08. August 2012 
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Only 27% of the annual Moscow office pipeline was completed in H1 2012
New office completions in Q2 reached 106,100 sq m. As a result, in H1 2012 around 220,000 sq m were added to the market, which represents only 27% of the expected new completions for 2012, reported Jones Lang LaSalle’s experts.
Seven new buildings were competed in Q2, from which only one was Class A (SkyLight – office area – 61,300 sq m). The remaining 42% was formed by five Class B office buildings (for. ex: Mosfilmovskiy BC – office area – 17,500 sq m, Dezhnyov Plaza BC – office area – 11,000 sq m, River City BC– office area – 9,700 sq m). The total Moscow modern office stock in Q2 reached over 14.3m sq m*.
Roughly another 580,000 sq m is expected to be completed by the end of this year, of which 27% is considered to be Class A space. Main Class A new completions expected to enter the market are: ALCON, Aquamarine 3, Country Park (Phase III).
The leasing activity in Q2 reached 323,500 sq m, which is an 8% increase QoQ. With 623,500 sq m take-up in H1, we expect to see more growth in the second half of the year and we forecast the annual take-up to reach 1.7m sq m.
Location-wise almost 60% of the executed deals in Q2 were completed between Third Transport Ring (TTR) and MKAD; 22% in Central Business District (CBD); 4% in Moscow City; 13% between Garden Ring and TTR.
The overall vacancy rate in Q2 2012 decreased by 0.7% QoQ and reached 14.7% (graph below). This indicator decreased further in CBD where it currently measures 11%. One of the highest vacancy rate was noticed in the southern area between TTR to MKAD (24%).
In terms of costs, rents remained stable during the last five quarters with: prime rents - USD1,200/sq m/year, Class A - USD850/sq m/year, Class B+ - USD600/sq m/year, all excluding operational expenses and VAT (see graph).
Liliana Stoianova, Head of Office and Occupier Research, Jones Lang LaSalle, Russia and CIS, mentioned: “Preferences for high quality space are on the agenda for most occupiers - 90% of the executed deals in Q2 were completed in Class A (30%) and B+ (60%) buildings. The drivers of Q2 demand were Banking & Finance companies with a 40% share; Manufacturing companies with 26%. The biggest deals this quarter included the sale of Nagatino i-Land to Raiffeisenbank (25,000 sq m) and Alfa-Bank (23,000 sq m); the lease of Novartis (16,000 sq m) in ALCON; Merlion (16,500 sq m) in Myakininskaya Poyma. These four deals represented almost half of the executed deals** of this quarter.”
*In Q2 2012 the historical dynamic of indicators were revised according to stock recounting.
Seven new buildings were competed in Q2, from which only one was Class A (SkyLight – office area – 61,300 sq m). The remaining 42% was formed by five Class B office buildings (for. ex: Mosfilmovskiy BC – office area – 17,500 sq m, Dezhnyov Plaza BC – office area – 11,000 sq m, River City BC– office area – 9,700 sq m). The total Moscow modern office stock in Q2 reached over 14.3m sq m*.
Roughly another 580,000 sq m is expected to be completed by the end of this year, of which 27% is considered to be Class A space. Main Class A new completions expected to enter the market are: ALCON, Aquamarine 3, Country Park (Phase III).
The leasing activity in Q2 reached 323,500 sq m, which is an 8% increase QoQ. With 623,500 sq m take-up in H1, we expect to see more growth in the second half of the year and we forecast the annual take-up to reach 1.7m sq m.
Location-wise almost 60% of the executed deals in Q2 were completed between Third Transport Ring (TTR) and MKAD; 22% in Central Business District (CBD); 4% in Moscow City; 13% between Garden Ring and TTR.
The overall vacancy rate in Q2 2012 decreased by 0.7% QoQ and reached 14.7% (graph below). This indicator decreased further in CBD where it currently measures 11%. One of the highest vacancy rate was noticed in the southern area between TTR to MKAD (24%).
In terms of costs, rents remained stable during the last five quarters with: prime rents - USD1,200/sq m/year, Class A - USD850/sq m/year, Class B+ - USD600/sq m/year, all excluding operational expenses and VAT (see graph).
Liliana Stoianova, Head of Office and Occupier Research, Jones Lang LaSalle, Russia and CIS, mentioned: “Preferences for high quality space are on the agenda for most occupiers - 90% of the executed deals in Q2 were completed in Class A (30%) and B+ (60%) buildings. The drivers of Q2 demand were Banking & Finance companies with a 40% share; Manufacturing companies with 26%. The biggest deals this quarter included the sale of Nagatino i-Land to Raiffeisenbank (25,000 sq m) and Alfa-Bank (23,000 sq m); the lease of Novartis (16,000 sq m) in ALCON; Merlion (16,500 sq m) in Myakininskaya Poyma. These four deals represented almost half of the executed deals** of this quarter.”
*In Q2 2012 the historical dynamic of indicators were revised according to stock recounting.
