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Moscow

Moscow office vacancy rate continues to decline

In Q3 2017, the sharpest reduction was observed in non-central Class A offices


Moscow, October 19, 2017 – According to JLL, 74,583 sq m of quality office space was delivered to the market in Q3 2017. The bulk of this, 56,949 sq m, was Class A buildings (Oasis and Fili Grad business centres). The overall Q1-Q3 2017 completions were 95,726 sq m, 63% lower YoY (256,953 sq m in Q1-Q3 2016).

About 446,000 sq m (82% of total 2017 completions) are planned for Q4 2017. “Taking into account common delays, completion of some projects can slide to next year.” – says Olesya Dzuba, Head of Research, JLL, Russia & CIS. – “We estimate actual 2017 completions at about 250,000 sq m, which will mark a 15-year low.”
 

Moscow offices take-up and completions volume19_10_03Moscow offices take-up and completions volume.png
 

Source: JLL

Take-up in Q3 2017 reached 319,046 sq m, rising 14% YoY. In Q1-Q3 2017, take-up was 769,526 sq m, down 10% YoY.  

Take-up in the Central Business District (CBD) rose 35% YoY in Q1-Q3 to 163,215 sq m. About 39% of all deals in January-September were concentrated in the area outside of the Third Transport Ring (TTR). 

In the take-up structure, manufacturing companies were the most active (24% of Q1-Q3 2017 deals), followed by banks and financial organisations (22%) and companies providing business services (20%). 


Moscow office demand by major business sectors in Q1-Q3
19_10_04Moscow office demand by major business sectors in Q1-Q3.png
 

Source: JLL

Low completions and recovering economy facilitate gradual decline in office vacancies, with the average rate reaching 14.7% in Q3, 0.3 ppt lower than in Q2. The Class A vacancy rate fell from 16.7% to 15.7%, Class B+ from 15.6% to 15.4%, Class B- did not change. The most significant vacancy reduction was in Class A buildings located outside the TTR. 

“Tenants who are aiming for high quality office often consider non-centrally located Class A buildings. As a result, the Class A vacancy rate in the buildings outside the TTR declined by 3.3 ppt in Q3, to 17%.” – says Elizaveta Golysheva, National Director, Head of Office Agency, JLL, Russia & CIS. – “Rental rates for Class A buildings outside the TTR are comparable to Class B+ rates within the Garden Ring. This provides an opportunity for tenants to improve the quality of occupied area without paying extra.”
 

Moscow office rental rates remained stable in Q3 2017. Prime offices asking rents were USD 600-750 sq m/year. Class A rental rates were USD 400-670 sq m/year and Class B+ rents were RUB 12,000-25,000 sq m/year. 


 


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 $145 billion. At the end of the second quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of nearly 80,000. As of June 30, 2017, LaSalle Investment Management had $57.6 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.