CBRE as recently summarised the key trends on the Russian regional industrial and logistics (I&L) property market for 2016. For the whole year, total new delivery of I&L space in the Russian regions amounted to 683,000 sqm, which is 16.8 percent higher than in 2014. This result represents all-time record for regional markets – previous maximum was seen in 2009 (673,000 sqm).
Total take-up in the regions in 2015 stood at 271,000 sqm, which is 10.5 percent lower than in 2014. Nevertheless, market activity in regions is still high and comparable to results of two previous years.
Demand is mainly fuelled by food retail. Despite slight decrease of this sector activity (-3 percent of take-up compared to 2014), its share in total take-up reached 63 percent. More than a half of taken-up premises relates to this sector for the second year in a row.
The major demand driving force was federal retail chains, which use current economic environment as an opportunity for expansion of their business.
The production sector showed a good performance as well and took 2.8 times more premises than in 2014. The reason of its growing activity was number of deals with involvement of food industry companies and alcohol producers – 54 percent of production sector take-up.
The largest deals of 2015 were completed with X5 Retail Group in Krasnodar, Kaluga and Perm (47,000 sqm, 38,665 sq m and 26,367 sqm accordingly). Leroy Merlin leased 19,856 sqm in Samara in nonfood sector.
Demand volume is expected to be moderate in the coming years, and the need for new warehouse space will depend on retail chains expansion plans more than it was before.
Take-up structure in 2015 was very similar to previous years – lease transactions (89 percent of all deals) overwhelmed purchases (11 percent).
New supply is expected to decline in 2016 through shrinkage of speculative development. 375,000 sqm of warehouse premises on regional markets is already under construction. All-in-all 2016 completions may reach 400,000 sqm.
The majority of regional markets are facing quite high vacancy rates. Thus, developers are likely to focus on letting vacant premises in existing buildings or on build-to-suit projects.
Fifty five percent of projects built in 2015 relates to Top-10 regional markets, including Yekaterinburg, Novosibirsk, Samara, Rostov-on-Don, Nizhniy Novgorod, Kazan, Voronezh, Tula, Chelyabinsk and Krasnodar. Almost the same proportion was seen in 2014 – 53 percent of total completions.
Highest delivery was seen in Yekaterinburg, where new supply increased by 4 times as compared to 2014, and reached 98,000 sqm. As a result, Yekaterinburg became the largest regional market in terms of modern logistic premises, slightly ahead of Novosibirsk (764,000 sqm vs 757,000 sqm).
Vacancy rates in the Russian Regions in the relatively developed markets amounted to 4-8 percent of the total stock. Average rent for class A and B warehouses stays at mid-2015 level of RUB4,300 per sqm per annum, including OPEX and VAT.
Vasiliy Grigoriev, Senior Consultant, Research Department, CBRE in Russia, said: “In 2015 regional markets saw record-breaking supply volumes. However, we cannot say that the regions were oversupplied with such huge delivery pipeline – 80 percent of the commissioned space is already occupied by end-users. In the coming years the need for new warehouse space on regional markets will persist at the current levels entailed by food retailers activity. We expect that new supply will come to markets, in most cases, through build-to-suit projects intended for specific companies, in particular for retail chains.”
Anton Alyabyev, Director of I&L Department CBRE in Russia, commented: “The largest food retailers such as X5, Magnit, Lenta and others are the key consumers of warehouse space in the regions. These companies increase their activity in the regional markets and expand their logistic infrastructure alongside new store openings. In 2016 this tendency will continue. Even now almost half a million of new distribution centres from federal retail chains are being constructed.”
