Overview of the commercial real estate market 3rd quarter. Conclusions and development forecasts
In August 2017, 2,766 objects were offered for rent commercial real estate with a total area of 1,461 thousand square meters. m. The volume of supply for the month increased by 5% in terms of quantity, and by 10% in terms of total area.
The average rental rate for the month decreased by 4% and amounted to 17,295 rubles per sq. m. m/year. The dollar exchange rate did not change in August, therefore, in dollar terms, the rate also decreased by 4% and amounted to $290/sq.m/year. Over the year, since August 2016, ruble rates have not changed, while dollar rates have decreased by 8%.
The increase in the volume of supply and the decrease in rental rates in August are moderate, which is typical for the summer period. There are currently no macroeconomic and other factors for a significant change in the commercial real estate market.
Traditionally, office space remains the leader in terms of supply, with a share of 48% by area. Next come production and storage (42%) and commercial premises (10%).
Retail property
In August 2017, 559 objects with a total area of 155,000 sq. m. were exhibited on the market. m. Compared with the previous month, the number of exhibited retail facilities increased by 1%, and the total area - by 5%.
Of these objects, 35 objects with a total area of 8 thousand square meters were exhibited in the center. m, which is lower than in July by 10% in number and by 29% in total area. The average requested rental rate for these facilities decreased by 5% over the month and amounted to 58,973 rubles per sq. m. m/year, while the rates for long-exhibited objects remained virtually unchanged. The decrease in the rental rate occurred, in particular, due to the departure in July of two expensive objects - on Staryi Gai Street (270 sq.m, 119,000 rubles/sq.m/year) and Ul. Tverskaya (173 sq.m, 131,261 rubles/sq.m/year).
The number of retail properties offered for rent outside the center increased by 2% in August 2017, and their total area - by 8%. The volume of supply amounted to 524 objects with a total area of 147 thousand square meters. m. The average rate for the month decreased by 8% and amounted to 26,671 rubles/sq.m/year,
In terms of monthly rate changes, the difference between objects in the center and outside is not significant, however, in the medium term, the demand for premises in the center is higher.
| Trading inside the UK | Quantity | Total GAP, million ₽ | Total area, thousand square meters m | Average area, thousand square meters m | Average rate, ₽/sq. m/year | Meaning | 29 | 394 | 6,937 | 0,239 | 63 215 |
|---|---|---|---|---|---|
| By July 2017 | -12% | -16% | -29% | -20% | +3% | By August 2016 | -33% | -2% | -15% | +26% | +18% |
Office real estate
In August 2017, the supply of office properties for rent, both in terms of number and total area, increased by 2% and amounted to 1,623 properties with a total area of 698,000 sq. m. m.
Over the month, the number of office buildings in the center increased by 8%, while the total area did not change. The average rental rate increased by 1% and amounted to 24,751 rubles/sq.m/year.
The volume of supply of office space outside the Garden Ring in terms of number and total area increased by 2%, while the average rate increased by 1% and amounted to 15,896 rubles/sq.m/year.
The change in rates for office real estate both in the center and outside it continues to be insignificant, which reflects the low business activity associated, incl. with the summer period.
Colliers International analysts conducted a study of the Moscow commercial real estate market and identified key trends in the office market, the street-retail market, and the warehouse market capital region.
Office real estate in Moscow
Offer in the office market of the capital
The volume of existing supply in the III quarter amounted to 17.23 million square meters, of which 3.96 million square meters - class "A". In the III quarter, the market replenished with 75,000 sq.m., which is almost 3.5 times more than in the first half of the year. Two of the four objects that appeared belong to the class "A", the rest - to the segment "B +" / "B-". At the same time, since the beginning of the year, the volume of commissioning has turned out to be a record low (95,000 sq.m) value of the commissioned office supply for the first three quarters of the year over the past five years.
In fact, the final growth rate will depend on the commissioning of two towers as part of the Moscow-City MIBC, because they form 70% of the commissioning volume planned by the end of the year.
In case of receipt of documentation on commissioning for all objects declared before the end of 2017, the total annual increase may amount to 450-465 thousand sq.m.
Demand for offices in Moscow
Despite the weakly active first half of the year, the dynamics and quality of deals concluded in the third quarter allow us to talk about a revival in demand.
For the first three quarters, the total volume of leased and purchased office space amounted to 826,000 sq.m., which is 30% more than in the same period in 2016.
The total number of lease and purchase transactions doubled: both small companies renting offices less than 200 sq.m. and large ones, which require more than 10,000 sq.m., demonstrated activity in terms of renting and buying.
The share of transactions on renegotiation and revision of lease terms continues to decrease. More than 80% of the total volume relates to company relocations.
Among the largest transactions in the third quarter of 2017 are the lease by Eksmo of 23,000 sq.m in the Poklonka Place business center, the lease by Tele2 of an office with an area of 13,100 sq.m in the Comcity office park, the lease by Technoserv of 12,000 sq.m. m in the Novospassky Dvor business district, lease by Deutsche Bank of 8,200 sq.m in the Aquamarine III business center and preliminary lease by Europlan of 8,000 sq.m in the Oasis business center.
Vacant office space in Moscow
The average value of vacancies in the market has not undergone major changes. The amount of free supply introduced was offset by moderate net absorption. On average, the market vacancy rate was 11.2%. In absolute terms, 1.9 million sq.m. are offered for rent and sale. In the structure of free supply, 32% formed the "A" class, 50% - "B +" and 17% - "B-".
Due to the shortage of large office blocks (more than 10,000 sq.m.) in high-quality buildings with convenient locations, the practice of entering into preliminary lease agreements by large companies in facilities under construction has been established: about 30% of office space in business centers commissioned since the beginning of the year and planned for commissioning by the end of the year is no longer offered on the market. At the same time, the owners of some objects continue to postpone the commissioning dates until the signing of the Pre-lease with the anchor tenant.
The existing amount of vacant office space is unevenly distributed, and some submarkets are characterized by a shortage of quality supply.
Prices for the sale of offices in the capital
In the sales segment, the trends of the beginning of the year are preserved: the volume of free quality supply remains small, the displayed sales prices are stable. At the same time, since the middle of the year, there has already been a conversion of existing interest into real transactions - the number of transactions for the purchase of office space less than 200 sq.m has increased compared to the same period in 2016.
Cost indicators in areas remote from the CBD, near the Third Ring Road, are 180,000 rubles/sq.m for class A and 150,000 rubles/sq.m for class B+. Objects located at a distance from the Third Ring Road towards the Moscow Ring Road are offered today at an average of 170,000 rubles/sq.m in class "A" and 115,000 - 130,000 rubles/sq.m in class "B +" / "B" -".
Expensive offices offered in central regions cities at an average cost of 315,000 rubles/sq.m for class A and 265,000 - 275,000 rubles/sq.m for classes B+/B-. In the towers of MIBC Moscow-City, offers range from 245,000 to 450,000 rubles per sq.m.
Rental rates for office space in Moscow
Q3 2017 was characterized by stable rental rates. Traditionally, fluctuations were observed in the given indicator of the rate due to the volatility of exchange rates. The market is still ruble.
There was a slight local change in the requested ruble rental rates by districts and classes, but this slightly increased the average market level - within 1-3%. In the CDR, the adjusted rental rates for class A offices amounted to 30,785 rubles/sq.m./year, for class B+ - 20,240 rubles/sq.m./year.
The quoted base office rental rate in US dollars for class A is $440/sq.m./year, in rubles - 25,831 rubles/sq.m./year. The given basic rental rate in US dollars for class "B+"/"B-" is $219/sq.m/year, in rubles - 12,817 rubles/sq.m/year.
Trends and forecasts for the development of the Moscow office market
The developers announced 370,000 sq.m. for commissioning in the fourth quarter, of which 340,000 sq.m. correspond to class A. If the announced plans are implemented, the annual volume of new construction in 2017 will increase by 50% compared to 2016.
Key facilities announced for commissioning in the fourth quarter of 2017
| Name | Class | Developer | Area (thousand sq.m) |
| "Federation East Tower" | "A" | AEON Corporation | 146,5 |
| IQ Quarter | "A" | CiTerInvest B.V., Hals Development | 123 |
| Neopolis Business District | "A" | A-Store Estates | 63,2 |
| "Quarter Park of Legends", bldg. 3 | "A" | GC "TEN" | 11 |
| "Square" | B+ | LenhartGlobal | 9,5 |
The appearance of class A objects will not have a significant impact on the volume of free supply in this segment, in view of the fact that already today in three out of four class A business centers, on average, no more than 10% are free.
If the commissioning of MIDC Moscow City facilities is postponed to 2018, the increase in new supply, on the contrary, will be 40% lower than last year (i.e. 197,000 sq.m), which will also affect the increase in the vacancy rate from the expected 10% up to 11.5%.
Taking into account that in the last two quarters the increase in the volume of transactions was 65% and 75%, and a significant amount of space is usually closed at the end of the year, the total volume of demand can be 1.0-1.1 million sq.m. Despite the fact that the expected volume of demand may be higher than the values of 2014-2016, it is still less than the pre-crisis values.
At the end of the year, the market will see a significant decrease in vacant space and a gradual increase in rental rates.
A reduction in the volume of high-quality supply, especially in the segment of large blocks, against the backdrop of positive demand dynamics, will gradually push up rates in the A and B+ classes, which, however, will be most noticeable in 2018.
Street-retail premises in Moscow
Street retail market trends in Moscow
The main event of the third quarter of 2017 in the street retail market was the completion of the next stage of the Moscow street renovation program. Construction and installation work has been completed on more than 80 city streets and territories, including the Garden Ring, boulevard ring, Tverskaya (from Nastasinsky Lane to Triumfalnaya Square), 1st Tverskaya-Yamskaya, etc.
In the summer, during the period of construction work, the average vacancy rate of the Garden Ring rose to 13%, and the vacancy rate of its individual sections reached 30%. The traffic and the average check of many catering establishments located in the reconstruction zones decreased by two or more times. According to the results of the third quarter, the average level of vacant retail space on the highway decreased to 12%, although the vacancy rate of some segments of the Garden Ring is still quite high (20-25%).
The highest percentage of rotation for the quarter occurred on Tverskaya - about 5% retail space the streets changed their tenants. Following Tverskaya is Pyatnitskaya Street with a rotation rate of 4%. On Arbat and Myasnitskaya Street, only 3% of the premises have changed their tenants. Next are st. Kuznetsky Most (2%) and st. New Arbat (1%). Neglinnaya Street showed a zero percentage of rotation - not a single tenant has changed here.
In Q3 2017, the average vacancy rate in the central trade corridors continued to decline and amounted to 6.5%.
The most active process of rotation of retailers in Q3 was observed in Tverskaya, Pyatnitskaya and Arbat, where tenants were replaced by 5%, 4% and 3% of the areas, respectively. The previous tenants are replaced mainly by retailers with a similar trading profile. For example, on the Arbat, the cafe of Georgian cuisine "eZo" replaced the cafe "Uralskie pelmeni", and on Pyatnitskaya, the restaurant Leonidas replaced the restaurant "Shardane".
Also, as one of the trends of the past quarter, it is worth noting the opening of consumer electronics stores on the central streets of Moscow. Yes, on st. Tverskaya, d. 27 opened stores of two chains at once: the Chinese Xiaomi and the re:Store chain, which moved from another premises and increased the area. These discoveries are remarkable in that these networks are developed mainly in shopping malls: for Xiaomi this is the first store in the street retail format in Moscow, and for re:Store - the seventh.
Demand and commercial conditions for renting street-retail in the capital
In the 3rd quarter, premises on Pyatnitskaya, Pokrovka, Maroseyka, Myasnitskaya, Neglinnaya and Petrovka streets were in the greatest demand. For example, the jewelry chain Tiffany & Co chose Petrovka to open a 490 sq.m boutique, which became the brand's second store since the company's transition to independent development in Russia.
Among the new networks and formats that are actively developing in street retail, we can single out the Modi home goods chain, the first store of which opened on the Arbat. The network plans to open new stores in the central streets of Moscow in the near future. Also noteworthy is the opening of the first Auchan supermarket in the street retail format on the street. Tverskaya. A feature of the new format is that a significant area of the supermarket is allocated for gastronomy and its own cafe.
The Moskhoztorg chain continues to actively develop, which opened eight new stores in the III quarter, among them - points on Smolensky Boulevard and st. Novokuznetsk.
In the III quarter of 2017, the largest number of applications came from catering operators - 85%.
Rental rates on the central shopping streets in Q3 2017 did not change compared to Q2.
Ginza Project, Tanuki, Crocus Group restaurants, and Novikov Group have traditionally active expansion plans. The latter, for example, in the III quarter opened several establishments at once in different price categories: #Farsh burger on the street. Lesnaya, cafe of Pan-Asian cuisine Hoshi on the street. Kuznetsky most, 15/17 and Bar & Grill in Novocherkassky lane.
The past quarter was rich in the opening of non-chain cafes and restaurants. The 23Tolstoy restaurant was opened in Khamovniki, the Chinese cuisine restaurant "Jimmy Lee" opened its doors on Prospect Mira, the restaurant "Myasnik's Pie" opened its doors on Novy Arbat, etc.
Key openings on the central trade corridors of Moscow in Q3 2017
| Name | The street | Profile |
| Tiffany&Co | Petrovka st. | Jewelry |
| Laduree | Nikolskaya st. | Cafes and restaurants |
| Villa Pasta | Novy Arbat st. | Cafes and restaurants |
| Auchan | Tverskaya st. | Products |
| Burger Heroes | Kamergersky per. | Cafes and restaurants |
| #Farsh | Lesnaya st. | Cafes and restaurants |
| Butcher Pie | Novy Arbat st. | Cafes and restaurants |
| Moskhoztorg | Novokuznetskaya st. | Household products |
| Modi | Arbat st. | Household products |
| Alfa Bank | Pyatnitskaya st. | Banks |
Forecasts for the development of the retail space market in Moscow
By the end of the year, a further reduction in the vacancy rate of the central shopping streets of Moscow is expected within 1 p.p. This will be facilitated, first of all, by the further development of the public catering segment.
Also, against the backdrop of news about the sale of the Perekrestok-Express chain, which has more than 30 stores within the Garden Ring, it is possible to actively develop new and existing grocery chains on the central streets of the capital.
Warehouse real estate in Moscow
Offer on the Moscow warehouse market
According to the results of the third quarter of 2017, the total supply of high-quality warehouse facilities in the Moscow region reached 13.16 million sq.m. Thus, the volume of completed construction in the first nine months of this year was similar to the results of the previous year, when 385,000 sq.m. were commissioned in the I-III quarters.
The largest warehouse facilities put into operation in the III quarter were Technopark Uspensky (area - 42,000 sq.m), Landmark "North 2" (43,100 sq.m), Logopark "Dmitrov" (25,600 sq.m) , as well as PSK Kozhukhovo (47,715 sq.m). It should be noted that the vast majority of the total warehouse space commissioned in Q1-Q3 2017 is located in the north and east of the Moscow region.
According to the results of the first nine months of 2017, the volume of demand exceeded the volume of commissioning by more than two times.
Demand for warehouses in the capital region
According to the results of the first three quarters of 2017, about 840,000 sq. m of warehouse space were leased and purchased in the Moscow region, which is 38% more than in 2016.
In the third quarter of 2017, there were 348,000 sq.m., while a significant volume of demand was generated by several large transactions: the purchase of a warehouse complex with an area of 68,700 sq.m. by Utkonos, as well as a deal to acquire a future warehouse with an area of 146,000 sq.m. wildberries. Both complexes will be built-to-suit. As a result of the closing of these transactions, purchases accounted for 34% of the total volume of transactions in three quarters, although a quarter earlier this proportion was 15% to 85% of leases.
Retail, and in particular online retail, has taken a dominant position in the total volume of transactions closed since the beginning of the year in the Moscow region.
Rental rates for warehouse space in Moscow
According to the results of the third quarter of 2017, the requested rental rate for Class A properties in the Moscow region has not changed significantly and is in the range of RUB 3,400–4,000/sq.m/year, depending on the location of the warehouse complex and the volume of the leased block.
The average asking rental rate in the Moscow region is 3,800 rubles/sq.m./year.
Trends and forecasts for the development of the warehouse real estate market in the capital
Against the backdrop of low commissioning and continued demand for high-quality existing warehouse complexes, a further decrease in the share of vacant space is expected by the end of this year - to the level of 7%. However, even given the current dynamics of vacancy reduction, the volume of warehouse space available for rent remains high. In addition to the already existing ready-made offer, developers are ready to offer the implementation of objects according to the built-to-suit scheme, which slows down the process of absorbing ready-made areas. Pressure from free competing storage facilities reduces the potential for rate increases until at least the end of this year and in the first few months of next year.
Among the largest warehouse complexes scheduled for commissioning by the end of 2017 are blocks 2, 6.1 and 7 in PNK-Valishchevo (developer - PNK Group, area - 51,080 sq.m) and phase 2 "Vnukovo II" phase 2 ( developer - Logistic Partners, area - 49,000 sq.m).
Review prepared by Colliers International
RRG conducted a study of the commercial real estate market in the capital region in the third quarter of 2017. Information for the study was obtained from more than 30 specialized and thematic sources on the Moscow commercial real estate market. Among the sources - electronic bases real estate, print and electronic media, real estate agencies and consulting companies.
As objects for researching the market for the sale of commercial real estate, office, production and warehouse premises (PSP) and free commercial premises (PSN) worth 36 million rubles or more, as well as retail premises worth 26 million rubles or more, or premises with a total area of at least 100 sq. m.
As objects for the study of the commercial real estate rental market, objects offered in open sources were selected - retail, office, production and warehouse premises (PSP) with a total area of at least 50 sq. m. m.
The volume of offers of real estate objects in both segments - sale and lease - decreased.
Sale
Market as a whole
Supply volume
In 3 sq. 2017, the volume of supply decreased by 1% in terms of quantity and by 4% in terms of total area. For the year, compared to the 3rd quarter. 2016, supply decreased by 5% in quantity and decreased by 28% in total area.
A total of 2,164 properties with a total area of 2,960,000 sq.m. were put up for sale in the 3rd quarter.
Price indicators
The weighted average price in 3 sq. m. 2017 decreased by 1% and amounted to 176,936 rubles/sq.m. Taking into account the fact that the dollar exchange rate increased by 3% over the quarter, and decreased by 9% over the year, the price in dollar terms increased by 2% over the quarter, and decreased by 19% over the year and amounted to $2,998/sq.m. The total value of commercial real estate decreased by 5% over the quarter, and by 35% over the year, and amounted to 523 billion rubles.
The decrease in prices both in rubles and in dollars over the year indicates a decrease in demand. At the same time, the decline in the supply of vacant space, their withdrawal from the market gives hope that a new equilibrium point in the market will soon be found.
| All segments | Quantity | Total cost, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | |
| meaning | 2 164 | 523 699 | 2 960 | 1,37 | 176 936 |
| to Q2 2017 | − 1% | − 5% | − 4% | − 3% | − 1% |
| to III quarter. 2016 | − 5% | − 35% | − 28% | − 24% | − 10% |
Supply volume
The volume of supply in terms of total area in the 3rd quarter compared to the 2nd quarter for retail real estate decreased by 14%, for office real estate - by 5%, for production and warehouse premises - by 5%, and for free-use premises - increased by 14%.
The volume of supply in terms of total area per year compared to 3 sq. 2016, for retail real estate decreased by 29%, for office - by 35%, for industrial and warehouse - increased by 17%, and for free-use premises decreased by 35%.
There have been changes in the structure of segments by area. The share of office objects was 59%. Next come premises for free use (21%), production and storage (13%) and retail premises (7%).
Price indicators
For the 3rd quarter of 2017, the price for retail real estate increased by 2% to 245,510 rubles/sq.m., for office real estate decreased by 4% and amounted to 202,521 rubles/sq.m. 63,439 rubles/sq.m., and for free-use premises - by 5% to 210,068 rubles/sq.m.
Compared to the 3rd quarter of 2016, the weighted average price decreased by 9% for retail, by 4% for office real estate, by 17% for industrial and warehouse real estate and increased by 1% for free-use premises.
The only segment where prices decreased in Q3 2017 was office real estate, however, the price increase in other segments was insignificant, and over the year prices decreased in all segments except for industrial and warehouse premises.
| Trading | Quantity | Total cost, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Weighted average price, rub./sq.m. |
| meaning | 348 | 45 738 | 186 | 0,54 | 245 510 |
| to Q2 2017 | − 15% | − 12% | − 14% | + 1% | + 2% |
| to III quarter. 2016 | − 7% | − 35% | − 29% | − 23% | − 9% |
| Office | Quantity | Total cost, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Weighted average price, rub./sq.m. |
| meaning | 1 341 | 347 182 | 1 714 | 1,28 | 202 521 |
| to Q2 2017 | + 4% | − 9% | − 5% | − 9% | − 4% |
| to III quarter. 2016 | − 3% | − 38% | − 35% | − 33% | − 4% |
| PSP | Quantity | Total cost, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Weighted average price, rub./sq.m. |
| Meaning | 160 | 39 688 | 626 | 3,91 | 63 439 |
| to Q2 2017 | − 18% | − 2% | − 5% | + 16% | + 4% |
| to III quarter. 2016 | − 15% | − 3% | + 17% | + 38% | − 17% |
| PSN | Quantity | Total cost, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Weighted average price, rub./sq.m. |
| meaning | 315 | 91 091 | 434 | 1,38 | 210 068 |
| to Q2 2017 | + 11% | + 20% | + 14% | + 2% | + 5% |
| to III quarter. 2016 | − 4% | − 35% | − 35% | − 32% | + 1% |
Retail property
Supply volume
In the 3rd quarter, 348 retail objects with a total area of 186 thousand square meters were exhibited, of which 32 objects were inside the Garden Ring and 316 objects outside it.
Over the quarter, the volume of supply of retail facilities in the center decreased by 9% in terms of number, and remained unchanged in terms of total area. The volume of supply of retail facilities outside the center decreased by 16% in terms of quantity and by 15% in terms of total area.
Price indicators
The weighted average price for retail objects in the center for the 3rd quarter of 2017 decreased by 16% and amounted to 824,912 rubles/sq.m. (2,586 sq.m., 2,200,000 rubles/sq.m.), as well as the entry into the market of cheap properties on Raushskaya nab. (398 sq.m, 282,518 rubles/sq.m), Tolmachevsky per. (680 sq.m., 262,500 rubles/sq.m.), Kazarmenny per. (720 sq.m, 305,556 rubles/sq.m).
The weighted average price for retail premises outside the center increased by 4% to RUB 219,283/sq.m. The price increase was associated with the entry into the market in the 3rd quarter of an expensive retail facility on Ryazansky Prospekt (9,747 sq.m., 359,064 rubles per sq.m.) .
Despite the fact that prices for premises in the center decreased over the quarter, and outside, on the contrary, increased, the situation is reversed over the year, so in the medium term we can say that the demand for premises in the center is higher, but until recently such premises were somewhat overrated.
| Trading | Quantity | Total cost, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Weighted average price, rub./sq.m. |
| meaning | 348 | 45 738 | 186 | 0,54 | 245 510 |
| to Q2 2017 | − 15% | − 12% | − 14% | + 1% | + 2% |
| to III quarter. 2016 | − 7% | − 35% | − 29% | − 23% | − 9% |
| Trading inside the UK | Quantity | Total cost, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Weighted average price, rub./sq.m. |
| meaning | 32 | 6 655 | 8 | 0,25 | 824 912 |
| to Q2 2017 | − 9% | − 16% | 0% | + 9% | − 16% |
| to III quarter. 2016 | − 22% | − 41% | − 48% | − 33% | + 14% |
| Trading outside the UK | Quantity | Total cost, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Weighted average price, rub./sq.m. |
| meaning | 316 | 39 083 | 178 | 0,56 | 219 283 |
| to Q2 2017 | − 16% | − 12% | − 15% | + 1% | + 4% |
| to III quarter. 2016 | − 5% | − 34% | − 27% | − 24% | − 9% |
street retail
Supply volume
In the 3rd quarter of 2017, 107 street-retail objects with a total area of 29,000 sq.m. were put up for sale, of which 10 objects are inside the Garden Ring and 97 objects outside it.
The volume of supply for retail facilities in the center decreased by 9% in terms of quantity, and by 10% in terms of total area. The volume of supply for retail facilities outside the center decreased by 14% in terms of quantity, and by 20% in terms of total area.
Price indicators
The weighted average price for street-retail properties in the center increased by 8% to RUB 960,183/sq.m., while the price for old properties decreased by 10%. The increase in prices was due to the entry into the market of an expensive object on M. Kozikhinsky per. (100 sq.m, 1,459,550 rubles/sq.m).
Outside the center, the weighted average price increased by 2% and amounted to 275,718 rubles/sq.m., which was due to a 5% increase in prices for objects that have been on display for a long time.
| street retail | Quantity | Total cost, million rubles | Total area, thousand m2 | Average area, thousand m2 | |
| meaning | 107 | 9 934 | 29 | 0,27 | 343 396 |
| to Q2 2017 | − 14% | − 15% | − 19% | − 6% | + 5% |
| to III quarter. 2016 | + 1% | − 22% | − 2% | − 3% | − 21% |
| Street-retail inside the UK | Quantity | Total cost, million rubles | Total area, thousand m2 | Average area, thousand m2 | Weighted average price, RUB/m2 |
| meaning | 10 | 2 747 | 3 | 0,29 | 960 183 |
| to Q2 2017 | − 9% | − 3% | − 10% | − 1% | + 8% |
| to III quarter. 2016 | − 41% | − 42% | − 38% | + 6% | − 7% |
| Street-retail outside the UK | Quantity | Total cost, million rubles | Total area, thousand m2 | Average area, thousand m2 | Weighted average price, RUB/m2 |
| meaning | 97 | 7 188 | 26 | 0,27 | 275 718 |
| to Q2 2017 | − 14% | − 18% | − 20% | − 6% | + 2% |
| to III quarter. 2016 | + 9% | − 10% | + 5% | − 4% | − 15% |
Rent
Market as a whole
Supply volume
The volume of supply in the rental market in 3 sq. m. 2017 decreased by 7% in number and by 10% in total area. In general, for 4 quarters, the volume of supply increased by 19% in terms of quantity, and by 3% in terms of total area.
In total, 4,452 objects with a total area of 2,260 thousand sq.m. were exhibited in the 3rd quarter.
Price indicators
The average rate both for the quarter and for the last 4 quarters decreased by 3% and amounted to 17,969 rubles/sq.m/year. Taking into account the fact that the dollar exchange rate increased by 3% in the third quarter, the price in dollar terms did not change for the quarter and amounted to $304/sq.m/year. The annual rent for the quarter decreased by 12% and amounted to 32.4 billion rubles.
The decrease in the average rental rate in both dollars and rubles for the year indicates that negative factors still prevail in the real estate market.
| All segments | Quantity | Total gap, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | |
| meaning | 4 452 | 32 416 | 2 260 | 0,51 | 17 969 |
| to Q2 2017 | − 7% | − 13% | − 10% | − 3% | − 3% |
| to III quarter. 2016 | + 19% | − 0% | + 3% | − 13% | − 3% |
Segment Benchmarking
Supply volume
The volume of supply in terms of total area for the 3rd quarter of 2017 in relation to the second decreased by 19% for retail, 11% for office and 4% for industrial and warehouse real estate.
The volume of supply for the total area of retail real estate decreased by 5% over the year, for office real estate - by 4%, and for industrial and warehouse real estate - increased by 17%.
Office space remains the leader in supply in terms of total area, with a share of 50%. Next come production and storage (38%) and retail premises (12%).
Price indicators
The average rental rate for the 3rd quarter of 2017 for retail real estate decreased by 2% and amounted to 30,808 rubles/sq.m./year, for office real estate - also decreased by 2% to 17,327 rubles/sq.m./year, and for the production and warehouse - increased by 2% and amounted to 6,656 rubles per sq.m./year.
Compared to the 3rd quarter of 2016, the change in the rental rate was -3% for retail, +1% for office, and for industrial and warehouse real estate, the rate did not change.
The change in rates both for the quarter and for the year continues to be insignificant, which is typical for the stage of market stagnation.
| Trading | Quantity | Total gap, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Average rate, rub./sq.m./year |
| meaning | 922 | 6 660 | 254 | 0,28 | 30 808 |
| to Q2 2017 | − 10% | − 17% | − 19% | − 10% | − 2% |
| to III quarter. 2016 | + 11% | − 3% | − 5% | − 14% | − 3% |
| Office | Quantity | Total gap, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Average rate, rub./sq.m./year |
| meaning | 2 633 | 19 984 | 1 090 | 0,41 | 17 327 |
| to Q2 2017 | − 7% | − 14% | − 11% | − 4% | − 2% |
| to III quarter. 2016 | + 18% | − 3% | − 4% | − 19% | + 1% |
| PSP | Quantity | Total gap, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Average rate, rub./sq.m./year |
| Meaning | 897 | 5 772 | 916 | 1,02 | 6 656 |
| to Q2 2017 | − 2% | − 3% | − 4% | − 3% | + 2% |
| to III quarter. 2016 | + 31% | + 15% | + 17% | − 11% | 0% |
Retail property
Supply volume
The volume of supply of retail real estate in the 3rd quarter decreased by 10% in terms of quantity, and decreased by 19% in terms of total area. The volume of supply for the year increased by 11% in terms of quantity, and decreased by 5% in terms of the total area.
In total, 922 objects with an area of 254 thousand square meters were exhibited in the 3rd quarter, of which 51 objects were in the center and 871 premises were outside.
The volume of supply for the total area in the 3rd quarter decreased by 18% in the center and by 19% outside it.
Price indicators
The average rental rate for retail facilities within the Garden Ring in 3 sq. m. 2017 decreased by 1% and amounted to 58,889 rubles/sq.m/year.
The average rental rate for retail properties outside the Garden Ring did not change and amounted to 29,164 rubles/sq.m./year.
The insignificance of changes in rates for retail facilities indicates stagnation in the market in the face of a decrease in supply.
| Trading inside the UK | Quantity | Total gap, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Average rate, rub./sq.m./year |
| meaning | 51 | 658 | 13 | 0,26 | 58 889 |
| to Q2 2017 | − 30% | − 24% | − 18% | + 17% | − 1% |
| to III quarter. 2016 | − 39% | − 29% | − 26% | + 22% | − 3% |
| Trading outside the UK | Quantity | Total gap, million rubles | Total area, thousand sq.m | Average area, thousand sq.m | Average rate, rub./sq.m./year |
| meaning | 871 | 6 001 | 241 | 0,28 | 29 164 |
| to Q2 2017 | − 9% | − 17% | − 19% | − 11% | 0% |
| to III quarter. 2016 | + 16% | + 1% | − 3% | − 17% | + 2% |
street retail
Supply volume
The volume of supply of street-retail objects in the 3rd quarter of 2017 decreased by 10% in terms of quantity and by 19% in terms of total area. Over the year, the volume of supply increased by 13% in terms of quantity, and by 4% in terms of total area. In total, 353 objects with an area of 76 thousand square meters were exhibited in the 3rd quarter, of which 17 objects were offered in the center and 336 objects outside it.
| Street-retail inside the UK | Quantity | Total gap, million rubles | Total area, thousand m2 | Average area, thousand m2 | Average rate, rub./sq.m./year |
| meaning | 17 | 255 | 5 | 0,29 | 67 263 |
| to Q2 2017 | − 32% | − 28% | − 6% | + 38% | − 13% |
| to III quarter. 2016 | − 51% | − 38% | − 29% | + 47% | − 3% |
| Street-retail outside the UK | Quantity | Total gap, million rubles | Total area, thousand m2 | Average area, thousand m2 | Average rate, rub./sq.m./year |
| meaning | 336 | 2 097 | 71 | 0,21 | 33 343 |
| to Q2 2017 | − 9% | − 19% | − 20% | − 12% | − 2% |
| to III quarter. 2016 | + 21% | + 9% | + 8% | − 11% | − 3% |
Analysts from Colliers International conducted a study of the commercial real estate market in Moscow and outlined key trends in the office market.
Offer in the office market of the capital
The volume of existing supply in the third quarter amounted to 17.23 million sq. m, of which 3.96 million sq. m - class "A". In the III quarter, the market replenished with 75,000 sq.m., which is almost 3.5 times more than in the first half of the year. Two of the four objects that appeared belong to the class "A", the rest - to the segment "B +" / "B-". At the same time, since the beginning of the year, the volume of commissioning has turned out to be a record low (95,000 sq.m) value of the commissioned office supply for the first three quarters of the year over the past five years.
In fact, the final growth rate will depend on the commissioning of two towers as part of the Moscow-City MIBC, because they form 70% of the commissioning volume planned by the end of the year.
In case of receipt of documentation on commissioning for all objects declared before the end of 2017, the total annual increase may amount to 450-465 thousand sq.m.
Demand for offices in Moscow
Despite the weakly active first half of the year, the dynamics and quality of deals concluded in the third quarter allow us to talk about a revival in demand.
For the first three quarters, the total volume of leased and purchased office space amounted to 826,000 sq.m., which is 30% more than in the same period in 2016.
The total number of lease and purchase transactions doubled: both small companies renting offices less than 200 sq.m. and large ones, which require more than 10,000 sq.m., demonstrated activity in terms of renting and buying.
The share of transactions on renegotiation and revision of lease terms continues to decrease. More than 80% of the total volume relates to company relocations.
Among the largest transactions in the third quarter of 2017 are the lease by Eksmo of 23,000 sq.m in the Poklonka Place business center, the lease by Tele2 of an office with an area of 13,100 sq.m in the Comcity office park, the lease by Technoserv of 12,000 sq.m. m in the Novospassky Dvor business district, lease by Deutsche Bank of 8,200 sq.m in the Aquamarine III business center and preliminary lease by Europlan of 8,000 sq.m in the Oasis business center.
Vacant office space in Moscow
The average value of vacancies in the market has not undergone major changes. The amount of free supply introduced was offset by moderate net absorption. On average, the market vacancy rate was 11.2%. In absolute terms, 1.9 million sq.m. are offered for rent and sale. In the structure of free supply, 32% formed the "A" class, 50% - "B +" and 17% - "B-".
Due to the shortage of large office blocks (more than 10,000 sq.m.) in high-quality buildings with convenient locations, the practice of entering into preliminary lease agreements by large companies in facilities under construction has been established: about 30% of office space in business centers commissioned since the beginning of the year and planned for commissioning by the end of the year is no longer offered on the market. At the same time, the owners of some objects continue to postpone the commissioning dates until the signing of the Pre-lease with the anchor tenant.
The existing amount of vacant office space is unevenly distributed, and some submarkets are characterized by a shortage of quality supply.
Prices for the sale of offices in the capital
In the sales segment, the trends of the beginning of the year are preserved: the volume of free quality supply remains small, the displayed sales prices are stable. At the same time, since the middle of the year, there has already been a conversion of existing interest into real transactions - the number of transactions for the purchase of office space less than 200 sq.m has increased compared to the same period in 2016.
The cost indicators in areas remote from the CBD, near the Third Ring Road, are 180,000 rubles/sq.m for class A and 150,000 rubles/sq.m for class B+. Objects located at a distance from the Third Ring Road towards the Moscow Ring Road are offered today at an average of 170,000 rubles/sq.m in class "A" and 115,000 - 130,000 rubles/sq.m in class "B +" / "B" -".
Expensive offices are offered in the central districts of the city at an average cost of 315,000 rubles/sq.m for class A and 265,000–275,000 rubles/sq.m for classes B+/B-. In the towers of the MIBC Moscow City, offers range from 245,000 to 450,000 rubles per sq.m.
Rental rates for office space in Moscow
Q3 2017 was characterized by stable rental rates. Traditionally, fluctuations were observed in the given indicator of the rate due to the volatility of exchange rates. The market is still ruble.
There was a slight local change in the requested ruble rental rates by districts and classes, but this slightly increased the average market level - within 1-3%. In the CDR, the adjusted rental rates for class A offices amounted to 30,785 rubles/sq.m./year, and for class B+ offices – 20,240 rubles/sq.m./year.
The quoted base office rental rate in US dollars for class A is $440/sq.m./year, in rubles – 25,831 rubles/sq.m./year. The given basic rental rate in US dollars for class "B+"/"B-" is $219/sq.m/year, in rubles - 12,817 rubles/sq.m/year.
Trends and forecasts for the development of the Moscow office market
The developers announced 370,000 sq.m. for commissioning in the fourth quarter, of which 340,000 sq.m. correspond to class A. If the announced plans are implemented, the annual volume of new construction in 2017 will increase by 50% compared to 2016.
Key facilities announced for commissioning in the fourth quarter of 2017
The appearance of class A objects will not have a significant impact on the volume of free supply in this segment, in view of the fact that already today in three out of four class A business centers, on average, no more than 10% are free.
If the commissioning of MIDC Moscow City facilities is postponed to 2018, the increase in new supply, on the contrary, will be 40% lower than last year (i.e. 197,000 sq.m), which will also affect the increase in the vacancy rate from the expected 10% up to 11.5%.
Taking into account that in the last two quarters the increase in the volume of transactions was 65% and 75%, and a significant amount of space is usually closed at the end of the year, the total volume of demand can be 1.0-1.1 million sq.m. Despite the fact that the expected volume of demand may be higher than the values of 2014-2016, it is still less than the pre-crisis values.
At the end of the year, the market will see a significant decrease in vacant space and a gradual increase in rental rates.
A reduction in the volume of high-quality supply, especially in the segment of large blocks, against the backdrop of positive demand dynamics, will gradually push up rates in the A and B+ classes, which, however, will be most noticeable in 2018.
