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News Release

​Moscow

Moscow office occupier activity increased following the stabilization of the macro environment over the course of Q2 2015

​New office supply dropped more than twice compared to H1 2014 results


​​Moscow, 29 July 2015 – According to JLL analysts, about 133,000 sq m of Moscow quality office space was delivered to the market over the course of Q2. For the first half of 2015 the amount of new supply of office space was estimated at 224,000 sq m which was almost 60% lower on a YoY basis. Among the biggest deliveries in Class A were Pallau RB (30,250 sq m) as well as new buildings in business parks Krylatsky Hills (24,600 sq m) and K2 Business Park (18,390 sq m).

In terms of the quality of new supply, Class A buildings comprise around 74% of all H1 deliveries. Location-wise, about 46% of all deliveries in H1 were located outside the Third Transportation Ring (TTR) while in Central Business District the amount of commissioned projects comprised less than a 1% of total H1 deliveries.

New Moscow Office Completion by Location-by Class_29072015.png   

Source: JLL

Over the second half of the year, we expect around 0.6m sq m of new supply of office space, therefore the amount of new supply for the entire 2015 is expected to be around 0.8m sq m which will be 40% lower YoY.

At the same time, the total supply of high quality office space in Moscow is about to reach 18m sq m which would reflect a 5.5% growth on a YoY basis. Amongst the largest upcoming projects for 2015 are Oruzheyny MFC in Central Business District, and Sirius Park outside TTR.

Occupiers have been actively renegotiating their terms of existing contracts over the course of the last quarter – renewals and renegotiations of lease terms comprised the majority of the total amount of transactions in H1.

In terms of demand for office space, the volumes of take-up over Q2 were estimated at 278,000 sq m representing a 29% recovery QoQ. Nonetheless, the total volumes of take-up for H1 was at 494,000 sq m which was 5% lower compared to the same period last year. 

“The rebound in demand for office space could be attributed mainly to the macro factors which stabilized over the course of Q2. The main drivers of demand for office space in Moscow in the first half of the year were companies from the Business Services and Manufacturing sector, accounting for 26% and 28% of all recorded transactions respectively. The share of local tenants increased to 70% of all recorded transactions in H1 2015 compared to 51% in H1 2014 – commented Alexander Churikov, Head of Office, Occupier & Industrial Research, JLL Russia & CIS. – Nonetheless, the macro turbulence could affect office market in the second half of the year, considering the increased volatility on the oil market (Brent prices has lost about 20% since the May’s peaks) as well as quite weak Russian macro-numbers for June. In terms of annual demand, assuming a sizeable decrease in Russia GDP this year, the volumes of take-up are estimated to be close to 0.9-0.95m sq m representing a 10-15% YoY decrease.” 

Moscow Office Demand by Business Sectors-by Class_29072015.png      

Source: JLL

By the end of June, the overall vacancy rate in the Moscow office market stood basically unchanged compared to the levels in Q1 at 17%. The vacancy rate in Class A decreased marginally to the 27.4% from the 27.6% seen at the end of Q1 2015.  Class B+ vacancy rate stood unchanged at 16%.  

“Over Q2 we observed a notable decrease in the Class A vacancy rate in Moscow-City to 32% compared to the level of 42% seen in the Q1 – commented Elizaveta Golysheva, National Director, Deputy Head of Office Agency, JLL Russia & CIS. - In the longer term, the further growth in vacancy rates will be rather limited taking into account the expected cut in the future supply of offices due to the end of the ongoing construction cycle – in Class A only 0.7m sq m of office space is currently under construction and can enter the market in coming 2-2.5 years which is comparable to the levels of Class A deliveries over the entire 2014.”

The Dynamics of Moscow Class A Office Completion
The Dynamics of Moscow Class A Office Completion_29072015.png 

Source: JLL

The rental costs stabilized over the last quarter with the level of rents for Prime offices stood unchanged QoQ in the range of USD 750–840 per sq m per year. Class A rents ranged between USD 450-650 and Class B+ between USD 275–450 per sq m per year. In Moscow City area, rents ranged between USD 450–650 per sq m per year.


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. A Fortune 500 company with annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000.  On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $55.3 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, 2014 and 2015 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg; Consultant of the Year at the RCSC Awards in 2015, and The Best Real Estate Consultancy in Ukraine at the Ukrainian Property Awards in 2013.

For further information, visit www.jll.ru