MIBC Moscow-City - Windows · Office buildings delivered and under construction on the territory of...

December 2016

MIBCMoscow-City

32

December 2016mIbc moscow-cIty research

Supply

Today 11 buildings comprising office premises are delivered with 905,5 thousand sq m GLA of offices. Class A office supply in Moscow-City holds about 20% of the Moscow Class A stock.

Federation Tower (East), IQ-quarter and Neva Towers are currently under construction. The development of Moscow-City should have been initially completed in 2007, but the pace of construction was slow and some projects were revised or put on hold during the 2008-2009 crisis. The construction of Federation Tower (East) started in 2007 still has not finished. Russia Tower was projected

to be the tallest building in Europe located at #17–18 plots of Moscow-City, but its construction was refused in April 2009 by Moscow authorities. The restart of the construction at these plots was decided in 2012. The commissioning of Neva Towers multifunctional complex (replacing the original project) is planned on 2018.

2014–2015 events has negatively influenced the economy and the office market in particular: developers faced a decline in demand for office space and as a result were forced to reconsider the current concepts of their projects. The trend of office component

Demand

The occupiers of Moscow-City are transnational companies, owning the whole towers (Transneft JSC, VTB Group) as well as companies leasing small representative offices (less than 1 thousand sq m).

Today public non-profit organizations, major oil companies and commercial organizations mainly of Russian origin display a keen interest in Moscow-City. These companies took advantage of the current market conditions to consolidate their offices and optimize the rental costs. Nevertheless, the share of foreign tenants reached 60% at the initial stage of the MIBC Moscow-City development.

The companies of financial and banking sectors are the most common occupiers (circa 30%). The share of companies operating in the field of mining, processing and transportation of oil and gas is 14%.

The companies with state participation occupy about half (47%) of delivered office space. Lease and purchase transactions completed by these companies have become more common due to the desire to avoid rental costs.

Office buildings delivered and under construction on the territory of MIBC Moscow-City

reduction in favor of the increase of the areas for apartments is actively spreading in the current market. Imperia business high-rise (phase II) is an example of such a conversion of the assets at the initial stage of the project.

The office space volume of Moscow-City will reach about 1.3 million sq m upon construction completion. Approximately 190 thousand sq m of office space in delivered projects are now available for lease and purchase, 70% are in shell & core condition.

Tower 2000

Offices

Appartments

Hotel

Retail gallery

GBA, sq m

GLA, sq m

Plot #2, 3

2015

Snegiri Development

Evolution Empire business high-rise

Empire business high-rise (phase II)

City Point Capital City NorthernTower

Naberzhnaya Tower IQ-quarter Eurasia Federation Mercury City Grand Tower OKO Neva Towers MFC

154.0

79.1

154.0 79.1

Plot #0

2001

PromstroyTekhinvest

Delivery date

Developer

61.1 26.2

Plot #4

2011

MosCityGroup

186.0 125.2

Plot #6, 7, 8

2013

Tashir

75.0 27.2

Plot #9

2008, 2009

Capital Group

278.5 81.1

Plot #10

2004, 2005, 2007

ENKA

265.6 155.9

Plot #11

2017 F

Hals-Development

Plot #13

2007, 2016 F

Federation Tower (ex. Mirax Group, Potok)

Plot #14

2013

Mercury Development

Plot #15

2019 F

Grand Titul

Plot #16

2014

Capital Group

Plot #17, 18

2018 F

RenaissanceDevelopment

Plot #19

2008

Noerthern Tower

Plot #20

2019 F

Solvers Estate

228.0 75.2

Plot #12

2014

MosCityGroup

186.0 125.2 148.1 174.0 87.6 250.7 110.0 357.0 136.8 135.0 60.7 179.0

Plot #4

2018 F

Solvers Estate

105.0

ОКО(phase II)

Plot #16B

2017F

Capital Group

23.4 21.0

Source: Knight Frank Research, 2016

MIBC Moscow-City key indicators dynamics

Take-up volume New delivery volume Vacancy rate

thousand sq m

0

50

100

150

200

250%

0

10

20

30

40

50

2009 2010 2011 2012 2013 2014 2015 2016F 2017F

28%

12% 15%

12%

22%

44%

25%

20% 21%

Moscow-City is the largest investment project in Moscow based on the concept of the developed areas of the world business capitals, comprising office, residential, retail and hotel components.

MIBC Moscow-City

4

ReseaRchDecembeR 2016mIbc moscow-cIty

Russian companies

Foreign companies

28%

72%

Source: Knight Frank Research, 2016Source: Knight Frank Research, 2016Source: Knight Frank Research, 2016

The vacancy rate fell down over the past two years from 44% in 2014 to 20.9% as of December 2016 due to the completion of a number of major transactions. The amount of vacant space may reach 240,000 sq m after IQ-quarter office building delivery.

MIBC Moscow-City has become a unique business cluster with central location owing to the reduced development activity and the restrictions imposed by the city authorities for the construction of commercial real estate in the central part of Moscow. Moreover, landlords offer large office units available for lease (over 10-15 thousand sq m). In case of market recovery the central business districts may experience a shortage of large units in quality buildings.

Attractive business conditions combined with the high quality of projects contribute to the gradual occupancy of Moscow-City offices. This is reflected in the commercial policy of some landlords not willing to adjust the asking rents downwards after attracting anchor tenants.

Tenant mix

Share of Russian and foreign companies-tenants in MIBC Moscow-City

Number of vacant office blocks in terms of condition and size

Banking / Finance / Investment

Oil and energy industry

B2B*

TMT**

Non-profit organisations

Manufacturing

Real estate / Construction

FMCG***

Pharmaceutical

* Legal / Consulting** Technology / Media / Telecommunication*** Fast moving consumer goods

VTB Group

Transneft

33%

76%

87%

14%14%

10%

6%

9%

5%

4%5%

33

42

7

2

2219 19

2,000–3,000 1,000–2,000 500–1,000 < 500

Shell & CoreFitted Out


Office buildings delivered and under construction on the territory of MIBC Moscow-City

Mercury City

Tower 2000

Evolution Tower

OKO

OKO(phase II)

EurasiaTower

City Point

Capital City

Naberezhnaya Tower

Northern Tower

Neva Towers

FederationTower

IQ-quarter

Empire businesshigh-rise

Grand Tower

Plot #20

Empire businesshigh-rise (phase II)

Mercury City

Tower 2000

Evolution Tower

OKO

OKO(phase II)

EurasiaTower

City Point

Capital City

Naberezhnaya Tower

Northern Tower

Neva Towers

FederationTower

IQ-quarter

Empire businesshigh-rise

Grand Tower

Plot #20

Empire businesshigh-rise (phase II)

Class А(delivered)

Class В

Class А (under construction)

5



Commercial terms

Rental rates in Moscow offices denominated in USD have displayed downward trend from 2012. The greatest decrease in commercial terms was recorded in Moscow-City offices in comparison with other business districts as here USD rates fell by 43% in 2013-2015.

More dynamic reduction of rates was due to the high competition, which, in turn, was caused by an excess of supply. During this period there were circa 540 thousand sq m available for lease and purchase in delivered and under construction buildings (51% of the total volume). The high vacancy of 2014 was a result of the maximum delivery of office space in the MIBC Moscow-City history, while such delivery was not supported by demand.

The record amount of vacant office space accelerated the formation of RUR denominated market in the business district. The landlords started to change commercial terms in order to minimize the vacant space by fixing the exchange rates or currency band as well as reducing asking rental rates. About 85% of office space available for lease in Moscow-City is offered in RUR, while, for example, in the Paveletskiy and Leningradskiy and Belorusskiy business districts the share of Class A office space offered in local currency is about 60–70%.

Today, the average asking RUR rental rate in delivered office buildings of Moscow-City is 27,802 RUR/sq m/year (triple net), and the rates vary significantly in the range of 18,000–32,000 RUR/sq m/year. The range is mainly dependent on the storey height as well as the difference in the quality of facilities and the condition of premises available (fitted-out or shell & core).

Asking rental rates* for office premises in MIBC Moscow-City

Rental rates dynamics in MIBC Moscow-City offices

Class А Class B

USD/sq m/year RUR/sq m/year USD/sq m/year RUR/sq m/year

Fitted-out 600–750 34,000–38,000 – 18,000–20,500

Shell & Core – 28,000–32,000 –

* triple net – excluding operational expenses, utility bills and VAT (18%)

646

200

400

600

800

1,000

1,200

1,400

2011 2012 2013 2014 2015 2016F 2017F

USD/sq m/year

873 899 866

646

493 450 445

Rental rates rangeAverage weighted rental rate


Office stock, vacancy rate and rental rates in key business districts in Moscow

211.4thousand

sq m

211.4thousand

sq m

311.5thousand

sq m

445.1thousand

sq m382.4thousand

sq m

181.1thousand

sq m

554.4thousand

sq m

119.1thousand

sq m

786.4thousand

sq m

786.4thousand

sq m

20.2%

14.9%

18.3%

15.1%

11.5%

29.4%

12.3%

19.9%

28,000–38,000 RUR/sq m/year600–750 USD/sq m/year

18,000–20,500 RUR/sq m/year

Class А

Class B


17,000–23,000 RUR/sq m/year

Class А

Class B


11,000–22,500 RUR/sq m/year

Class А

Class B


17,000–22,000 RUR/sq m/year

Class А

Class B

Leningradskiybusiness district

Belorusskiy business district

MIBC Moscow-City Paveletskiy business district

Class А Class B

20.8% 17.8%

Office stock volume

Vacant area

Occupied aria

6


1/80

Federation Tower1,234 parking lots

1/120

–30,000 RUR

ОКО2,200 parking lots

1/50

22,000 RUR25,000 RUR

Capital City1,230 parking lots

1/60

–25,000 RUR

NorthernTower

688 parking lots

1/80

–25,000 RUR

Empire business high-rise

1,012 parking lots

1/130

25,000 RUR30,000 RUR

iQ-quarter716 parking lots

1/175

–25,000 RUR

NaberezhnayaTower

1,470 parking lots

1/150

–350 USD

Mercury City

437 parking lots

1/150

20,000 RUR25,000 RUR

Tower 2000430 parking lots

1/66

7,000 RUR15,000 RUR

GroundUnderground

Parking typeParking ratio

Transport infrastructure

The public transport system of Moscow-City includes the lines of the Moscow metro and suburban train connection. Today, there are 3 metro stations (Mezhdunarodnaya, Vystavochnaya and Delovoy Centre) and Testovskaya suburban train station, together serving daily about 50,000 people.

City Transport Hub will be launched on the territory of the business district in 2016 according to the plans of the Moscow Government on the transport development. This hub will bring together 4 types of transport: the Moscow Central Ring, metro, radial railway directions and land public transport.

The Transport Hub will be connected with the towers by an underground passage. Moreover, above-ground pedestrian gallery is planned across Testovskaya St. transferring passengers to the skyscrapers of Moscow-City.

Another transport terminal – Shepelikha Transport Hub – is scheduled for construction in the immediate vicinity of Moscow-City at the intersection of Shmitovsky Lane and Shelepihinskoe Hwy. It will be integrated with the metro station of the Second Metro Ring (Third Interchange Circuit). As a result, visitors of Moscow-City will benefit of to two metro circular lines access.

Parking

The paid parking area near MIBC Moscow-City includes 14 adjacent streets and is bounded by Shmitovsky Lane on the north, by 1905 Goda St. on the east, by Presnenskaya and Krasnopresnenskaya Emb. on the south, by Testovskaya St. on the south-west and by the Third Transport Ring on the west. Since December 2016 the highest parking rate – 200 RUR/hour day and night is applied in the territory of Moscow City.

Parking space in the number of streets with heavy traffic located inside Third Transport Ring also costs 200 rub./hour. The rate in the other areas of paid parking between the Garden Ring and the Third Transport Ring depends of time of the day. From 8.00 AM to 20.00 PM progressive rate system is used starting from 60 RUR/hour and 100 RUR/hour later on

ReSeaRCh

Olga YaskoDirector, Russia & CIS [email protected]

OffiCeS

Konstantin LosiukovDirector [email protected]

+7 (495) 981 0000

© Knight frank LLP 2016 – This overview is published for general information only. Although high standards have been used in the preparation of the information, analysis, view and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects.

Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank. KnightFrank.ru


The number of parking lots in MIBC Moscow-City completed and under construction office buildings

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