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News Release

Moscow

The total office take-up in Moscow this year will outpace the 2015 result

​Lower rents stimulate tenant activity


​Moscow, 28 October, 2016 – According to JLL, the total Q3 2016 office take-up in Moscow was 279,000 sq m. This brought the year-to-date take-up to 857,300 sq m, which was above the Q1-Q3 2015 volume by 7.3%.

Class A offices represented the majority of transactions: more than 100,000 sq m in Q3 and 460,000 sq m in January-September. This was almost 2.5 times higher in YoY terms. The take-up growth, across the market and in class A particularly was a product of a few of large transactions, whereas tenant activity remained modest.

“There are currently two major trends in tenant demand for quality offices. First, companies which previously occupied class B- and C premises are keen to upgrade, and they move to class B+. Second, the demand for class A space is shaped by tenants which optimize their expenses while trying to improve the quality and effectiveness of their location within the same class.” – Elizaveta Golysheva, National Director, Head of Office Agency, JLL, Russia & CIS, says. – “The recent stabilization of the economy coincided with favorable leasing terms and became the catalysts of growing tenant attention to higher quality premises. The latter are seen as the most attractive for leasing or buying at the present stage of the commercial property market cycle.”

Domestic companies still determine the demand structure, with 88% of the new transactions in Q3 and 85% in Q1-Q3 2016.

Tenants remain active in renegotiations and renewals of their leasing agreements, with such transactions accounting for 49% of the total take-up in Q3.

The asking rental rates remained the same, at 400-600 USD/sq m/year in class A and 12,000-20,000 RUB/sq m/year in class B+. The range of asking rents in Moscow City remained unchanged as well, at 360-600 USD/sq m/year. The only correction was observed in the upper level of the premium segment, which fell from 800 USD/sq m/year to 750 USD/sq m/year.

The contraction of asking rental rates and the increase of the difference between asking and closing rents stimulates market activity. This has caused a revision of the total 2016 by JLL analysts have revised the 2016 from 1.0 to 1.1m sq m.

​Moscow Office Space Take-Up Dynamics
Moscow Office Space Take-Up Dynamics_28102016.png


Source: JLL

The average vacancy rate in Moscow in Q3 remained stable at 15.7% compared to 15.6% in Q2. As a consequence of growing demand and limited delivery, the vacancy rate eased in class A offices by 0.7 pp QoQ and by 7pp YoY, to 20.3%. The vacancy rate in class B+ increased slightly, from 16.3% to 16.9%. 

Vacancy Rates on the Moscow Office Market
Vacancy Rates on the Moscow Office Market_28102016.png

Source: JLL

Construction activity decelerates, being a reflection of the current stage of the development cycle. According to JLL, only 82,000 sq m of quality offices were completed in Q3, three times less than in Q3 2015. The cumulative delivery during Q1-Q3 2016 was only 257,000 sq m, about a half of the Q1-Q3 2015 volume. Only one class A project was completed in Q3, whereas the majority of deliveries belong to class B+ outside of the Third Transportation Ring.

“As the delivery of several large projects was postponed until 2017, the total office completion in 2016 to comprise about 410,000 sq m. This will be the lowest level on record. With respect to the overall volume of vacant space and the announced completions, we do not expect new large projects to appear in the medium term.” – Alexander Zinkovskiy, Head of Office Research, JLL, Russia & CIS, comments.


​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 $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $59.1 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, 2006-2016 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, 2016, St. Petersburg; Consultant of the Year at the RCSC Awards in 2015.