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News Release

Moscow

Warehouse vacancy rate kept growing through the first quarter

JLL announces Q1 2015 results for the Moscow warehouse market


​​​​Moscow, 28 April, 2014 – According to JLL estimates, the level of vacancy rates in existing warehouse premises grew up to 10.4% by the end of last quarter compared to 7.9% seen in the end of 2014. However, this increase in vacancy was due to high volumes of available premises amongst new deliveries – about 80% of the total warehouse space commissioned in the Q1 was vacant. 

About 349,000 sq m of new warehouse space was delivered in the Moscow Region over the first three months of 2015, with the majority of supply being already being at the later stage of construction at the end of 2014. Therefore, the result of the first quarter was about 40% higher than the level seen in Q1 2014 while the total stock of high quality warehouse space in Moscow region reached 11.6m sq m.

Among the biggest deliveries in Q1 there were new premises in industrial park LP Sofyino (Phase 1 with a total area of 91,000 sq m), LP Kievskoye-22 (Phase I, 42,000 sq m) and Sherrizon-Nord WC (Phase I, 55,600 sq m). In terms of geographic location, the biggest increase was seen in the south-eastern and northern directions of the Moscow Region with a 39% and 17% share in the total amount of deliveries over the past three months respectively.

According to JLL analysts, the pipeline of high quality warehouse space for the rest of 2015 is estimated at 0.6mn sq m, whereas the total volume of expected completions in the warehouse sector for the entire 2015 is estimated to be close to 0.9m sq m. Among the largest upcoming warehouse projects in 2015 we expect new complexes in PNK – Chekhov 3 (102,000 sq m), PNK - Bekasovo (80,000 sq m) and Synkovo LP (28,000 sq m). Despite the fact that the expected volume of new deliveries in 2015 will be approximately 40% less than last year, in absolute terms the amount of new supply looks rather impressive, being lower only than the result of 2009 (1.2mn sq m) as well as the record amount of 1.7m sq m that entered the market in 2009.

 Dynamics of New Warehouse Supply in Moscow Region

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“Due to the fall in rents coupled with the rising cost of construction, most of the developers are switching to BTS (built-to-suit) schemes implying the construction process begins only in case of a real demand for a warehouse premise. Moreover, given the ongoing macroeconomic turbulence, many of developers adjust their construction plans by putting on hold the projects on the early stage of construction and postponing planned projects - commented Petr Zaritsky, Regional Director, Head of Warehouse and Industrial Department, JLL, Russia and CIS. - Taking into account that developers don’t currently start new warehouse projects and demand for warehouse space will likely be moderate this year, we expect that the overall vacancy rate is unlikely to grow further while the differentiation between vacancy rates in newly constructed and second-hand stock will be more visible over the course of 2015.”

As far as the demand dynamics is concerned, the volume of total transactions for warehouse space in Q1 2015 stood close to the levels seen in the same period last year and amounted to 150,000 sq m compared to 130,000 sq m of transacted space over the Q1 2014. The average deal size stood at of 8,600 sq m which was close to the level seen in Q1 2014.  

In terms of the structure of demand for warehouse premises in Moscow, distributers were among the most active players and accounted for 36% of share in total volume of demand for warehouse space while the traditional leaders – retail companies – were least active players with roughly 12% share of all recorded transactions over the last quarter. Nonetheless, we see actual deferred demand for warehouse space, mainly from the retail companies, which could be met in the second half of 2015, thus the share of retailers in the total amount of transactions may increase further from the levels seen in Q1. Location-wise, the demand for warehouse space was concentrated mostly in the South and South-East of Moscow region.

“Over the past three months we witnessed an increased occupier activity in renegotiating the current lease terms seeking either a fixed currency corridor or switching to rouble denominated contracts. As for demand for new warehouse space, the most of tenants, however, are still cautious – added Petr Zaritsky – taking into account a further decrease in FX volatility, the amount of demand for warehouse space in Moscow region could reach 800-850 thousands sq m by the end of 2015 which is comparable to the levels seen in the past year."

Demand and Supply of Warehouse Market in Moscow Region

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Due to the high FX volatility seen in 2014 and Q1 2015, the majority of deals in the warehouse market are currently conducted in roubles. In addition, the difference in rents depending on the location became more visible with the relatively expensive supply on the West of Moscow Region and more affordable warehouse space on the East. The average rents were in the range of 4,500 - 5,000 RUB/sq m/year (triple net) while maximum rents were close to 5,500 RUB/sq m/year (triple net). The average level of rental costs (including rental rates on new warehouse space as well as the level of rents for renegotiation the terms of existing leases) was at the level of 105 USD/sq m/year by the end of Q1.

Market Balance in Moscow Region

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