2012 Global Market report - NAI Global

Moscow, Russia
St. Petersburg, Russia
Contact
NAI Becar
+7 495 787 42 97
Country Data
Area (Sq Mi)
GDP Growth
GDP 2011 (US$ B)
GDP/Capita (US$)
Inflation Rate
Unemployment Rate
Interest Rate
Population (Millions)
6,601,668
4.3%
$1,678.11
$11,996.17
7.4%
7.3%
8.3%
139.887
Among other BRIC emerging markets, Russia has been
impacted the most by the global economic crisis. Nevertheless,
the economy, still very dependent on raw materials and oil
prices, has also seen a relatively fast recovery as Russian
GDP grew by 4.8% in 2011. Moscow, as the capital and
largest city of the country, has experienced the fastest
recovery within Russia over the past two years.
Office rents are up, now reaching $1,200/SM for prime
properties, and the overall vacancy rate at about 13% is
significantly lower than in 2009 and 2010. Russian
corporate occupiers are leading the way, looking for larger
premises as they are expending and hiring new staff. Good
news from the employment market, combined with a
growing economy, are reasons to be optimistic for 2012
which should see a stronger revival in demand for office
space in both Class A and Class B submarkets. One
exception to this trend is the relatively new neighborhood of
Moscow City, which has never recovered from the downturn
of 2008 and 2009.
Large office towers that were expected to bring a total of
more than 1.5 million SM to Moscow’s prime market in just
three years, have see very high vacancy rates at over 20%.
There is little hope for improvement due to the lack of
infrastructures and good access. Nevertheless there are
good opportunities to be found, with high quality Class A
office rental rates sometimes below 40% of what they are
in other parts of the center, negotiated as one to three years
subleases. The prime office market is doing generally better
outside this neighborhood, with vacancy falling and rents
steadily rising.
Prime retail rents rose by over 30% in the past two years,
stabilized prime shopping centers and key street retail
locations have vacancy levels below 2% and rents are
increasing. Secondary shopping centers have not recovered
yet from the serious drop in both rentals and occupancy
level. Turnover by Russian retailers improved significantly
over the past 24 months and retail chains are expanding
again in Moscow.
Prime office and retail yields have been stable at around
10% with very few transactions. Prime cash flow properties
are rare or inadequately priced. Russian investors are active
in the secondary office market, acquiring properties $5 to
$30 million in size, at yields similar to the primary market.
This submarket is expected to see yield compressions over
the next year.
Contact
NAI Becar
+7 812 490 70 01
Country Data
Area (Sq Mi)
GDP Growth
GDP 2011 (US$ B)
GDP/Capita (US$)
Inflation Rate
Unemployment Rate
Interest Rate
Population (Millions)
6,601,668
4.3%
$1,678.11
$11,996.17
7.4%
7.3%
8.3%
139.887
The second largest city in Russia, St. Petersburg is located
at the crossroads of Finland and the Baltic countries, and
historically has benefited from the positive influence of the
dynamic economy in this region. Large international and
Russian companies generally decide to be headquartered
in Moscow so St. Petersburg has been less impacted by the
global economic crisis than the rival capital city.
Office rents have recovered slowly but steadily since 2010
where they used to be much lower than in Moscow, but are
now about equal. Rental rates reached $900/SM for the
best office buildings located in the heart of the historical city
around Nevsky Prospect. At this level, the demand, from
mainly foreign corporate occupiers, has yet to return to
normal levels and the vacancy remains high at over 30% in
some prime office buildings. Meanwhile the Class B and
Class C office markets have seen relatively higher demand
and lower vacancies.
Retail rents are now reaching $3500/SM for prime properties,
almost back to pre-crisis levels. These properties are fully
occupied while the secondary market, still oversupplied, has
not fully recovered and continues to see higher vacancies
at about 20%.
The industrial market is still under-supplied but rents
withstood the impact of the crisis better than other sectors.
Prime warehouse rental rates were stable at $170/SM per
year during 2010 and 2011 and remain at a higher level
than in Moscow.
The hospitality market, which had been strongly hit in 2009
with dropping occupancy rates, continues its recovery that
began in 2010. Hospitality remains attractive to many
investors due to the strong tourism potential of the region
and lack of European standard two and three star hotels in
the city.
Investment yields were stable in 2011, and at the current
10% to 11% for Class B office, are at the same level as in
Moscow. There is no Class A office investment market
currently in St Petersburg due to high vacancies, the large
amount of potential deals starting at over $40 million and
inadequate pricing. Many owners are still trying to lease or
sell prime properties at pre-crisis prices, resulting in a large
gap between the offer and the demand. This imbalance is
expected to progressively disappear over the next two years.
Moscow At A Glance
RENT/M 2 /YR
US$ RENT/SF/YR
low High low High Vacancy
cItY center offIce
New Construction (AAA)
$ 600.00 $ 1,100.00 $ 55.74 $ 102.18 15.00%
Class A (Prime)
$ 700.00 $ 1,200.00 $ 65.03 $ 111.47 7.00%
Class B (Secondary)
suburban offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
IndustrIal
$
$
$
$
500.00
400.00
500.00
250.00
$
$
$
$
900.00
700.00
800.00
600.00
$ 46.45
$ 37.16
$ 46.45
$ 23.22
$ 83.60 10.00%
$ 65.03 20.00%
$ 74.32 20.00%
$ 55.74 15.00%
Bulk Warehouse
Manufacturing
$
$
90.00
100.00
$
$
115.00
120.00
$
$
8.36
9.29
$ 10.68 25.00%
$ 11.15 15.00%
High Tech/R&D
retaIl
$ 120.00 $ 135.00 $ 11.15 $ 12.54 15.00%
Downtown
$ 1,500.00 $ 5,000.00 $ 55.74 $ 102.18 10.00%
Neighborhood Service Centers $ 800.00 $ 3,500.00 $ 65.03 $ 111.47 5.00%
Community Power Center (Big Box) $ 500.00 $ 3,500.00 $ 46.45 $ 83.60 15.00%
Regional Shopping Centers/Malls
Solus Food Stores
$
$
500.00
600.00
$ 4,000.00
$ 2,000.00
$ 46.45
$ 55.74
$ 83.60
$ 102.18
5.00%
5.00%
deVeloPment land low/m 2 High/m 2 low/acre High/acre
Office in CBD
Land in Office Parks
Land in Industrial Parks
Office/Industrial Land - Non-park
Retail/Commercial Land
Residential
$ 1,150.00 $ 1,850.00 $ 4,653,884.86 $ 7,486,684.34
$ 450.00 $ 1,300.00 $ 1,821,085.38 $ 5,260,913.32
$ 1,550.00 $ 600.00 $ 6,272,627.42 $ 2,428,113.84
$ 150.00 $ 450.00 $ 607,028.46 $ 1,821,085.38
$ 150.00 $ 2,200.00 $ 607,028.46 $ 8,903,084.08
$ 400.00 $ 2,500.00 $ 1,618,742.56 $10,117,141.00
St. Petersburg At A Glance
RENT/M 2 /YR
US$ RENT/SF/YR
low High low High Vacancy
cItY center offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
suburban offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
IndustrIal
Bulk Warehouse
$ 380.00
$ 400.00
$ 300.00
$ 320.00
$ 320.00
$ 230.00
$ 100.00
$ 540.00
$ 900.00
$ 530.00
$ 500.00
$ 480.00
$ 400.00
$ 120.00
$
$
$
$
$
$
$
35.30
37.16
27.87
29.73
29.73
21.37
9.29
$ 50.17
$ 83.61
$ 49.24
$ 46.45
$ 44.59
$ 37.16
$ 11.15
20.00%
12.00%
15.00%
N/A
20.00%
25.00%
10.00%
Manufacturing
$ 82.00 $ 111.00 $ 7.62 $ 10.31 25.00%
High Tech/R&D
retaIl
City Center
Retail Units in Parks
Community Power Center (Big Box)
Regional Shopping Centers/Malls
Solus Food Stores
$ 110.00
$ 800.00
$ 500.00
$ 240.00
$ 320.00
$ 400.00
$ 150.00
$ 3,500.00
$ 900.00
$ 480.00
$ 1,400.00
$ 1,000.00
$
$
$
$
$
$
10.22
74.32
46.45
22.30
29.73
37.16
$ 13.94
$ 325.16
$ 83.61
$ 44.59
$ 130.06
$ 92.90
N/A
N/A
N/A
N/A
N/A
N/A
deVeloPment land low/m 2 High/m 2 low/acre High/acre
Office in CBD
Land in Office Parks
Land in Industrial Parks
Office/Industrial Land - Non-park
Retail/Commercial Land
Residential
$ 650.00 $ 1,350.00 $ 2,630,460.74 $ 5,463,264.60
$ 57.00 $ 200.00 $ 230,671.17 $ 809,372.53
$ 34.00 $ 115.00 $ 137,593.33 $ 465,389.21
$ 57.00 $ 230.00 $ 230,671.17 $ 930,778.41
$ 115.00 $ 570.00 $ 465,389.21 $ 2,306,711.72
$ 570.00 $ 1,900.00 $ 2,306,711.72 $ 7,689,039.07
2012 Global Market Report n www.naiglobal.com 58