February 1, 2012
Moscow's office market remains one of the most active in Europe, although there are signs that activity is slowing as uncertainty over European economic prospects takes hold.
2011 saw office take-up in the Russian capital return to pre-crisis levels, with 1.7 million sq m of office space absorbed, according to Jones Lang LaSalle‘s research.
And unlike other European capitals, there were some substantial deals concluded, most notably the decision by the Mail.Ru Group to take the 30,000-sq m Tower A in the Sky Light business centre, developed by Hals-Development.
Mikhail Mindlin, associate in office agency at Cushman & Wakefield, says the deal summed up the strong demand from the IT sector during 2011 and the Mail.Ru deal was run a close second by Kasperskiy Lab renting 29,840 sq m at Olympia Park.
Mindlin says the banking sector was also active with Rosselhosbank taking 27,450 sq m in the Alfa Arbat Center and Sberbank taking 23 863 sq m at the Danilovsky Fort Business Centre.
But Mindlin warns that deals on this scale may be harder to find in 2012, as Moscow now seems to be operating a very rapid market cycle with just four years from peak-to-peak in 2007 and 2011. “Market activity will be moderated during the next two to three years, with the next peak expected in 2014,” he forecasts.
Colliers International director Olga Pobukovskaya says that in addition to IT companies and financial institutions, the natural resources sector, construction and pharmaceutical companies were most active tenants in 2011. The majority of office tenants were Russian companies, accounting for 72 per cent of all office deals. And lease deals prevailed with 81 per cent of gross office take-up.
In terms of location, Alexei Efimov, national director and head of Jones Lang LaSalle’s corporate solutions group says Leningradskoe Highway was the most active followed by Moscow City and Kutuzovskiy Avenue/ Mozhayskoe Highway. But looking forward he believes the lack of completed high quality premises and office projects in the central administrative district means office space located outside the TTR will gain in popularity.
And as for rents, Knight Frank associate director Nikola Obajdin, notes that prime rents have strengthened over the past 18 months to reach $1,100-$1,200 per sq m pa. And in class A business centres Obajdin says rents stabilized in the range of $750-$850 per sq m over the second half of 2011. “We can’t expect any drastic changes in the near future as there’s still uncertainty in the economy,” Obajdin concludes.
Hals-Development has a lot to celebrate, having achieved two of the top five lettings of 2011 at Sky Light and Danilovsky Fort, but company president Sergey Kalinin believes a downturn was apparent before the year end.
“2011 began with rising activity, when companies’ sentiments for the future were positive and confidence in a stable development was rising,” he says. “This was a window when businesses started considering new office expansions.
“But during the autumn sentiment changed with a feeling that a crisis might happen. This influenced businesses that are now holding back on office expansion plans.”
The conference Russian real estate market in 2012: highlights and forecasts will take place at MIPIM 2012 on Tuesday, March 6 at 11:30.
Catch up with the discussion at MAPIC 2011 about the most attractive submarkets for new retail development in Russia.
Image: Dieter Karner