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News Release

Moscow

Class A Moscow Office Vacancy Rate Reached the Lowest Level Since 2013

​Supported by high demand and the lowest-ever completion


​​Moscow, 28 February, 2017 – According to JLL, office completions in Moscow in Q4 2016 totalled for 60,300 sq m, the lowest quarterly level ever. Total 2016 completions reached 317,200 sq m, also the lowest level in the Moscow office market history.

Only three Class A office buildings of were delivered in 2016 with the total area of 70,500 sq m. That was five times lower than the 2015 volume and ten times less than in 2014.

The 2016 completions fell short of expectations as the delivery of about 90,000 sq m was delayed until H1 2017. It is expected that 2017 completions will reach 542,000 sq m, including 219,000 in Class A. Besides delays, the completion volume was reduced as the functional use of some projects was converted into residential.

Moscow Office Completions
Moscow Office Completions_06032017.png
Source: JLL

The occupier demand focused on Class A objects. With more than 51% of total new lease and purchase transactions in 2016, the segment enjoyed double the volume of 2015 transactions. The demand is decentralizing as well: out of 414,000 sq m transactions outside the Third transportation ring, about 178,000 sq m were done in Class A objects (a 54% YoY growth).

The total volume of transactions in 2016 was 1.06m sq m, which is similar to 2015 due. The Q4 volume was about 200,000 sq m.

Moscow Office Space Take-Up
Moscow Office Space Take-Up_06032017.png

Source: JLL

With low completion and growing demand, the vacancy rate in class A reached the lowest level of 18.1% since 2013. Modest vacancy rate growth was registered in Class B+, from 16.9% in Q3 to 17.3% in Q4, with most 2016 completions done in this segment. The overall vacancy rate at the end of 2016 declined to 15.5% from 15.7% in Q3 and from 16% in 2015.

Moscow Office Vacancy Rates
Moscow Office Vacancy Rates_06032017.png

Source: JLL

Asking rental rates reached the bottom in 2016 and remained stable in Q4: 600- 750 USD/sq m/year in the premium segment, 400-600 USD/sq m/year in Class A and 360-600 USD/sq m/year in Moscow City. Asking rents in Class B+ remained unchanged as well, at 12,000-20,000 RUB/sq m/year.

“As the economy and the rouble stabilized, market risks became less significant in 2016. Using favourable market environment, tenants began to explore more actively the available options for relocation to new premises.” – Elizaveta Golysheva, National Director, Head of Office Agency, JLL, Russia & CIS, says. – “At the same time, developers showed more flexibility in negotiations of rental conditions.”

“Economic forecasts for 2017 presume gradual demand recovery. We expect the Moscow office take-up to increase to 1.1m sq m. Attractive market conditions and positive business outlook for many companies will encourage them to close new leasing transactions. This will support the rental rates, with potential rise in the second half of the year. However, this will be curtailed by the large volume of vacant office space.” – Alexander Zinkovskiy, Head of Office Research, JLL, Russia & CIS, adds.


About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset 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, St. Petersburg; Consultant of the Year at the RCSC Awards in 2015.