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News Release

​Moscow

Occupier activity on Moscow office market somewhat revived in Q3 following decrease in rouble volatility

​The amount of take-up for offices space in 2015 will likely beat the forecast


​​Moscow, 22 October, 2015 – According to JLL analysts, the volumes of office take-up in Moscow over the past three months was 305,000 sq m or an increase of 10% QoQ (though flat YoY). Lower rouble volatility at the end of Q2 was the main driver for the rebound in occupier activity in Q3. For the first nine months the amount of space being taken from the market was about 800,000 sq m representing about 3% drop compared to the same period last year. 

“Several large transactions for new space such as 20,000 sq m leased by adidas Group in Krylatsky Hills BP had a notable positive impact on the volume of transacted office space over the past nine months though demand for office space in Moscow is still under pressure due to a challenging macro environment.” - commented Elizaveta Golysheva, National Director, Deputy Head of Office Agency, JLL, Russia & CIS. – “In case occupier activity remains high through the remainder of the year, the actual amount of demand for the entire 2015 will likely beat our initial forecast of 0.95m sq m and ought to be close to the levels seen in 2014 (1.1m sq. m). Nonetheless, we wouldn’t exclude that the second wave of ruble devaluation seen over Q3 as well as persistent inflationary pressure will likely affect the markets going forward.”

Market Balance of Moscow Office Market
Market Balance of Moscow Office Market_22102015.png

Source: JLL

At the same time, the amount of supply of office space is gradually decreasing. Deliveries of new office space in Q3 2015 amounted to 241,000 sq m which is half of what entered the market over the same period last year. Class A premises comprised a 54% share of total deliveries over Q3 with the largest Class A projects delivered over Q3 were Oruzheyny MFC (100,000 sq m – office area) and Kuntsevo Plaza (29,092 sq m). The total amount of new supply for nine months was 464,500 sq m representing around 55% YoY drop.

“In the longer term, the future supply of offices will be much tighter compared to previous years due to the end of the ongoing construction cycle – the amount of new deliveries for the entire 2015 we will likely by around 830,000 sq m which is 41% less YoY. Moreover, in Class A only 0.5m sq m of office space is currently under construction and can enter the market in coming 2-2.5 years which is less than the levels of Class A deliveries over the entire 2014 (0.7m sq m).” – Alexander Churikov, Head of Office, Occupier & Industrial research, JLL, Russia & CIS, said.

The Dynamics of Completions in Moscow Class A
The Dynamics of Completions in Moscow Class A_22102015.png

​Source: JLL

Total vacancy remained unchanged over the quarter at 17% - an increase in Class B premises was offset by slight decline in Class A vacancy, attributed mostly to the occupied office space entered the market over Q3 as well as increasing number of lease transactions with expansions of occupied space. At the end of Q3, the vacancy rate in Class A premises was 26.8% (compared to 27.4% in Q2) while for Class B+ the vacancy rate grew up to 16% (for Class B- to 11.1%) with the further potential to grow by the end of the year. In Moscow-City, vacancy rate stood at 31% compared to the level of 29% seen in the last quarter. 

The level of asking rents for premium offices stood at the range of USD750-840 per sq m per year while for Class A asking rents were close to the levels seen in Q2 – USD450-650 per sq m per year for Class A and USD275-450 per sq m per year for Class B+ office premises. In Moscow City area, asking rents ranged between USD 450–650 per sq m per year. The outcome of lease terms negotiations and the actual level of rents depends on numerous factors such as level of vacancy in a particular building as well as the financial position of both tenant and landlord.


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 316.0 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $56 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.