Commercial real estate market overview 2012

   The trend of office premises absorption volumes excess over the new supply volumes remained relevant in the Moscow Region in 2012. The aggregate volume of introduced office areas reached approx 600 thous. sq.m in 2012, which was 3% less than the analogous index of the past year.

Therefore, the aggregate volume of high-quality office premises amounted to about 11.9 mln. sq.m at the end of 2012.

Business activity in the market of office rent and purchase was rather high during 2012, which, against serious reduction of delivery volumes, caused the decline of vacant premises level. At the end of 2012 the share of vacant premises constituted 8% in “A” class and 9-10% in “B”  class.

All the incoming requests to Blackwood Company comprised of 56% requests for premises rent and 44% - for premises purchase.

A high level of business activity during the whole 2012 together with the trend of new supply delivery volumes decline made it possible to state considerable growth of rental rates: by the results of 2012 the rental rates were 10-12% up.

At the end of 2012 the rental rates varied from $550 to $1, 500 per sq.m. per year for “A” class office premises, from $300 to $1, 200 per sq.m. per year for “B+”, from $250 to $1, 000 per sq.m. per year in “B-” class (all the rates are indicated exclusive of VAT and OPEX).

During 2012 the professional retail real estate supply of the Moscow Region increased by 258, 100 sq.m of the total area (133, 300 sq.m. of them were rentable area). This annual increase pace was minimal since 2004. The aggregate retail real estate supply volume amounted to 6.3 mln. sq.m of the total area at the end of 2012, the rentable area constituted 3.2 mln. sq.m. The provision of Moscow population with high-quality retail areas was at the level of 307 sq.m per 1, 000 residents.

The delivered to the market retail centers included the first in Russia professional outlet center Outlet Village Belaya Dacha. The opening of a number of outlet centers, including the ones near Sheremetievo airport and near Vnukovo airport, was announced for 2013-2014. 19 large RECs with the aggregate area of more than 1.5 mln. sq.m were opened in 2012 in regions.

Therefore, the concentration growth continued in the segment of household goods and appliances in 2012. Operating in the Russian market retail chains were actively struggling for buyers, offering new formats. The preservation of retail operators’ high activity made it possible to anticipate the retention of a minimal level of vacant areas of 1.5% for the most in-demand retail centers and retail streets.

During 2012 the rental rates both for premises in retail centers and in the street retail segment displayed a stable growth, which by the results of the year constituted 10-15% for successful properties and premises of key retail corridors.

The preservation of rather low new supply increase paces is expected in 2013. And against the background of retail operators’ announced high activity (both in terms of international chains’ entry to the Russian market and in terms of the chains’ presence expansion in regional cities) a further growth of rental rates and the retention of minimal indices of vacant areas may be forecasted.

During 2012 two new hotels were opened in Moscow: the increase of new supply since the beginning of the year constituted 253 rooms. The opening of such projects as “Aquamarin III” and the hotel in “Moscow-City” MIBC was shifted for 2013. As the result, the new supply increase paces was minimal in 2012 since 2000, which was the consequence of developers’ and hotel operators’ activity decline in the crisis period of 2008-2009.

The Moscow Government’s shares in a number of the hotels (“Budapest”, “Metropol”, “Swissotel”, “Radisson SAS Slavyanskaya”) were sold in 2012. The reconstruction aiming the increase of a class will in most likelihood be carried out in a number of hotels. Therefore, the supply increase will continue in the upper segment of the Moscow market in the short term.

During 2012 the increase of new supply under international hotel operators’ management surpassed 1, 000 rooms in regional cities: the opening of  Tulip Inn Rosa Khutor, Park Inn by Radisson and the Radisson Blu Resort & Congress Center took place in Sochi and the opening of Ibis took place in Samara.

The main trend of the hotel market of Moscow in 2012 was  considerable decline of new supply increase paces conditioned by developers’ activity decrease in the crisis period of 2008-2009. As the demand for accommodation was recovering and stabilizing, it caused double indices of RevPAR increase: by the results of the year the index increased by 11%.

International players preserve high activity, the largest international companies continue aggressive regional expansion. As the hotel markets of million-plus cities are saturating, operators’ interest is shifting towards smaller cities: taking into account limited capacity of the market, those operators will be on velvet, whose properties will open earlier.