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News Release

Moscow

Moscow office occupier activity is getting back to normal

New leases and relocations restore their position


Moscow, July 25, 2017 – According to JLL, the Moscow office market saw no completions in Q2 2017. This extended the recent trend of delayed deliveries.

Until the end of 2017, 542,000 sq m of new offices are expected to enter the market. In the first half of the year, only 21,143 sq m were completed, implying that almost all completions this year will take place in H2. The bulk of space will appear to projects in Moscow City: IQ-Quarter, Federation Tower East and OKO (Phase II).

Moscow office completions
2507 1Moscow office completions.png

Source: JLL

The total volume of transacted space was 283,477 sq m in Q2 2017 (10% lower YoY) and 450,480 sq m in H1 2017 (a 22% decrease YoY). However, the take-up expected by the end of 2017 (1.1m sq m) will be roughly the same as last year.
 
Moscow office take-up volume
2507 2Moscow office take-up volume.png

Source: JLL

“The Moscow office market is gradually shifting towards normal activity, with prevalence new leases and relocations. The pickup in transacted space after a drop in Q1 2017 as well as the restoration of new leases and relocations indicate the beginning of a Moscow office market recovery.” – says Elizaveta Golysheva, National Director, Head of Office Agency, JLL, Russia & CIS. – “Thus, the share of renewals and renegotiations continues to decline, reaching 19% in H1 2017 versus 49% in 2016 and 64% in 2015.”

Moscow office take-up structure
2507 3Moscow office take-up structure.png

Source: JLL

Geographically, a large share of transactions has been signed in decentralized locations outside the Third Transport Ring (36%), while the CBD accounted for 18% of take-up in H1 2017.

In the demand structure the following business sectors were most active in H1 2017: banking & finance (40%), business services (23%) and manufacturing (18%). Note that banking & finance maintained its leading position.

Moscow office demand by major business sectors
2507 4Moscow office demand by major business sectors.png

Source: JLL

In Q2 2017, the overall vacancy rate remained roughly unchanged and decreased by 0.1 ppt to 15%. “Tenants favour moving to business centres of higher quality: significant decrease in vacancy was relevant for Class A and Class B+ objects.” – adds Elizaveta Golysheva. – “Class А vacancy rate declined to 16.8%, Class B+ – to 15.6% (compared to 17.5% and 16.3% in Q1 2017 respectively). The vacancy rate in Class B- grew from 10.8% to 12.5%.”

Asking rental rates remained stable in Q2 2017. In the prime segment, asking rents were USD 600–750 sq m/year (RUB 35,000 – 44,000). Class A asking rents are USD 400–670 sq m/year (24,000 – 40,000 RUB). Class B+ asking rents are RUB 12,000–25,000 sq m/year. In Moscow City, asking rents were USD 360–750 sq m/year (RUB 21,000 – 44,000).

 


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 its clients managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At the end of the first quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 78,000. As of March 31, 2017, LaSalle Investment Management had $58.0 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, 2006-2017 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.​