According to JLL, the Moscow office market saw no completions in Q2 2017. This extended the recent trend of delayed deliveries.
Until the end of 2017, 542,000 sqm of new offices are expected to enter the market. In the first half of the year, only 21,143 sqm were completed, implying that almost all completions this year will take place in H2. The bulk of space will appear to projects in Moscow City: IQ-Quarter, Federation Tower East and OKO (Phase II).
The total volume of transacted space was 283,477 sqm in Q2 2017 (10 percent lower YoY) and 450,480 sqm in H1 2017 (a 22 percent decrease YoY). However, the take-up expected by the end of 2017 (1.1m sqm) will be roughly the same as last year.
“The Moscow office market is gradually shifting towards normal activity, with a prevalence of new leases and relocations. The pickup in transacted space after a drop in Q1 2017 as well as the restoration of new leases and relocations indicate the beginning of a Moscow office market recovery,” said Elizaveta Golysheva, National Director, Head of Office Agency, JLL, Russia & CIS. “Thus, the share of renewals and renegotiations continues to decline, reaching 19 percent in H1 2017 versus 49 percent in 2016 and 64 percent in 2015.”
Geographically, a large share of transactions has been signed in decentralized locations outside the Third Transport Ring (36 percent), while the CBD accounted for 18 percent of take-up in H1 2017.
In the demand structure the following business sectors were most active in H1 2017: banking & finance (40 percent), business services (23 percent) and manufacturing (18 percent). Note that banking & finance maintained its leading position.
In Q2 2017, the overall vacancy rate remained roughly unchanged and decreased by 0.1 ppt to 15 percent.
“Tenants favour moving to business centres of higher quality: significant decrease in vacancy was relevant for Class A and Class B+ objects,” added Elizaveta Golysheva. “The Class А vacancy rate declined to 16.8 percent, Class B+ to 15.6 percent (compared to 17.5 percent and 16.3 percent in Q1 2017 respectively). The vacancy rate in Class B- grew from 10.8 percent to 12.5 percent.”
Asking rental rates remained stable in Q2 2017. In the prime segment, asking rents were USD 600–750 sqm/year (RUB 35,000 – 44,000). Class A asking rents are USD 400–670 sqm/year (24,000 – 40,000 RUB). Class B+ asking rents are RUB 12,000–25,000 sqm/year. In Moscow City, asking rents were USD 360–750 sqm/year (RUB 21,000 – 44,000).
