Professional Documents
Culture Documents
Moscow,
commercial real estate
June 2008
CONTENTS
ECONOMY .............................................................................................................................................. 3
GDP and economic growth ............................................................................................................................ 3
GDP structure................................................................................................................................................ 4
Personal income............................................................................................................................................ 4
Retail turnover ............................................................................................................................................... 4
Structure of consumption ............................................................................................................................... 4
Inflation ......................................................................................................................................................... 5
Investment climate in Russia ......................................................................................................................... 5
Foreign investments ...................................................................................................................................... 6
Rate of regions investment appeal ................................................................................................................. 8
State regulation of investment activity .......................................................................................................... 11
Investment in construction ........................................................................................................................... 12
Investments in Russian commercial real estate............................................................................................ 12
RETAIL SECTOR.................................................................................................................................. 15
Retail real estate market supply ................................................................................................................... 15
Retail real estate market demand ................................................................................................................ 16
Rental rates................................................................................................................................................. 17
OFFICE SECTOR.................................................................................................................................. 20
Office real estate market supply................................................................................................................... 20
Office real estate market demand ................................................................................................................ 21
Rental rates................................................................................................................................................. 22
WAREHOUSE SECTOR ....................................................................................................................... 26
Warehouse real estate market supply .......................................................................................................... 26
Warehouse real estate market demand........................................................................................................ 28
Rental rates................................................................................................................................................. 30
ECONOMY
During more than eight years the Russian economy was one of most quickly growing in the world. And though
this growth in many ways was supported by the high prices for oil, economic growth of the country nevertheless
impresses. In 1999 GDP of Russia could be compared with GDP of Denmark. Now the size of GDP of Russia
exceeds size of GDP of Denmark, Finland and Sweden all put together. According to the results of 2007 Russia
has taken the 7th place in the world by the size of GDP in view of purchasing capacity parity. Fast economic
growth has led to substantial growth of consumption. As a result Russia with its population of 143 million
person, a stable economic situation and decreasing political risks has drawn attention of investors. Even more
important the fact that the Russian economy possesses huge potential of growth.
1800
1600
1400
1200
1000
800
600
400
200
0
2003 2004 2005 2006 2007 F 2008
th
On March, 11 , 2008 Standard & Poors international rating agency has raised the forecast of independent credit
rating of the Russian Federation under long-term obligations in a foreign currency from "stable" up to "positive".
Annual average
2003 2004 2005 2006 2007 growth rate,
2003-2007
Retail turnover
Retail turnover in Russia in 2007 has made 448, 24 billion $, that is on 15, 2% more than in 2006.
600
500
400
300
200
100
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 F
In January-March, 2008 the retail turnover growth has quickened. In comparison with January-March, 2007 the
growth has made 16, 7% (in January-March, 2007 - 14, 6%). Trade growth in January-March was supported
both by the growth of personal income and by bank consumer crediting (though its terms tightened noticeably).
Structure of consumption
The increase of incomes is accompanied by changes in structure of consumption: the population increases
expenses on the industrial goods, reducing food expenses more and more. In structure of food consumption
poor quality products are gradually displaced by products with the bigger added value and imported products. In
manufacturing industry there are good prospects of growth (relative to severization of requirements to quality of
life) for cars, furniture, home appliances and finishing materials manufacturers. Also severization of
requirements to quality of life will increase the demand in civil work and the real estate.
Changes in structure of consumption in Russia
Inflation
In IQ 2008 inflation at the consumer market has made 4, 8%, that is on 1, 4% more then in IQ 2007. Food prices
growth makes the significant contribution to inflation. Thus the influence of growth of prices on socially
significant goods on inflation has decreased twice.
14
2007 2008
12
10
0
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Ja
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Trying to suppress the rates of prices growth in economy, the Bank of Russia since February, 4th, 2008 has
raised the rate of refinancing on 0,25% - up to 10,25% annual. Before this the rate of refinancing gradually
decreased during last 10 years.
400
350
300
250
200
150
100
50
0
2003 2004 2005 2006 2007 2008 F
In IQ 2008, by estimate, 1295, 9 bln. rubles of capital investments were drawn, volume of investments in IQ
2008 has increased for 20, 2% in comparison with the relevant period of the previous year
Saint-
Petersburg
Moscow
4%
11%
Russian
Federation
85%
Foreign investments
According Ernst & Young research leaders of most attractive for investments regions of the world rating
changed. If two years ago the majority of top-managers of the international organizations wished to invest in the
USA and the Western Europe, now they prefer developing countries. Investment appeal of Russia has grown
from 5 up to 21% for two years.
Ernst & Young analyzes investment appeal of the countries and regions on the basis of interview. In 2008 834
top-managers have taken part in this survey.
China became the leader of the survey – 47% of respondents called it attractive to investments. The Western
Europe took the 2nd place with 33%, the USA and Canada are on the 3rd place with 21%. Russia also gathered
21%.
Investment potential leaders
II
III
CHINA
WESTERN USA
EUROPE CANADA
RUSSIA
According to Ernst & Young, Russia has taken the 4th place among all European countries by number of the
workplaces created by foreign investors and the 8th - by number of new projects.
Besides, 12% of respondents called Russia as a possible place for the investment project. By this parameter
the country has taken the 3rd place after Poland and Germany.
140
120
100
80
60
40
20
0
2003 2004 2005 2006 2007
Share of Moscow in total amount of foreign investments in Russian economy, 2007
Russian
Federation
42%
Moscow
58%
According to “Expert-RА” rate agency Moscow has shown the best parameters at once by three kinds of private
risks: economic, financial and social. Tomsk region has the optimum position by legislative risk, Lipetsk region -
by criminal risk, Ingushetia - by ecological risk, and St.-Petersburg - by administrative risk.
Management risk
Stability and
Qualit Stability
According to the rating three first places with the minimal integrated investment risk in the federal districts
occupied:
• In Southern federal district - Krasnodar territory, Rostov region and Stavropol territory.
• In Ural federal district - Yamalo-Nenets and Khanty-Mansiisk autonomous districts and Tyumen region
• In Far Eastern federal district – Khabarovsk and Primorie territory and Republic of Sakha (Yakutia)
Regions with investment potential level above regional average for last 12 years
Total potential
Total potential average
Regions average size, 96/95-
rank, 96/95-2007/06
2007/06, %
1 Moscow 16,147
2 Saint-Petersburg 5,457
3 Moscow region 4,079
4 Ekaterinburg region 2,802
5 Khanty-Mansiisk autonomous district-Yugra 2,467
6 Krasnoyarsk territory 2,355
7 Samara region 2,160
8 Krasnodar territory 2,112
9 Kemerovo region 2,104
10 Nizhniy Novgorod region 2,099
11 Perm territory 2,091
12 Republic of Tatarstan 2,029
13 Rostov region 1,907
14 Republic of Bashkortostan 1,876
15 Chelyabinsk region 1,866
16 Irkutsk region 1,633
17 Republic of Sakha (Yakutia) 1,484
18 Yamalo-Nenets autonomous district 1,405
19 Novosibirsk region 1,389
20 Belgorod region 1,280
21 Saratov region 1,217
Source: EXPERT RA rate agency
First ten regions by the rank of investment potential didn’t change, though here were some rearrangements. Still
the list is headed by Moscow, St.-Petersburg and the Moscow region. The Yekaterinburg region has overtaken
Khanty-Mansiisk autonomous district and has taken the 4th place by investment potential. As a result of
unification with other regions Krasnoyarsk territory has taken the 7th place, having bypassed united Perm
territory that made the same jump last year.
The greatest progress in a rank of cumulative investment potential was achieved by Saint-Petersburg (+ 7
places) and Tyumen regions (4 places). The Aginsk Buryat Autonomous District, the Vladimir and Orenburg
regions, Republic of Altai, Dagestan, Ingushetia and Khabarovsk territory have added by three places each in a
rating. To the contrary, the rank of Omsk region has dropped on six places, Kaliningrad region - on five places.
Calculation of an average level of regions investment risk for all 12 years of carrying out of rating researches
has allowed revealing the most attractive and stabling regions by an investment climate. Only 27 regions from
85 have lowered (below Russian average level) index of integrated investment risk. They include nine regions
from CFD, eight – from PFD, five – from NWFD, four – from Souhern FD and one – from S FD (the Tomsk
region). Among the regions with least risks by results of all ratings there are no any regions from Ural and Far
Eastern federal districts.
Regions with the level of investment risk below Russian average level for last 12 years
Average index of integral risk
Rank of average risk Regions
96/95-2007/06
1 Moscow 0,785
2 Belgorod region 0,816
3 Saint-Petersburg 0,818
4 Novgorod region 0,819
5 Republic of Tatarstan 0,819
6 Kaliningrad region 0,865
7 Yaroslavl region 0,866
8 Moscow region 0,869
9 Nizhniy Novgorod region 0,869
10 Krasnodar territory 0,896
11 Lipetsk region 0,912
12 Republic of Bashkortostan 0,914
13 Rostov region 0,932
14 Saratov region 0,937
15 Vologda region 0,938
16 Oryol region 0,951
17 Chuvash Republic 0,959
18 Tver region 0,961
19 Saint-Petersburg region 0,962
20 Tomsk region 0,965
21 Republic of Mordovia 0,970
22 Kaluga region 0,972
23 Perm territory 0,975
24 Stavropol territory 0,981
25 Volgograd region 0,987
26 Samara region 0,988
27 Vladimir region 0,995
Source: EXPERT RA rate agency
To the contrary, among 21 regions that have an average rank of potential above average regional, four of six
regions are from UFD. FEFD is presented by Republic of Sakha (Yakutia). Besides, in this list there are six
regions from PFD, four – from SFD, three – from CFD, two – from Souhern FD and St.-Petersburg represents
NWFD.
Only 11 regions of Russia possess simultaneously stable, that is having the greatest share in cumulative
investment potential, and qualitative (risk below average Russian risk) investment climate. It is Moscow, St.-
Petersburg, the Moscow, Samara, Nizhniy Novgorod, Rostov, Belgorod and Saratov regions, Krasnodar
territory, Tatarstan and Bashkortostan.
• The size of investment risk shows probability of loss of investments and the income from them.
• The integrated risk is combined from seven kinds of risk (excluding political). The rank of region by
each kind of risk was defined on value of investment risk index - relative deviation from average
Russian level which is taken as a unit.
• The investment potential considers the basic macroeconomic characteristics, such as a saturation of
territory by manufacture factors, consumer demand and other parameters.
• The Cumulative investment potential of region in ratings is combined from eight private potentials,
each of which, in turn, is characterized by the whole group of parameters. The rank of each region by
each kind of potential depends on a quantitative estimation of size of its potential as shares (in
percentage) in total potential of all Russian regions.
The general parameter of potential or risk is rated as the weighed sum of private kinds of potential or risk.
Parameters are summarized, everyone with their weight factor. The final rank of region is rated on size of the
weighed sum of private parameters. As a result besides a rank each region is characterized by a quantitative
estimation: how big is its potential as object of investments and how big is the risk of investment in comparison
with Russian average.
The estimation of weights of the contribution of each component in cumulative potential or integrated risk has
been received as a result of the interview among experts from the Russian and foreign investment and
consulting companies by the specially developed questionnaire.
In conditions of "universality" of the most popular legislative tools of support the great value is got with
normative innovations. Among them it is necessary to mention the appearance of such institutional structures,
as Funds of region development. These funds are called to become the special tool of the state stimulation of
the investment and innovative activity that will bring along development and stabilization of economy of region in
key directions. Now activity of majority of funds is directed to development of an engineering and social
infrastructure that is rather important for creation of a favorable investment climate in region.
Since 2006 alongside with funds of regional development funds of municipal development began to be formed.
The main aim of their creation is alignment of a level of social and economic development of municipal
formations. Financial assets from these funds in the form of grants are given to local budgets for participatory
financing investment projects (programs) of development of a social and engineering infrastructure of municipal
formations.
Number of regions
Forms of support using this form as
of 01.10.2007
Partial repayment of interests on commercial credits given for realization of investment projects from the
70
regional budget
Presence of guarantees (fund) and protection of investments 67
Tax privilege 66
Investment tax credit 55
Partial compensation of charges on leasing payments under contracts of financial rent (leasing) regarding
54
payment of bank interest for using extra means for leasing object purchase
State financial guarantees given by federation subject for investment projects realization 48
Investments in development of industrial base of organizations carrying out construction activity, $ bln
20,00
18,00
16,00
14,00
12,00
10,00
8,00
6,00
4,00
2,00
0,00
2003 2004 2005 2006 2007 2008 F
Investments into Russian commercial real estate in 2007 have made 15 billion dollars, or 18% from all foreign
investments into economy of the Russian Federation. Growth towards volume of investments comparing with
2006 has made about 270%.
The total amount of direct investments into the commercial real estate in the world in 2007 has reached 759
billion dollars, having increased on comparison with 2006 on 8%.
Warehouse real
estate
Hotel real estate 8%
11%
Shopping real
Office real estate
estate 57%
24%
One of trends of investment transactions in the commercial real estate is integration of projects. If 5 years ago
average size of the project was about 10 thousand square meters, now interest displaced aside larger objects
with total area from 30 000 thousand square meters and more
The level of trust to Russia continues to grow steadily. The high-yielding real estate market attracts even the
most conservative investors, such as the western pension funds. They discuss opportunities for investment not
only in Moscow, but also in regions.
So, Canadian SITQ invests nearby 200 million dollars in development projects on territories in Russia and the
CIS. VTB group will act as the partner of the company in Russia. SITQ portfolio of real estate includes 114
objects with a total area of 3,3 million square meters in the USA, France, Great Britain, Germany. Cost of
actives under control of the company makes 10,3 billion canadian dollars. And also IMG Partners creates fund
of investments into the real estate of Russia and the CIS. Means of fund at a rate of 450 million euro are
planned to direct in development projects. Presumably the share of the European Reconstruction and
Development Bank will reach 75 million euro - 20% from total amount of fund.
Region Region
Novosibirsk region
Region Region
Insignificant potential – moderate risk (3B2) Low potential – extreme risk (3D)
Republic of Marij El
Republic of Mordovia
Chuvash Republic
Kirov region
Republic of Altai
Republic of Buryatia
Republic of Khakassia
Krasnoyarsk territory
Voronezh region
Murmansk region
Republic of Dagestan
Udmurtian Republic
Ulyanovsk region
Chita region
Ivanovo region
Republic of Karelia
Astrakhan region
Sakhalin region
Kurgan region
Karachayevo-Cherkessian Republic
Kabardino-Balkarian Republic
Retail floor space commission rates compared to previous year, Moscow region, thousand sq.m.
1600 200%
181%
180%
1400
150%
148% 157% 160%
1200
140%
1000
120%
800 100%
85% 80%
600
60% 60%
400
40%
200
20%
0 0%
2003 2004 2005 2006 2007 2008 F
Source: ASTERA
As for retail real estate market of St. Petersburg the volume of retail areas supply amounts to 3,4 mln. sq.m.
During 1st quarter 2008 110 900 sq.m. of total retail areas were commissioned, available for leasing – 79 000 m²
Retail floor space commission rates compared to previous year, St. Petersburg region, thousand sq.m.
1400 600%
533%
1200
500%
1000
400%
800
300% 300%
600
200% 200%
400
Source: ASTERA
Retail real estate market structure, St. Petersburg, end of 2007
Source: ASTERA
Thus we can mark the following features of retail real estate market supply:
• Total supply of retail premises in Moscow comprise 6.47 million sq. m., GLA over 3.6 million sq. m.
• In the retail real estate market of St. Petersburg there are about 130 retail facilities with total area of
3.36 mln.sq.m., leasable area of 2 mln.sq.m.
• Shopping centers with total area of over 50,000 sq. m. comprise over 50% of total retail space.
• A couple of years ago the market started to attract international institutional investors while
previously it was totally dominated by local developers and investors.
• Lack of variety in retail formats: retail & entertainment centres traditionally dominate
• Lack of suitable land plots
• There is a distinctive tendency of project commissioning delay.
Food
5%
Bank s
9%
16
Also there is high demand for retail premises with leasable area of less than 200 sq.m. (45% of requests), and
from 200 to 500 sq.m. (26% of requests).
7%
less than 200 sq.m.
22%
45% 200 sq.m. - 500 sq.m.
In Moscow region demand for purchase and rent is the highest for the premises located in the center of Moscow,
inside the Sadovoe Ring.
Demand by location**
12%
52%
36%
In 2008 vacancy rate remained low and did not exceed 2%. It stands below 10% in outdated centers with low
customer flows.
Besides, there is unsatisfied demand for new format shopping centers with lower rental rates.
Rental rates
Lack of high quality retail facilities and competition between retailers determines the constant increase of rental
rates. Rental rates grew by average of 10% in 2007
Shopping center rent level depends not only on shopping center format but also on location and rented area, and
also varies greatly according to tenant profile.
17
Rental rates range in shopping centers, Moscow region
Shopping centre rental rates depending on location, Moscow region, $/sq.m. per year, 2008
16000
14000
12000
10000
min
8000
max
6000
4000
2000
0
Central South-western Western North-western North-eastern
Source: ASTERA
Shopping centre rental rates depending on location, St. Peterburg region, $/sq.m. per year, 2008
8 000
7 000
6 000
5 000
min
4 000
max
3 000
2 000
1 000
0
Historical center Central territories Main transport Suburban city
of the city highways and districts
metropolitan
stations
Source: ASTERA
18
The 2007 Global Retail Development Index™
In 2007 Russia ranked 2 in authoritative rating of Global Retail Development Index (GRDI) of A.T. Kearney
company. It is a very good index of investment expectations in retail real estate market.
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2003 2004 2005 2006 2007
Source: ASTERA
Thus, we can mark the following trends in Russian retail realestate market development:
• Yields rate in retail segment of realestate market amounts to 8.5-9%. Due to market saturation there is a
tendency of yields rate decreasing. Despite this fact, yields rate in Moscow region will be of high level for
quite a long time compared to European market. Thus, within the next few years the high activity of
foreign and Russian investors in the realestate market will remain the same.
• Very low vacancy rate: 2% in high quality retail premises, below 10% in outdated centers with low
customer flows.
• Shopping centers are becoming larger, more sophisticated and of higher quality
• Rental rates grew by average of 10% in 2007. In 2008 further increase in rental rates is expected.
19
As for regions of Russia we can mark the following:
OFFICE SECTOR
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2003 2004 2005 2006 2007 2088 F
Last several years St.Petersburg Office Real Estate Market is stably developing as in relation of volume increase,
so in relation of increase of qualitative indicators. Factors, which influence its development, are: general
economical, retailment and goods turnover growth, removal of large federal companies to the city and,
accordingly, investment inflow of capital, growth of industrial production, gross regional product.
Office Real Estate Market in business-centers differs by stable regular development, gradual decrease of dole of
non qualitative business-centers in total structure of supply and intensive development of zones of the most
intensive business activity: Central’niy, Petrogradskiy, Primorskiy, Moscovskiy and Vasileostrovskiy districts of
St.Petersburg.
20
Total Supply and New Construction, St. Petersburg region, thousand sq.m.
1200
1000
800
600
400
200
0
2003 2004 2005 2006 2007 2088 F
By the result of 2007 total supply of high quality office premises amounts to 600 thousands sq.m. The total
amount of business-centers of different classes makes up near 314.
1st quarter of 2008 was characterized by the implementation of big amount of business-centers class “B”, which
made up 71% from total volume over the city (10 business-centers). Business-centers class “A” made up 29% (4
business-centers).
19% 16%
500-1,000 s q.m .
200-500 sq.m .
21
Average vacancy rates, Moscow region, %
0
2003 2004 2005 2006 2007
Class A Class B
Source: ASTERA
0
2003 2004 2005 2006 2007
Class A Class B
Source: ASTERA
Rental rates
In 2008 compared to the previous year we can observe an increase in rental rates. In 2008 rental rates of 20%
is expected.
st
In Moscow region in the 1 quarter of 2008 the average rate of operating expenses for class A stands at 100-150
$/sq.m./year, for class B+ 80-100 $/sq.m./year, for class B- 70-85 $/sq.m./year. The highest leasing rates are
observed in business-centers of high class, located in the historical center of the city. There is a tendency of
removal from evaluation of leasing rate in USD in all classes of office real estate market.
22
Rental rates for office premises depending on class,
$/sq m/year
1600
1400
1200
1000
800
600
400
200
0
А В+ В-
min max
Source: ASTERA
Average rental rates, $/sq.m./year (including operating expenses, net of VAT), Moscow region
1600
1400
1200
1000
800
600
400
200
0
2003 2004 2005 2006 2007 2008 F
Class A Class B
Source: ASTERA
Rental rates for office premises in business centers, $/sq.m./year (including operating expenses and
VAT), St. Petersburg region
Source: ASTERA
23
Rental rates for office premises depending on class, , $/sq.m./year, St. Petersburg region
1200
1000
800
600
400
200
0
A B
min max
Source: ASTERA
Average rental rates, $/sq.m./year (including operating expenses, net of VAT), St. Petersburg region
900
800
700
600
500
400
300
200
100
0
2003 2004 2005 2006 2007 2008 F
Class A Class B
Source: ASTERA
Dynamics of regional office realestate market, 2007-2009, thous. sq.m.
Source: ASTERA
*market potential calculated according to 500 m2 per 1,000 citizens
24
The dynamics of Yields Rate, Office Sector, 2003-2007
16,00%
14,00%
12,00%
10,00%
8,00%
6,00%
4,00%
2,00%
0,00%
2003 2004 2005 2006 2007
Source: ASTERA
Thus, we can mark the following features and trends in office real estate market of Moscow and St.
Petersburg:
• In Moscow region total office space in first half of 2008 amounts to 7.5 million sq.m. About 1 million sq.m.
added to Moscow region stock in 2007 (A class-22%, B class – 78%).
• Decentralization of the office real estate market. One of the reason for high demand for office premises
located near the Third Transport Ring Road or the MKAD is lower rental rates and also higher motorway
traffic capacity compared to the Central district.
• Developing of industrial areas in Moscow determined by shortage of areas for new construction.
Factories are transferred out of Moscow and on the vacant areas new high-quality complexes with
modern maintenance engineering systems and infrastructure are constructed.
• In St. Petersburg total supply of high quality office space reached 600 th.sq.m. by beginning of 2008. B
class offices dominate the market of St. Petersburg and comprise 47% of total supply.
• Enlargement of scale of business centers and mixed-use complexes construction, mixed-use complexes
prevail as developers aim at risks diversification.
• Increasing demand for large rental areas required by foreign and Russian companies as a result of
business development, expansion and further sublease.
• Along with large objects construction and high demand for large office premises we can observe the
shortage of small areas especially in middle price segment.
• Commission delay of office projects.
• Increasing rental rates for high quality office premises, we expect growth rate to remain the same (20% in
2008).
• In connection with weakening of American currency there are changes in lease and purchase terms:
either dollar exchange rate for rental rates and for sale prices is fixed or all the accounts are made in
rubles or Euro.
• Growing competition between federal and regional developers.
• Demand in regions is mainly driven by representatives of international or federal companies as few local
players are ready to pay premium for class A offices.
• Ekaterinburg and Nizhniy Novgorod are demonstrating the highest potential for office market
development.
• Within the next few years market of seller will guarantee high profitability in sphere of Office real estate.
25
• In view of high growth rate of supply demand for high quality office premises exceeds the supply greatly;
vacancy rates in business centers are still very low. Interest to office segment of the city from Russian
and foreign investors becomes stronger.
WAREHOUSE SECTOR
The total area of warehouse premises commissioned in 2007 in Russia amounted to 1.3 mln sq.m., including 900
thousands in Moscow region.
4000
3500
3000
2500
2000
1500
1000
500
0
2004 2005 2006 2007 2008F
Source: ASTERA
At the end of 2007 the total area of warehouse facilities to be commissioned in 2008 amounted to 1,400,000
sq.m. The major part of all high-quality warehouse facilities due to be constructed in 2008 will be located in the
South (35%), North(30%), South-West (15%), North-West (10%), East (5%), South-East (5%).
26
Structure of Commission of Warehouse Premises in Moscow
Region in Directions
S-W
15%
North
S-E 30%
5%
N-W
10%
East
5%
South
35%
Source: ASTERA
In 2007 in St. Petersburg and its region more than 400 000 sq.m. of high quality warehouse premises were
commissioned, including 100 000 sq.m. for personal needs.
The main sources of A and В class warehouse premises are new warehouse objects, located in the border of St.
Petersburg with Leningrad region, in the industrial zones and also zones close to CRR.
Existing and Future Stock of class A and B Premises, th.sq.m., St. Petersburg region
1600
1400
1200
1000
800
600
400
200
Source: ASTERA
The greatest part of St. Petersburg warehouses is still of C and D class, their part is 56 and 27 percent,
respectively. Logistic complexes and warehouses for lease have 35 percent part for each one. The part of
warehouse premises for own needs of companies implemented in 2007 is 30 percent. During two next years we
may forecast the increase of logistic complexes and warehouses for lease part, while the part of warehouses for
own needs decreases.
27
Structure of St. Petersburg Warehouse Real Estate Market by function
30%
35%
logistics
for lease
35%
Source: ASTERA
Structure of St. Petersburg Warehouse Real Estate Market by class
10%
27% 7%
A class B class
C class D class
56%
Source: ASTERA
28
Demand by Premises Area*
15%
35%
25%
25%
29
In Moscow region there is high demand for premises located in the South, in the North and in the North – West of
Moscow region and for premises located within 15-45 km from the MKAD.
The demand for A and В class premises in St. Petersburg also is not satisfied. The increasing need in high class
complexes is connected with foreign retail companies and logistic operators entering St. Petersburg region
markets. Also this is due to economic advancement.
А from 3 500
В 500 – 3 000
Source: ASTERA
Due to demand increase for high class warehouses, most of the A class warehouse premises are being fully
leased on the stage of construction, according to the preliminary agreements.
Rental rates
In Moscow region in the first quarter of 2008 the average rental rates for class A warehouses located not far than
10 km from the MKAD are estimated at 140-170 $/sq.m./year, for class A warehouses located in more distant
districts are estimated at 120-145 $/sq.m./year. As for class B, the average rental rates for warehouses located
not far than 10 km from the MKAD are 115-150 $/sq.m./year, located far than 11 km from the MKAD are
estimated at 100-130 $/sq.m./year.
The rental rates for warehouses located in Moscow are higher than for premises in Moscow region. Class “A”
warehouses rental rates in Moscow are approximately 15% higher than in Moscow region, class “B”- 12%.
In the first half of 2008 the general tendency of stable rental rates remains the same. Despite possible delay of
warehouse projects delivery we do not expect a significant increase in rental rates in Moscow region. ASTERA
specialists assume an increase in rental rates of 6-7% in 2008.
Average Rental Rates for Class A and B Warehouses, $/sq.m./year, Moscow region
160
140
120
100
80
60
40
20
0
2004 2005 2006 2007 2008
Class А Class В
30
Source: ASTERA
180 170
160 150
140
120
120
100
100
80
60
40
20
0
A B
min max
Source: ASTERA
Rental rates for warehouse premises located inside 10 km from the MKAD,
$/sq.m./year
180 170
160 150
140
140
115
120
100
80
60
40
20
0
max min
class А class В
160
145
140 130
120
120
100
100
80
60
40
20
0
max min
class А class В
In St. Petersburg in the 1 quarter 2008 the growth of rental rates for warehouse premises was insignificant.
Rental rates for A and B class warehouse premises are 110,1 – 144 $/sq.m./year (net of VAT and operating
expenses).
Average Rental Rates for Class A and B Warehouses, $/sq.m./year, St. Petersburg region
140
120
100
80
60
40
20
0
2004 2005 2006 2007 2008
Class А Class В
Source: ASTERA
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Average Rental Rates for warehouses, 1Q 2008, $/sq.m./year, St. Petersburg region
160
144
140
127
118
120 110
100
80
60
40
20
0
A B
min max
Source: ASTERA
Warehouse market development in Russia, 2007-2011
33
The dynamics of Yields Rate, Warehouse Sector, 2003-2007
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2003 2004 2005 2006 2007
Source: ASTERA
• Commission delay of developer projects determined by risk of insufficient financing, difficulties in getting
building license, zoning regulation toughened by the Government.
• Enlargement of required rental area and increasing lease terms up to 9-10 years.
• Repeated inquiries for space available from large tenants as a result of their enlargement, growth and
expansion.
• Tenants are taking into consideration highways that were not very popular before in order to avoid traffic
jams.
• Professional developers continue active regional expansion.
• Growth of the investors’ interest to the Warehouse real estate market of St. Petersburg is continued –
large companies buy land and lease large areas for location of their enterprises.
• In St. Petersburg region the significant objects specialized in port logistics appear.
• While goods turnover with European countries increases, the demand for high quality warehouse areas
will grow.
• In short-term prospect insignificant increase of the rental rates is forecasted (5-10%), due to supply
deficiency, and also to an increase in warehouse construction costs.
34