Growth in consumer spending for certain groups of goods and services.
In IQ 2017, for the first time in the last few years, an increase in rental rates was noted in the office and retail segments of the Moscow commercial real estate market. However, analysts are in no hurry to rejoice: already in the next quarter, a significant commissioning of new facilities is expected, which will entail an inevitable increase in the level of vacancy.
During the reporting period, 51.8 thousand square meters were commissioned in the office segment. m GLA. Despite the increase in the indicator compared to the fourth quarter of 2016 by 16.4%, NAI Becar analysts note a continuing trend of a slowdown in the pace of commissioning of office buildings. By the end of the year, according to the asset management department of NAI Becar, about 430 thousand square meters are expected to be commissioned. m of office space.
Following the results of the first three months, a decrease in vacancy levels was recorded in high-quality office properties, which, in turn, led to an increase in rental rates for the first time since 2014. Thus, in class A, vacancies have decreased by 6% since the end of last year, in class B+ - by 12.7%, in class B - 8%. Meanwhile, at the moment the share of free space in class A remains at a high level and amounts to 21.3%. Rental rates compared to the end of 2016 increased in class A by 4.8% (up to 1.9 thousand rubles), by 7.5% (up to 1.4 thousand rubles) in class B+ and by 4.7% (up to 1.1 thousand rubles) in class B.
The key trend of the beginning of 2017 can be considered the increased interest in coworking spaces on the part of the owners of existing business centers. As studies show, the placement of a coworking operator on the territory of a business center significantly increases the interest of tenants in the office facility itself. This is due, first of all, to the possibility of more efficient use of their space. For example, the presence of a coworking space allows tenants to save on renting additional space allocated, in particular, for meeting and conference rooms. In addition, thanks to coworking spaces, tenant companies have the opportunity to attract employees to project work without worrying that they will not have enough space in the office. Thus, by developing the infrastructure component of objects today, owners increase their competitive advantage in the future.
Among the largest transactions in the first quarter. 2017 - Yandex, which rented 10.3 thousand sq. m in the Aurora Business Center, and Servier JSC, which entered into a lease agreement for 6.6 thousand sq. m. m in the business center "White Gardens".
It is noteworthy that about 87% of the total volume of transactions fell on the office segment, primarily due to the purchase by VTB Bank of 22.4 thousand sq. m. m in the Eurasia Tower of the MIBC Moscow City.
In the Moscow retail real estate segment, 11.3 thousand sq. m. have been introduced since the beginning of the year. m GLA, which is 91% lower than the 4Q 2016 indicators. However, already in the second quarter, 6 retail facilities with a total area of 150 thousand sq. m are expected to be put into operation at once. m., which will negatively affect the vacancy level. The overall vacancy level in quality shopping centers in Moscow today is 12% (a decrease of 4% compared to the end of 2016). Rates for tenants of a shopping gallery fell during the reporting period by 4.1% to 37.3 thousand rubles per 1 sq. m. m, for “anchors” they remained unchanged - 12.9 thousand rubles per “square”.
The warehouse segment demonstrated good commissioning dynamics in the first quarter of 2017 - about 119 thousand sq. m. entered the market. m GBA, an increase of 10.2% compared to the end of last year. Thus, 4 new class A+/A complexes were put into operation: TSC “Klin” (56 thousand sq.m), “Technopark” (18.7 thousand sq.m), ORC “Radumlya” (1st stage, 13 thousand sq.m.), PSK "Nikolskoye" (8 thousand sq.m.). By the end of the year, another 500-600 thousand square meters are expected to be launched. m. Against this background, the vacancy rate continues to increase and at the end of March is 16% in class A and 15% in class B. Rental rates in the segment compared to the end of 2016 fell by 14% (to 4.1 thousand rubles ) in class A and by 10% (up to 3.8 thousand rubles)
in class B.
In August 2017, 2,766 commercial real estate units with a total area of 1,461 thousand square meters were offered for rent. m. The volume of supply for the month in terms of quantity increased by 5%, and in terms of total area - by 10%.
The average monthly rental rate decreased by 4% and amounted to RUB 17,295 per sq. m. m/year. The dollar exchange rate did not change in August, so in dollar terms the rate also decreased by 4% and amounted to $290/sq.m/year. Over the year, since August 2016, ruble rates have not changed, while dollar rates have decreased by 8%.
The increase in supply and the decrease in rental rates in August are moderate, which is typical for the summer period. Macroeconomic and other factors for a significant change in the commercial real estate market are currently absent.
The leader in supply volume traditionally remains office space, the share of which by area is 48%. Next come industrial and warehouse (42%) and retail premises (10%).
Retail real estate
In August 2017, 559 objects with a total area of 155 thousand square meters were exhibited on the market. m. Compared to the previous month, the number of exhibited retail objects increased by 1%, and the total area - by 5%.
Of these objects, 35 objects with a total area of 8 thousand square meters were exhibited in the center. m, which is lower than July by 10% in quantity and 29% in total area. The average requested rental rate for these properties for the month decreased by 5% and amounted to RUB 58,973 per sq. m. m/year, while rates for objects that have been exhibited for a long time have remained virtually unchanged. The decrease in rental rates occurred, in particular, due to the departure in July of two expensive properties - on Stary Gai Street (270 sq.m., 119,000 rubles/sq.m./year) and st. Tverskaya (173 sq.m., 131,261 rub./sq.m./year).
The number of retail properties offered for rent outside the center increased by 2% in August 2017, and their total area by 8%. The volume of supply amounted to 524 objects with a total area of 147 thousand square meters. m. The average monthly rate decreased by 8% and amounted to 26,671 rubles/sq.m/year,
In terms of the level of changes in rates per month, the difference between objects in the center and outside it is not significant, however, in the medium term, the demand for premises in the center is higher.
| Trading inside the UK | Quantity | Total gap, RUB million | Total area, thousand sq. m | Average area, thousand sq. m | Average rate, ₽/sq. m/year | Meaning | 29 | 394 | 6,937 | 0,239 | 63 215 |
|---|---|---|---|---|---|
| By July 2017 | -12% | -16% | -29% | -20% | +3% | By August 2016 | -33% | -2% | -15% | +26% | +18% |
Office real estate
In August 2017, the volume of supply of office properties for rent, both in quantity and in total area, increased by 2% and amounted to 1,623 objects with a total area of 698 thousand sq. m. m.
Over the month, the number of office properties in the center increased by 8%, but the total area did not change. The average rental rate increased by 1% and amounted to 24,751 rubles/sq.m./year.
The volume of supply of office space outside the Garden Ring in terms of quantity and total area increased by 2%, while the average rate increased by 1% and amounted to 15,896 rubles/sq.m./year.
Changes in rates for office real estate both in the center and outside it continue to remain insignificant, which reflects low business activity related, incl. with the summer period.
The first threat is shrinking margins. The level of rental rates is decreasing, and the owner’s expenses are only increasing. The decrease in rates is caused by increased competition for good properties. Owner costs are increasing due to changes in legislation. is now calculated from the cadastral value, and not from the inventory value.
The second threat also concerns laws. We are talking about excessive regulation at the legislative level. Regional authorities prohibit construction, limit opening hours (for example, of shops), set rental rates - all this negatively affects business, and therefore rent.
Thirdly, one cannot fail to mention the influence of politics on the commercial real estate market. It strongly depends on the economic situation in the country, and it, in turn, on the political situation. In particular, uncertain relations with the West have an impact on foreign investors and their flow into the Russian market. And the instability of exchange rates affects the purchasing power of the population, which is already falling.
The fourth threat is that banks and government agencies are increasingly acquiring commercial real estate into their portfolio. Many properties were taken over by banks due to debts. This prevents the industry from developing according to the laws of the market. Too much government involvement. At the same time, there is no government support in the commercial real estate market.
Office real estate
An analysis of the office real estate market in 2016 showed that the percentage of premises put into operation was two times lower than in 2015. The New Year promises to increase momentum and deliver 440,000 square meters of offices.
Olesya Dzyuba, Director of Market Research, CBRE, suggests that the volume of office space that will be commissioned this year will be even greater and amount to 507,000 square meters.
As for rental and purchase and sale transactions, their expected volume is about 1.1 million square meters, comments Olesya Dzyuba.
The number of vacant class “A” areas should remain at the same level. But there will be fewer available class B offices.
As for rates, they should remain stable. If their growth is possible, then by 5 - 10%. The cost per square meter of class A prime offices starts from 42,000 rubles, class A from 18,000 rubles, class B from 13,000 rubles.
Warehouse real estate
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In warehouse real estate, there is a tendency for tenants to move to higher quality properties and concentrate in distribution centers.
If tenants can afford the “built-to-suit” warehouse format, they do it. If not, they will prefer “class A” and standard functionality.
Anton Alyabyev, director of industrial and warehouse real estate department, CBRE, believes that the warehouse real estate market has stabilized, and at the end of 2017 we can already expect an increase in rates and a reduction in vacancies. Evgeniy Numerov, Managing Director of Skladman USG, confirms the decline in supply levels this year.
Retail premises
The pace of commissioning of retail premises in 2017 will be reduced. True, the occupancy level will be good. They will open at least 80% full (versus last year's 50-60%).
A similar situation is expected in the regions. There are many cities where the purchasing power of the population is high, but there are no decent shopping centers. The development potential in such regions is great. Large retail chains, DIY and children's goods segments, taking these sentiments into account, continue to actively develop in them.
Hotels
The hotel business in the capital is experiencing an increase in the flow of tourists. At the same time, luxury hotels are cautious about this trend and do not increase the average price per room/night.
As for the regions, the level of tourism has increased due to the introduction of sanctions and the corresponding development of domestic destinations.
In 2017, 11 hotels of international brands are due to open in Russia. (In 2016, 9 of them opened, in 2015 - 13).
By 2021, the number of international hotels will reach 109. Such hotels will also open in cities where there were no hotels of international brands before: Khabarovsk, Arkhangelsk, Tomsk, Vladimir, Tolyatti, Orenburg, Vladivostok, Pereslavl-Zalessky Zelenogradsk, Stavropol, Kemerovo, Saransk, Mineralnye Vody, Novorossiysk.
Investments
When it comes to investments, there are two opinions. First: yes, the number of foreign investments has decreased, but the growing interest of foreign investors is visible, especially from Asia and the Middle East (Arab infusions). The share of Russian investors in commercial real estate is still dominant.
Second opinion: due to the instability of political relations with the West and currency volatility, foreign investment is a big question, and what awaits us is unclear.
So far, the leading areas of commercial real estate for investors are office, retail and hotel.
The volume of investments in 2017 is projected to reach $5 billion.
Forecasts
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Opinions differ on the situation in 2017. First forecast: the market has stabilized, the peak has passed, and 2017 performance will improve.
Second: only in 2017 will we face a real crisis in the commercial real estate market, and everything will stabilize by 2019. However, experts note that the expected decline will not be as strong as in 2008-2009.
In connection with such forecasts, many players took a wait-and-see approach. Therefore, conservatism in actions now prevails in the market.
However, as noted Head of the company "ARR" Vitaly Denisov, there is no such situation when in the market either everything is developing or everything is not developing. Players who survived the difficult economic situation of 2016 know how to adapt to the situation and change their plan and direction of action. This means that, despite general economic indicators, companies will develop, investors will invest, and transactions will be completed.
The results of the current year and the main trends in the office, warehouse, retail and hotel real estate markets were analyzed by the leading international real estate consulting company CBRE. The company’s specialists also determined the prospects for the commercial real estate market in the coming 2017.
2016 will be remembered for the stabilization of the real estate market, increased investor activity, albeit with a limited number of market investment transactions, and a change in the mood of tenants - from revisions of lease terms to the conclusion of new transactions in all segments starting from the second half of the year.
According to expert forecasts, the Russian economy will show slight growth in 2017 - from 0.5% to 2%. The base scenario forecast of the Ministry of Economic Development (MED) assumes economic growth of 0.8% in 2017.
Against the backdrop of expectations for a gradual economic recovery, the main driver of growth in the commercial real estate market will be continued stability and the beginning of a new cycle, within which investors have good profitability potential
Despite the reduction of the key rate by the Bank of Russia, the cost of bank financing still does not allow developers to start new projects. At the same time, they are effectively using the pause that has arisen: they are looking at sites, agreeing on the parameters of new projects and obtaining permits. This will allow them to take advantage of the improvement in debt market conditions expected next year.
Commercial real estate market trends in 2016
In 2016, there was a continued decline in the new supply of commercial real estate, especially in the warehouse and office markets, while the volumes of retail real estate commissioning remained high due to inertia. There was a reduction in the share of vacant space in the office segment due to the activity of government agencies and companies that, taking advantage of the situation, bought or rented large volumes of office space.
The market finally stabilized in 2016, and in the second half of the year, tenant activity increased significantly. This year, the prerequisites for the start of a gradual recovery of the commercial real estate market in 2017 have finally formed
Rental rates for commercial real estate are firmly established in the ruble zone (with rare exceptions), reached the bottom and stabilized in all segments. The volume of transactions for renewals of existing lease agreements, as well as revisions of their terms, decreased by a third. At the same time, since the middle of the year, there has been an increase in activity in concluding new lease transactions on market conditions.
For Moscow, 2016 was a breakthrough year in terms of infrastructure development: the Rumyantsevo and Salaryevo metro stations in New Moscow were opened, the Moscow Central Circle was launched, and by the end of the year it is planned to commission the first section of the Third Interchange Circuit.
CBRE analysts believe that the commercial real estate market experienced a final stabilization in 2016, and in the second half of the year, tenant activity increased significantly. This year, the prerequisites for the start of a gradual recovery of the commercial real estate market in 2017 were finally formed.
Investments in commercial real estate
According to Irina Ushakova, senior director, head of the capital markets and investment department at CBRE, the volume of investments in 2016 will increase by 29% and amount to $4.5 billion (or about 300 billion rubles). At the same time, 40% of this volume was formed by transactions concluded by government agencies and state-owned companies, while last year there were no such transactions.
Russian capital dominated in 2016, accounting for 96% of the total transaction volume. The share of foreign capital in the volume of investment transactions decreased to 4% from 15% last year. However, we see high investment activity of foreign funds already represented on the Russian market, as well as additional capital inflow. A landmark deal involving foreign capital was the acquisition by the Arab fund Mubadala, together with RDIF, of warehouse buildings in two projects PNK Sheremetyevo and PNK Chekhov 3.
The leaders in terms of investment volume at the end of the year will be the office segment (44%) and hotels (17%). Moreover, the share of hotels this year is a record high over the past 10 years. Also in 2016, a high share of the residential segment was recorded (11%) - developers were actively buying sites for housing construction. The share of retail and warehouse real estate will be 18% and 4%, respectively.
The number of market investment transactions continues to be limited by the significant difference in price expectations between buyers and sellers, which constrains the closing of transactions
According to experts, the amount of equity capital available for investing in commercial real estate is about $3.5 billion (more than 50% of which is money from foreign investors), and another about $1 billion for investing in housing. Including leverage, more than $10 billion is seeking real estate investment opportunities.
Against the backdrop of established stability and expectations of a gradual economic and market recovery, as well as an understanding of the available capital in the market in 2017, the volume of investment, according to CBRE forecasts, may increase to US$5 billion. The main driver of growth in this case will be continued stability and the beginning of a new cycle, within which investors have good profitability potential.
Office real estate
Elena Denisova, senior director, head of the office premises department at CBRE, believes that the first half of 2016 was influenced by trends formed in 2015: the demand for office real estate was supported by large transactions carried out by government agencies or companies with state participation, often of a non-market nature and were related to the settlement of debt obligations. Such transactions include the transition of the Eurasia Tower to VTB, the President Plaza Business Center to Sberbank.
Since the second half of 2016, indicators of the state of demand for commercial real estate have improved - there has been a tendency to increase the volume of new transactions concluded on market conditions
Another positive and significant moment for the office real estate market in 2016 was the decrease in vacancy rates. The share of vacant premises decreased most noticeably in the class A office segment: at the end of 2015, the vacancy rate here was 26%; at the end of this year, according to analysts, it will drop to 19.8%. In 2017, experts predict stability of vacancies in this class, since a number of large business centers are planned for commissioning. In class B, a more significant reduction in the share of vacant space is possible - from 15.2% at the end of 2016 to 14% in 2017.
According to CBRE estimates, the volume of new space commissioned at the end of 2016 will be 355,000 sq. m. m, which is two times lower than last year’s figure. In 2017, according to announced announcements, 440,000 sq. m. will be commissioned. m of new office offer. It is noteworthy that the main volume will be in Moscow City (210,000 sq. m) and the Central Business District of the capital (100,000 sq. m). The limited introduction of new high-quality facilities contributes to the further “washing out” of high-quality products from the market for large users.
Rental rates for office real estate are stable, and at the end of 2016 they will remain in the following ranges: for class A Prime - $800 - 900 per sq. m. m per year, for class A - 18,000 - 35,000 rubles. per sq. m per year, for class B - 13,000 - 28,000 rubles. per sq. m per year (all rates are excluding operating expenses and VAT).
In 2017, the nomination of requested rental rates will remain predominantly in rubles, and with the gradual normalization of the external background, an increase in rates in ruble terms by 5-10% is possible.
Warehouse real estate
According to Anton Alyabyev, director of the industrial and warehouse real estate department at CBRE, 2016 was a transitional year for warehouse real estate - from a slowdown phase to a phase of further stabilization of the market.
Economic fluctuations at the beginning of the year caused the implementation of a number of transactions to be postponed to a later date, which was reflected in low demand volumes in the second and third quarters of 2016. However, towards the end of the year there was a recovery in business activity: the volume of transactions with warehouses in the fourth quarter could reach 300,000 sq. m. m, which is the highest figure for the year.
In parallel with fluctuations in demand, there was a change in the trend in the movement of key market indicators - the share of free warehouse space and rental rates. The increase in vacancies at the beginning of the second quarter, which occurred due to the entry of end-user warehouse facilities into the market, quickly faded away. The share of free warehouses has remained stable over the past 6 months. At the same time, rental rates for warehouse space have remained at the same level for three quarters.
In 2016, CBRE analysts saw the emergence of new trends in the structure of supply and demand. Business activity is increasingly stimulated by new drivers - the move from old warehouse facilities to better ones, the transition from the premises of logistics operators to direct lease and the consolidation of warehouse capacity in large distribution centers.
These changes in the nature of demand, in turn, stimulated differentiation of supply. Developers offer different solutions for different categories of clients. These could be high-tech built-to-suit warehouses designed for the needs of large businesses that continue to grow. For companies that would like to move to a new quality building, but are more limited in financial resources, standardized Class A warehouses with a basic set of specifications are offered.
In 2017, the market will continue to operate in the current environment. The volume of commissioning will be further reduced, and new buildings will mainly be built for the client. The annual rate of new supply is expected to be 500-600 thousand sq. m. m.
The projected volume of transactions in the warehouse market in 2017 may be at least 800,000 sq. m. m. The market stabilization that has occurred creates the preconditions for a gradual increase in business activity. In the second half of the year, we may see positive changes in market dynamics in the form of a gradual decrease in vacancy and an increase in rental rates for warehouses.
Retail premises, Moscow
Marina Malakhatko, director of the retail space department at CBRE in Moscow, believes that the volume of retail space commissioned in Moscow in 2016 will be about 427,000 sq. m. m, which is 3% less than in 2015. This volume is significant for the market, and the commissioning of 7 new properties caused a short-term increase in vacancies in the retail real estate market during the year, which increased to 11.4% by the third quarter. But by the end of this year, it is expected to decrease systematically, and, thanks to the reduction in input volume, to reach the 10% mark in the first half of 2017.
The total supply of quality shopping centers in Moscow by the end of the year will be 5.6 million sq. m. m, and the provision of retail space is 456 sq. m. m per 1000 people.
New retail properties opened with a good occupancy level: in shopping centers in 2016, the vacancy level varied from 20-40%, while last year facilities opened with 50-80% vacancy. The number of retailers leaving the Russian market has decreased significantly: 2 brands in 2016 versus 11 in 2015
In 2017, a further decrease in the pace of commissioning of retail space is expected: about 273,000 sq. m. are announced for opening. m, which is 36% less than the volume of 2016. At the same time, one of the objects for next year - Butovo Mall (54,000 sq. m GLA), was originally announced for opening in 2016.
Among the largest shopping centers in 2016, it is worth noting Riviera (91,200 sq. m GLA), Oceania (60,000 sq. m GLA) and Good! (53,000 sq. m), Metropolis phase 2 (38,000 sq. m GLA). Vacancy rates at opening for new properties vary greatly depending on location and concept. On average, new retail properties opened with a good occupancy level: in shopping centers in 2016, the vacancy level varied from 20-40%, while last year facilities opened with 50-80% vacancy.
Over the 11 months of 2016, 32 international brands entered the Moscow market, and another 5 are planning to open their first stores in the capital by the end of the year. This is comparable to the figure for 2015, when 40 international brands entered the Moscow market. It is worth noting that the number of retailers leaving the market has decreased significantly: 2 brands in 2016 versus 11 in 2015.
The prime rental rate for retail space in Moscow was 100,000 rubles per sq. m. m per year, practically unchanged compared to 2015. In 2017, CBRE experts predict that rates will remain stable due to the relatively high vacancy rate of retail space.
Rental rates in shopping centers are finally denominated in rubles, or an exchange rate corridor is fixed. The owners are ready to provide discounts for the first year of rent, with a gradual increase in the rate in subsequent years. The form of interaction with the owner of a retail facility in the format of a percentage of turnover is an increasingly common and more comfortable practice for retailers, and is no longer used only for anchors, but also for medium-sized tenants of all profiles. A variety of schemes for structuring rental rates allow owners and tenants to find a compromise by choosing an acceptable option for commercial conditions within the framework of emerging market practice. The latter, in turn, is strongly tied to the turnover of retailers.
At the end of 2016, the turnover of luxury and economy class retailers in Moscow increased, in some cases the growth reached 30%. Mid-level retailers showed minimal growth in turnover at the end of the year
Retail premises in Russian regions
According to Mikhail Rogozhin, director of the regional retail space department at CBRE, at the end of 2016, the increase in retail space in Russia will be about 1.2 million square meters. m, of which 58% (719,000 sq. m) were introduced in regional cities, excluding St. Petersburg. The total volume of retail space commissioned in Russia decreased by 28% compared to the previous year, and in the regions - by 40%. Among the largest new regional centers in 2016, it is worth noting MegaGrinn in Kursk (129,000 sq. m GLA), Maxi in Arkhangelsk (49,200 sq. m GLA), Sedanka City in Vladivostok (45,000 sq. m GLA).
The share of vacant retail space in Russian regions varies greatly from city to city. The average vacancy rate for million-plus cities today is 8-10%. But, as a rule, in every city there are projects with a good location and a strong tenant mix, in which the occupancy rate is close to 100%
In 2017, regional cities are expected to further reduce the volume of new retail space commissioned - to 637,000 sq. m. m, which is 11% less than in 2016. At the same time, some objects of 2017 were initially announced for commissioning in 2016, but subsequently the dates were postponed.
In general, it is worth noting the high potential for the development of the retail real estate market in cities with a low supply of quality retail facilities in the presence of good purchasing power of the population. Such cities today include Khabarovsk, Chita, Stavropol, Makhachkala, Noyabrsk and others.
The share of vacant retail space in the regions of the Russian Federation varies greatly from city to city and depending on the quality and location of the property. The average vacancy rate for cities with a population of over a million today is 8-10%, which is slightly higher than the vacancy level in 2015 of 7-8%. But, as a rule, in every city there are projects with a good location and a strong tenant mix, in which the occupancy rate is close to 100%.
Among the retailers represented in the regions, the most active in 2016 were the Lenta, X5 Retail, and Magnit grocery chains. At the beginning of the year, they announced ambitious plans for development in Moscow and the regions: Lenta - 40 hypermarkets, Pyaterochka - 1000 stores, Magnit - 950 stores and 80 hypermarkets. The current state of the market has allowed the networks to successfully implement their announced expansion plans. DIY retailers Leroy Merlin and OBI, electronics stores M.Video and Eldorado, and children's goods store chains Detsky Mir and Dochki-Synochki are also developing quite actively in regional cities.
Hotels
Stanislav Ivashkevich, Deputy Director for Development, Hospitality Industry, CBRE, believes that the main factor influencing the Moscow hotel market in 2016 was the growth of tourist traffic. According to preliminary data, by the end of the year the number of tourists in Moscow alone will be about 17.5 million people, the share of tourism consumption in the capital’s GRP will exceed 4% and could reach 470 billion rubles. Thus, of this volume, the share of hotel revenues could be about 60 billion rubles by the end of the year.
During 2016, the number of hotels managed by international chains increased by 3,772 rooms. The largest new hotel this year in Moscow was the Accor complex, which opened three hotels on Kievskaya Square: Ibis, Adagio, Novotel with a total of 701 rooms. Of the main regional openings, it is worth highlighting two large Marriott hotels in Krasnodar and Voronezh
Despite the fact that the overwhelming majority of tourists are Russians (70-75%), the increase in the flow of foreign tourists is now also really noticeable, as is the fact that it is happening primarily due to the Asian market in general and Chinese tourists in particular . According to Rostourism estimates, the increase in flow due to this group of tourists alone will be about 40% by the end of 2016.
Thus, in 2016, occupancy rates in Moscow hotels reached record levels, exceeding 70% in certain segments. The increase in occupancy, in turn, caused an increase in hotel rates, increasing the average ADR by 8% over 9 months of 2016.
The most strikingly positive dynamics of the average cost of a room was manifested in the segment of high-quality expensive hotels, where the most significant increase in ADR to the level of 20-22 thousand rubles was recorded in the group of leaders in this segment (for example, such premium hotels as Hyatt, Baltschug Kempinski, Four Seasons ).
At the same time, most hotels in the luxury segment are cautious and do not increase ADR, keeping it at the level of 12-15 thousand rubles. Thus, in the segment of the most expensive hotels, ADR now averages about 18 thousand rubles.
In the “average” and “below average” segments, there was no increase in accommodation rates in 2016. There are still strong dumping sentiments in the hotel market, and therefore many hoteliers have not raised prices, regardless of the growth in demand.
During 2016, the number of hotels managed by international chains increased by 3,772 rooms, of which 1,511 belonged to the Moscow region. The largest new hotel this year in Moscow was the Accor complex, which opened three hotels on Kievskaya Square: Ibis, Adagio, Novotel with a total of 701 rooms. Of the main regional openings, it is worth highlighting two large hotels of the Marriott chain in Krasnodar and Voronezh.
For 2017, 11 hotels have been announced in Russia under the management of international brands with a total room capacity of 2,566, of which 3 hotels are to be opened in Moscow: Four Points By Sheraton at Vnukovo Airport, Radisson Blu at the Novion MFC on Olimpiysky Prospekt and Hyatt Regency VTB Arena Petrovsky Park as part of the complex development of VTB Dynamo on Leningradsky Prospekt.
Review prepared by CBRE
Commercial real estate, commercial real estate market analysis, retail real estate, office real estate.
Main conclusions
1. The volume of supply on the Moscow commercial real estate sales market has decreased significantly over the year, with a simultaneous significant reduction in prices. On the contrary, in the commercial real estate rental market, rates remained at the level of December 2016, with a less significant decrease in supply volume.
2. The volume of supply in both the rental and sales markets increased over the year only for retail premises. In the rental market, a decrease in rates was observed only for retail properties, and in the sales market, the decrease in prices for them was maximum in comparison with other types of real estate.
3. For individual segments in the rental and sales markets, the situation is as follows:
- The reduction in rates for retail properties was less significant compared to the reduction in prices and differed little between properties both within and outside the Garden Ring. For street retail properties, rates and prices outside the center decreased insignificantly, while in the center the rates and, especially, prices decreased much more significantly.
- With the exception of offices rented outside the center, the volume of supply of office properties has seriously decreased, however, while rates have increased moderately (more significantly in the center), prices have decreased (more significantly within the Garden Ring).
- The total area of industrial and warehouse premises on the rental market has decreased significantly, and rates have increased slightly. In the sales market, both supply volume and prices decreased at an average rate.
Main conclusion:
The lack of growth in the commercial real estate market, as before, is associated with an insufficient level of business activity in the construction of new facilities and extremely modest macroeconomic indicators. Despite the increase in investment in commercial real estate in Russia in 2017 by 27% compared to 2016, the lag in investment volume from the pre-crisis level of 2013 is more than twofold. In such conditions, the rental market feels more confident than the sales market.
The implementation of pent-up demand in the low office market due to low business activity is not yet capable of leading to an increase in prices even in the face of a reduction in supply. The situation on the rental market is somewhat better, but the increase in rates is insignificant. Consumer demand remains low both due to low incomes of the population and the predominance of the saving behavior model. These factors have a negative impact on the retail space market in general, and on the overstocking of the sales market in particular.
In 2018, the year of the presidential elections, investment activity is likely to be traditionally low. Given the lack of growth in investment and business activity, it can be assumed that there will be no noticeable improvement in the commercial real estate market during the year.
Research methodology
As objects for research of the commercial real estate sales market, commercial real estate objects put up for sale in open sources were selected - office, industrial and warehouse premises (PSP) and free commercial premises (PSN), as well as retail premises with a total area of more than 100 sq.m. In this case, for the purpose of analyzing price dynamics, the weighted average sales price is used, which is calculated as the ratio of the total cost of objects to the total area of these objects.
As objects for research of the commercial real estate rental market, commercial real estate objects offered in open sources were selected - retail, office, industrial and warehouse premises (PSP) with a total area of more than 50 sq.m. For the purpose of analyzing price dynamics, the average rental rate is used, which is calculated as the arithmetic average of the prices of all objects, as well as the total annual rent (GAP), which is calculated as the sum of the rent for the year.
Sale
Market as a whole
Supply volume
With the exception of the start of the year and a major surge in October, supply has remained relatively stable in 2017.
From December 2016 to December 2017, the supply volume decreased by 17% in quantity, and by 31% in total area and amounted to 1,331 objects with a total area of 1,738 thousand sq.m.
Price indicators
Prices gradually decreased throughout the year, with two price corrections occurring in February and August: The decrease in ruble prices over the year turned out to be comparable to the figures for 2016 and amounted to 10%, and in dollar prices – 20%. The weighted average price on the Moscow commercial real estate market in December 2017 decreased to 168,804 rubles/sq.m., or $2,865/sq.m.
The decline in prices, as in 2016, occurred in the context of a decrease in supply, which may indicate a lack of growth in demand under the influence of more than modest macroeconomic indicators.
The total volume of supply by value from 469 billion rubles. in December 2016 decreased by 38% and in December 2017 amounted to 293 billion rubles.
Comparative analysis by segments
Supply volume
In 2017, the supply volume for the total area of retail premises increased by 42%. In all other segments, on the contrary, the volume of supply decreased - by 45% for office premises, by 32% for industrial and warehouse premises, and by 9% for free-use premises.
The supply volume in December 2017 amounted to 355 retail properties with a total area of 319 thousand sq.m., 718 office properties with a total area of 843 thousand sq.m., 101 production and warehouse premises with a total area of 353 thousand sq.m. and 157 free-use premises with a total area of 223 thousand sq.m.
In the market structure by total area, the leading position in December 2017, as before, was occupied by office premises, the share of which on the market was 61%, second place with a share of 19% was held by industrial and warehouse premises, the share of free-use premises was 11%, and the share of retail premises is 9%. The share of office premises over the year decreased by 3 percentage points, the share of retail premises increased by 2 percentage points, the share of free-use premises decreased by 7 percentage points, and the share of industrial and warehouse premises increased by 8 percentage points.
Judging by the decrease in the average area of exhibited office and industrial warehouse facilities by 23 and 27%, respectively, large premises are gradually being washed out of the market. On the contrary, for retail properties and free-use premises, the average area of which increased by 22 and 13% over the year, demand shifted towards smaller facilities.
Price indicators
A decrease in prices was observed in all segments and amounted to: 16% for retail facilities, 13% for office premises, 11% for industrial and warehouse premises and 1% for free-use premises.
The volume of supply in value terms for retail facilities increased by 20%, for office premises decreased by 52%, for industrial and warehouse premises - by 39%, and for free-use premises - by 10%.
The minimal decrease in prices for vacant premises compared to other types of real estate can be explained by the imbalance that arose in price dynamics in 2016, when the decrease in prices for such objects was maximum. Therefore, most likely, in this case, we are talking only about a price correction, but otherwise the demand for different types of commercial real estate decreased on a comparable scale. The maximum reduction in prices in 2017 was noted for retail premises against the backdrop of a significant increase in their supply volume. This may be due to overstocking of the market due to low consumer demand in conditions of low incomes and the spread of the savings behavior model of the population.
Retail real estate
Supply volume
In December 2017, the total area of supply of retail real estate in the center increased by 19% compared to December 2016, and outside the center - by 44%.
In total, in December 2017, 38 objects were put up for sale within the Garden Ring and 317 objects outside it with a total area of 20 and 299 thousand. sq.m respectively.
The total supply of retail premises in December amounted to 355 objects with a total area of 319 thousand. sq. m with an average facility area of 900 sq. m.
12
Price indicators
Prices for retail properties both in the center and outside from December 2016 to December 2017 decreased by 14% and amounted, respectively, to 622,400 rubles/sq.m. and 194,422 rubles/sq.m. The price for all retail premises in 2017 decreased by 16% to RUB 220,759/sq.m.
The value of the supply of retail premises over 12 months in the center increased by 3%, and in the periphery - by 24%.
Street-retail
The volume of supply of street-retail format objects in 2017 in terms of total area increased by 51% and amounted to 34 thousand sq.m. In the center, the total area of exhibited objects increased by 114% to 6 thousand sq.m., and outside it - by 41% and amounted to 27 thousand sq.m.
The weighted average price for the city as a whole decreased by 8% and amounted to 382,352 rubles/sq.m./year. In the center, prices decreased by 33% to 732,913 rubles/sq.m./year, and outside the center - by 4% to 301,778 rubles/sq.m./year.
Compared to 2016, the situation in price dynamics has changed, and if in 2016 the maximum reduction in prices was observed for premises outside the center, then in 2017 the maximum reduction in prices was observed for objects already in the center. This situation indicates the instability of market development.
Office real estate
Supply volume
The volume of office supply in the center decreased by 53% in total area and by 49% in number, while outside the center it decreased by 44% in total area and increased by 23% in number.
In total, in December 2017, 102 objects with a total area of 87 thousand sq.m. were exhibited. within the Garden Ring and 616 objects outside it with a total area of 756 thousand sq.m. The total supply of office space amounted to 718 objects with a total area of 843 thousand sq.m. with an average area of one object of 1,174 sq.m.
Price indicators
Over the 12 months from December 2016 to December 2017, the weighted average price for office properties in the center decreased by 24% to RUB 327,424/sq.m, and outside the Garden Ring it decreased by 8% to RUB 168,994/sq.m. . The weighted average price for all office premises in 2017 decreased by 13% and amounted to RUB 185,378/sq.m.
Judging by the significant reduction in prices for office properties in the center in 2017, the demand for them, after growth in 2016, has decreased significantly.
The decrease in supply in value terms was 64% to 28 billion rubles within the Garden Ring and 48% to 127 billion rubles outside it, and in general the cost of office properties in 2017 decreased by 52% to 156 billion rubles.
