse space delivered this year. Another 350,000 sq m of new supply are expected to be delivered on these directions by the end of 2014, which could cause some additional pressure on the level of rents in these locations.


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 $4.0 billion and gross revenue of $4.5 billion, JLL has more than 200 corporate offices, operates in 75 countries and has a global workforce of approximately 53,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.0 billion square feet, or 280.0 million square meters, and completed $99.0 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $50.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, 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