According to JLL, the H1 2019 take-up volume in the Moscow region increased by one-third y-o-y and reached 854,000 sqm of which over 500,000 sqm transacted in Q2 2019.
The demand of logistic companies has grown the most significantly. The share of logistics in the take-up structure has risen to 31 percent from 14 percent in 2018, deals volume was 5.4 times higher than the same indicator of the previous year and amounted to 261,000 sqm. This is a maximum H1 transaction volume with logistic companies since 2007. At the same time, retailers have been the most active segment on the warehouse market in Q2 2019 and regained their leading position in the demand structure (41 percent in H1 2019).
“Retail sector is transforming because of the e-commerce growth. Today retailers develop their own online stores and adapt logistics infrastructure to service the Internet orders. The speed and reducing number of mistakes in orders’ picking and packing, as well as returns management are increasingly critical to competitive success. This leads to an increasing need for additional warehouse space and to the implementation of latest technological solutions,” commented Evgeniy Bumagin, Head of Industrial & Warehouse Department, JLL, Russia & CIS. “Under the influence of new trends, the warehouse market is undergoing structural changes: logistics companies actively promote fulfillment services, the largest online stores and marketplaces start to provide logistics services.”
The largest deals of H1 2019 were the lease of 108,000 sqm in PNK Park Veshki by retailer VkusVill, the purchase of the whole PNK Park Koledino by Mistral trading company (53,000 sqm, the deal closed by JLL team) and the purchase of new building (50,000 sqm) in Vnukovo Logistics Center-2 by Russian Post.
Strong demand contributes to continued decline of the vacancy rate. The vacancy rate in the Moscow region warehouse market has declined by 0.6 ppt in the past six months of 2019, to 3.9 percent (by 0.3 ppt in Q2). The vacant space volume reached 703,000 sqm in absolute terms by the end of H1 2019.
Further commission of new warehouses will affect the vacant space volume. Some 380,000 sqm were completed in H1 2019, of which 31 percent remained vacant at the end of June. “By the end of 2019 additional 975,000 sqm of warehouse premises are announced for delivery, of which 682,000 sqm have already been contracted. We expect continued absorption of vacant space leading to the vacancy rate decline to 3.6-3.7 percent by the end of the year,” commented Vladislav Fadeev, Deputy Head of Research, JLL, Russia & CIS.
“Last year the Moscow region warehouse market was marked by the vacancy rate decline, record volumes of take-up and selective growth of rental rates. In H1 2019, we have observed positive momentum in the warehouse property market. However, despite the forming shortage of warehouse space, we expect developers to remain conservative in speculative development until the average rents in the Moscow region go beyond the level of RUB4,000 per sqm per year,” added Evgeniy Bumagin.
Since the beginning of the year several major landlords have raised asking rental rates for their projects by RUB100-200/sqm/year (excluding VAT and operating expenses), which resulted in growth of average indicator in Moscow region to RUB3,800/sqm /year (excluding VAT and operating expenses) in H1 2019. According to JLL estimates, the low vacancy rate will lead to further growth of rates, therefore the average level will increase to RUB3,900–4,000/sqm/year by the end of 2019. However, the rental rates for new deals in particular directions and in individual projects will remain at the level below RUB3,600/sqm/year.
