In Q3 2017, the sharpest reduction was observed in non-central Class A offices
According to JLL, 74,583 sqm of quality office space was delivered to the market in Q3 2017. The bulk of this, 56,949 sqm, was Class A buildings (Oasis and Fili Grad business centres). The overall Q1-Q3 2017 completions were 95,726 sqm, 63 percent lower YoY (256,953 sqm in Q1-Q3 2016).
About 446,000 sqm (82 percent of total 2017 completions) are planned for Q4 2017. “Taking into account common delays, completion of some projects can slide to next year,” said Olesya Dzuba, Head of Research, JLL, Russia & CIS. “We estimate actual 2017 completions at about 250,000 sqm, which will mark a 15-year low.”
Take-up in Q3 2017 reached 319,046 sqm, rising 14 percent YoY. In Q1-Q3 2017, take-up was 769,526 sqm, down 10 percent YoY.
Take-up in the Central Business District (CBD) rose 35 percent YoY in Q1-Q3 to 163,215 sqm. About 39 percent of all deals in January-September were concentrated in the area outside of the Third Transport Ring (TTR).
In the take-up structure, manufacturing companies were the most active (24 percent of Q1-Q3 2017 deals), followed by banks and financial organisations (22 percent) and companies providing business services (20 percent).
Low completions and recovering economy facilitate gradual decline in office vacancies, with the average rate reaching 14.7 percent in Q3, 0.3 ppt lower than in Q2. The Class A vacancy rate fell from 16.7 percent to 15.7 percent, Class B+ from 15.6 percent to 15.4 percent, Class B- did not change. The most significant vacancy reduction was in Class A buildings located outside the TTR.
“Tenants who are aiming for high quality office often consider non-centrally located Class A buildings. As a result, the Class A vacancy rate in the buildings outside the TTR declined by 3.3 ppt in Q3, to 17 percent,” said Elizaveta Golysheva, National Director, Head of Office Agency, JLL, Russia & CIS. “Rental rates for Class A buildings outside the TTR are comparable to Class B+ rates within the Garden Ring. This provides an opportunity for tenants to improve the quality of occupied area without paying extra.”
Moscow office rental rates remained stable in Q3 2017. Prime offices asking rents were $600-750 sqm/year. Class A rental rates were $400-670 sqm/year and Class B+ rents were RUB 12,000-25,000 sqm/year.