Commercial real estate market overview Q1 2012

The trend of the reduction of the delivery volumes of high-quality areas in the office real state market of Moscow aggravated in 2012: no large high-quality office property entered the market in Q1 2012. For comparison, approx 250 thous. sq.m. of offices were commissioned for Q1 2011. 

Therefore, the aggregate volume of high-quality supply in the office real state market of the Moscow Region stayed at the level of 11.3 mln. sq.m. in Q1 2012.

Activity in the rental and purchase market was moderate in the first quarter, which is characteristic of the beginning of the year. By the results of Q1 2012 the share of vacant premises preserved approximately at the level of the end of 2011 and amounted to 10-12% in “A” class and 12-13% in “B” class.

Activity of demand in Q1 2012 was not so high, which is a seasonal peculiarity of the office real estate market. The total volume of absorption of areas in Q1 2012 amounted to about 100 thous. sq.m.

In 2011, the growth of rates posted about 10-15%. Due to the preservation of the total dynamics of the market and the threat of the occurrence of the deficit of the high-quality office premises in the central part of the city, more considerable growth of rates and sale prices is possible in 2012. The growth for the most popular city areas may reach about 20%.

In Q1 2012, no considerable change of the price level was observed in the office real estate market. The rental rates for “A” class office premises vary from $540 to $2, 000 per sq.m. per year, for “B+”, “B-” premises the rates constitute $360-$1, 200 per sq.m. per year (all the rates are indicated exclusive of VAT and OPEX).

During Q1 2012 the increase of new supply of professional retail real estate in Moscow took place due to the entry of large properties to the market. Therefore, the aggregate volume of supply with minor changes remains at the level reached at the end of 2011: the total area is 6.1 mln.sq.m., the rentable area is 3.1 mln.sq.m. The provision of the Moscow population with high-quality retail areas constitutes 294 sq.m. per 1, 000 residents. 

In Q1 2012, the chain of French bakeries Paul entered the Russian market, opening its first shop-café in Tverskaya str. Another important event was the opening of the “anchor” tenant of a retail gallery in the structure of the “Moskva” hotel, which is Podium store in a new for it format Podium Market.

As far as the deals in the segment of retail operators are concerned, two landmark events, indicative of the continuing growth of concentration in the market took place at the beginning of 2012:

 Eldorado company acquired the chain of household goods and electronics store “Beringov”, besides, it was reported about Alfa Group’s acquisition of “Formula Kino” chain of cinema halls. 

There were no landmark events, influencing the dynamics of rental rates at the beginning of 2012. Retail operators’ high activity continues to contribute to the buyers’ growth of rates, however, their indices are minor in the quarter term. 

As far as the main retail corridors of Moscow are concerned, the growth of the market participants’ activity may be stated both on the part of demand for the premises and on the part of owners. As far as the rental rates are concerned, the average level increased insignificantly since the beginning of the year, which is indicative of the stabilization of the market and low possibility of the price indices decline in the short term. 

By the end of 2012 the preservation of the market players’ high activity may be observed in the professional retail real estate market: developers will complete the projects, which were put on hold in the crisis period, as well as begin the implementation of the new ones. Retail operators will continue to develop actively, new landmark players will enter the market. The strengthening of competition for the most attractive premises will contribute to the further gradual growth of rental rates.

During the first quarter of 2012 the supply of hotel rooms in Moscow increased due to the opening of the hotel under the new for the Russian market brand Mercure (Accor Group). According to Accor Group operator’s announcements, the company plans to open 10 hotels Mercure in Russia during the nearest years, and only two of the announced properties will be located in Moscow, the rest of them—in the regions.

During Q1 the increase of the supply of hotels under international operators’ management in regional cities amounted to 359 rooms due to the opening of the Tulip Inn Rosa and Park Inn by Radisson hotels. International operators’ high activity in regional cities is preserved concerning new projects: 11 projects of hotels with the summary room stock of 2, 000 rooms were announced during Q1, the majority of properties are positioned in 3-4* and 4* segments. 

The main trend of Q1 2012 was the stable growth of the main operational indices of the hotel market of Moscow. The occupation  of hotels was set at the stable level of more than 70% for the upper segment and about 60% for the market on the whole. The price indices displayed stable positive dynamics. It may be forecasted due to the seasonality factor that the recovery of the hotel market of Moscow will continue in Q2 and Q4 2012.