3/2017 REAL ESTATE MONITOR Magazine of the Association of European Businesses
CAPITAL · OFFICE · RETAIL · WAREHOUSE · HOSPITALITY · HOUSING Contents
Contents
Introduction Letter from the Chief Executive Officer 01 Letter from the Chairman of the AEB Real Estate Committee 02 Moscow market overview Capital market 03 Retail market 05 Office market 08 Warehouse market 11 Hospitality market 16 Housing market 21 St. Petersburg market overview Office market 28 Retail market 29 Street retail market 30 Warehouse market 31 Hot Topics Cloud services: new business models for VAC system manufacturers 32 Unjustified tax benefit in real estate – what is on the tax authorities’ agenda? 34 Lease termination: is the courts’ approach likely to change? 36 Current trends on the housing market 38
Publication name/ Published by/Учредитель: Chief Editor/ Release date/Дата выхода: Publisher’s address/ Наименование издания: Non-profit making partnership Главный редактор: 22 September 2017/ Адрес издателя, редакции: AEB Real Estate Monitor “Association of European Y.S. Melnikova/Мельникова Ю.С. 22 сентября 2017 года 16, bld. 3, Krasnoproletarskaya (“АССОЦИАЦИЯ Businesses”/Некоммерческое Publication volume and Cost/Цена: Distributed free str., 127473, Moscow, ЕВРОПЕЙСКОГО БИЗНЕСА: партнерство “АССОЦИАЦИЯ number/Номер выпуска: of charge/Бесплатно Russia/ Россия, Обозрение рынка ЕВРОПЕЙСКОГО БИЗНЕСА” 03, 2017 127473, г. Москва, ул. недвижимости”) Краснопролетарская, д. 16, стр. 3
The “AEB Real Estate Monitor” is registered with The Federal Service for Свидетельство о регистрации ПИ № ФС77-24458 от 23 мая 2006 Supervision of Legislation in Mass Communications and Protection of Cultural The opinions and comments expressed here are those of the authors and do Heritage, Certificate registration ПИ № ФС77-24458/ СМИ “АССОЦИАЦИЯ not necessarily reflect those of the Non-profit making partnership “Association ЕВРОПЕЙСКОГО БИЗНЕСА: Обозрение рынка недвижимости” зарегистрировано of European Businesses”/Мнения/комментарии авторов могут не совпадать в Федеральной службе по надзору за соблюдением законодательства с мнениями/комментариями учредителя публикации, Некоммерческого в сфере массовых коммуникаций и охране культурного наследия. партнерства “АССОЦИАЦИЯ ЕВРОПЕЙСКОГО БИЗНЕСА” AEB Real Estate Monitor | 3/2017
Dear readers,
It is my genuine pleasure to welcome you to the third edition of the AEB Real Estate Monitor in 2017!
I hope you had a wonderful summer time and are going to start a new business season with fresh and bright impressions.
Frank Schauff This issue will traditionally provide the overview of the Moscow and St. Petersburg Chief Executive Officer, real estate markets. In particular, the edition comprises data on retail, office and Association of European warehouse markets in terms of overall investment activity, completion level, and Businesses vacancy rate dynamics in the second quarter of 2017.
As always, a separate section reviews Moscow hospitality sector from the perspective of average daily rates and occupancy indicators. Figures on the number of the hotels opened in the first half of 2017 and announced for opening by the end of the year are also specified.
Supply and demand trends of the Moscow prime rental market are analysed based on various criteria including rental budget rates and the most popular areas.
The hot topics, as usually, deal with the most acute and in many cases widely discussed issues referring to the real estate. There is a general article about the current trends on the housing market; a specific article on cloud services for ventilation and air conditioning system manufacturers; and two more juridical-related topics concerning the ‘unjustified tax benefit’ concept, and the courts’ approach to lease termination.
I would like to express my sincere gratitude to the members of the AEB Real Estate Committee for their substantial contribution to the present publication and other activities.
A new business season has just started and I hope to meet you at the upcoming AEB Real Estate Committee events.
Enjoy your reading!
AEB Real Estate Monitor | 3/2017 1 AEB Real Estate Monitor | 3/2017 Introduction
Russia real estate investment market | Q2 2017 Dear readers, Russia real estate We are back to business after summer holidays and looking with a fresh mind on the development in the real estate sector. investment market
So far the new normal seems to get hold of the market and it continues to evolve with • Supported by stable currency and the recovery of the Russian economy, investor ac on the real estate market improves, the number of investment deals the same dynamics that we have seen before. increases. • The H1 2017 investment volume on real estate market increased by 39% YoY to USD2.2bn. • In H1 2017, retail was the most ac e sector, accoun for 41% of the total volume. The office sector followed, with 32% of all transac ons. In Q2, the largest deal Filippo Baldisserotto Even if the residential construction has dropped 10,4% in the period of January-July was the sale of Vozdvizhenka Centre to Fosun Group and Avica Management Company. Chairman of the AEB Real 2017, the overall figure of construction works for the same period is slightly over 100%. • Moscow remained the most c e for investors in Russia in H1 2017, with a 73% share of the total volume. The share of St. Petersburg grew to 18%. Estate Committee, • In H1 2017, foreign investors increased their share to 21%. General Director, The preparation for the AEB Real Estate Day scheduled for 27 September 2017 is in • Benchmark prime yields remained unchanged between 9.0-10.5% for Moscow offices and shopping centres and 11.0-12.5% for warehouses. Stupino 1 Industrial Park full swing and we invite all interested parties to contribute to this event to make it • We expect the po e investment momentum to extend into the near future. We forecast the investment volume to reach USD4.5bn in 2017. informative.
Thank you all and looking forward to seeing you at the upcoming Real Estate Committee meetings and other events. Russia real GDP growth Sovereign bond yields
9% 9%
6% 7%
3% 5%
0% 3%
-3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 1% -6%
-9% Jun. 2014 Oct. 2014 Feb. 2015 Jun . 2015 Oct . 2015 Feb . 2016 Jun . 2016 Oct . 2016 Feb . 2017 Jun . 2017
Russia 23 10 Year U.S. Treasury
Source: Rosstat, Oxford Economics Source: Bloomberg, US Treasury
Exchange rate dynamics, USD/RUB
90
80
70
60
50
40 Oct. 2015 Oct. 2016 Apr. 2017 Apr. 2016 Jun. 2017 Jun. 2015 Jun. 2016 Feb. 2016 Feb. 2017 Dec. 2015 Dec. 2016 2 AEB Real Estate Monitor | 3/2017 Aug. 2015 Aug. 2016 Source: Central Bank of Russia Moscow market overview | Capital market AEB Real Estate Monitor | 3/2017
Russia real estate investment market | Q2 2017
Russia real estate investment market | Q2 2017 Russia real estate RussiaMoscow real estate investment marketmarket | Q2 2017 overview invRuesstsimae renatl mesatartkee t RuCapitalssi market,a re aQ2l e2017state • Supporteid bny stabvle cuerrencsy antd them recovery ofn the Rtussi anm economay, inrvesktor aec t on the real estate market improves, the number of investment deals increases. • •S uSupportedpported by sta bbyle c uarr establency and tcurrencyhe recovery oandf the Rtheussi arecoveryn economy, iofnve sthetor a c • oMoscown the real e staremainedte market i mtheprov emosts, the n uattractivember of inve stformen tinvestors deals in • The H1 2017 investment volume on real estate market increased by 39% YoY to USD2.2bn. iRussianinncreasevs. economy,est investorm eactivityn ont them real aestater kmare- tRussia in H1 2017, with a 73% share of the total volume. • In H1 2017• T,h ree Htai1 l201 wa7s itnhvee smtmoestn ta vcolumee se ocnto rre,a al ccoestautne mar kfeotr i4nc1r%ea osef dthe by t3o9ta% lYoY vol umto USD2.2e. Theb onffi. ce sector followed, with 32% of all transac ons. In Q2, the largest deal was the •saketSluep op fo improves,Vrtoezdd bvyiz shtaebnlke a cwith uCerrenntr ceythe aton dF otnumberhesu nrec Gorvoeurpy oofafn t dhinvestment eA Rvussiica Mana econonageme mdealsy,n int vCome stinopr- aanc y. The on tsharehe real e ofsta tSt.e m arPetersburgket improves, tgrewhe num btoer 18%.of inves tment deals • iInnc Hre1a 2017ses. , retail was the most ac e sector, accoun for 41% of the total volume. The office sector followed, with 32% of all transac ons. In Q2, the largest deal creasing. • In H1 2017, foreign investors increased their share to • Moscow• rTewahmes a Htihen1 ed201 sa tleh7 eoin fm vVeosztsmdt veiznhte vnocklumea Cee fn otrnr e irn etvoae lF seotstasourntse Gi nmr oRaruukpssie atn aind ic nAr evHaic1sae 2017 dM bayn a3, g9wieme%t YoYh nat 7tComo3 %USD2.2 pshanayr.eb no.f the total volume. The share of St. Petersburg grew to 18%. • In H1 2017•• •IMn, HofInos1cr e o2017iwH1g nre ,i mnr2017,evataieinsedtl owar ts hs i investmentent hmcer oemsatos setd a tchceei re svolumes efhocart oriner,v taeoccos t2o 1ruons%n in. Rrealu fssiora 4 iestate1n% H 1o f2017 the markett,o witatlh v oal um73 %e .s Theh21%.are o offif cet h es etocttaorl vfollluomwe.d T, hwite shh 3a2re% o of fSt al. lP treatenrssabcurogn gsr. eInw Q to2 ,1 t8he% .lar gest deal was the sale of Vozdvizhenka Centre to Fosun Group and Avica Management Company. • • increasedIn H1 2017, fo byreig n39% inves toYoYrs in ctorea sUSDed the 2.2ir sha billion.re to 21%. • Benchmark prime yields remained unchanged between Benchm•arMk opsrcimeow ryeimeladisn edrem thaei nmedos tu nchanc gede fo br eintvweesteonr s9. in0 R-10.ussi5a% in f oHr1 M2017osc,o wiwt ho ffia 7c3e%s asnhadr esh oof pthpein tgo tacel nvotrluems ea.n Tdh 11.e sh0a-r12e o.5f St%. fPoert waersbreuhrgo gurseews .to 18%. • Benchmark prime yields remained unchanged between 9.0-10.5% for Moscow offices and shopping centres and 11.0-12.5% for warehouses. • We expe•c•Itn t InHhe1 2017pH1o ,2017, foer einigvne retailsintvmeestno tr wassmome incr etheansetdum mostth etior sehx aactivetrende to i2n1t %osector, .t he nea accountingr future. We fo rec9.0-10.5%ast the investme fornt vMoscowolume to rofficeseach USD4. and5bn inshopping 2017. centres and • We expect the po e investment momentum to extend into the near future. We forecast the investment volume to reach USD4.5bn in 2017. • forBen ch 41%mark pofrime the yiel ds total rema in volume.ed unchan gTheed be tw officeeen 9.0 -10. sector5% for M ofollowed,scow offic es a11.0-12.5%nd shopping cen fortres awarehouses.nd 11.0-12.5% for warehouses. • withWe expe 32%ct the ofpo alle transactions.investment mome nIntum Q2, to e xthetend ilargestnto the ne adealr futu rwase. We fore•c asWet the expect investme thent vo lpositiveume to rea chinvestment USD4.5bn in 201momentum7. to extend the sale of Vozdvizhenka Centre to Fosun Group and Avica into the near future. We forecast the investment volume to Management Company. reach USD 4.5 billion in 2017. (1–9 ) RussiaRussia real GDP real GDPgrowth growth SSoovveerreeigign bonndd y yieieldldss 1Russia RUSSIA real REALGDP gGDProwth GROWTH 2 SSOVEREIGNovereign bo BONDnd yie YIELDSlds
9%9% 9% 9%9% 9%
6% 6% 6% 7%7%7%
3%3% 3% 5%5% 5% 0% 0% 0% 3% -3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3% 2017F 2018F -3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3% 2017F 2018F 1% -3% 2006 -6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 1% -6% 1% -6% -9% Jun. 2014 Oct. 2014 Feb. 2015 Jun . 2015 Oct . 2015 Feb . 2016 Jun . 2016 Oct . 2016 Feb . 2017 Jun . 2017 -9%
Jun. 2014 Russia 2Oct. 2014 3 Feb. 2015 10 YearJun . 2015 U.S. TreaOct . 2015 sury Feb . 2016 Jun . 2016 Oct . 2016 Feb . 2017 Jun . 2017 -9%
Source: Rosstat, Oxford Economics Source:Jun. 2014 Russia Bloomberg, Oct. 2014 23 USFeb. 2015 Treasury10 Year Jun . 2015 U.S. TreasOct . 2015 ury Feb . 2016 Jun . 2016 Oct . 2016 Feb . 2017 Jun . 2017 Source: Rosstat, Oxford Economics Source: Rosstat, Oxford Economics Source:Russia Bloomberg, 23 US Treasury10 Year U.S. Treasury Exchange rate dynamics, USD/RUB Source: Rosstat, Oxford Economics Source: Bloomberg, US Treasury Source: Bloomberg, U.S. Treasury 3E xchan EXCHANGEge rate RATE dynamics, DYNAMICS, USD/RUB USD/RUB
Exchan90ge rate dynamics, USD/RUB
90 80
90 7080
80 60 70
50 70 60
40 60 50 Oct. 2015 Oct. 2016 Apr. 2017 Apr. 2016 Jun. 2017 Jun. 2015 Jun. 2016 Feb. 2016 Feb. 2017 Dec. 2015 Dec. 2016 Aug. 2015 Aug. 2016
Source: Central Bank of Russia 40 50 Source: Central Bank of Russia Oct. 2015 Oct. 2016 Apr. 2017 Apr. 2016 Jun. 2017 Jun. 2015 Jun. 2016 Feb. 2016 Feb. 2017 Dec. 2015 Dec. 2016 AEB Real Estate MonitorAug. 2015 | 3/2017 Aug. 2016 3 40 Source: Central Bank of Russia Oct. 2015 Oct. 2016 Apr. 2017 Apr. 2016 Jun. 2017 Jun. 2015 Jun. 2016 Feb. 2016 Feb. 2017 Dec. 2015 Dec. 2016 Aug. 2015 Aug. 2016
Source: Central Bank of Russia Russia real estate investment market | Q2 2017 Russia investment volume dynamics* Investors by source of capital Russia real estate investment market | Q2 2017 USD m 0.9% AEB Real Estate Monitor | 3/2017 1.6Moscow% market overview | Capital market Russia real estate investment market | Q2 2017 1.1% 0.9% Russia invRussiaeRussiastme real real estaten estatet v oinvestment linvestmentume dy market marketna m| Q2 |i cQ2 2017s *2017 Investors by source of capi1.4tal% % Russia real estate investment market | Q2 2017 6.4% 3.9% 0.3 Russia39% inve2,181stment volume dynamics* Investors by source of capital USD m % RussiaRussia4R ussia real RUSSIA iestaten ivnevse investmenttsme INVESTMENTtmentn vt ovmarketloumelume | dyQ2VOLUME dy n2017anmamicis cDYNAMICS**s* 5I nIvn INVESTORSevsetsotrosr bs yb yso s uBYorucer SOURCEce o fo cf apicapi tOFatla0.9 lCAPITAL% 7.1 Russia investment volume dynamics* 1.6Inv%estors by source of capital 0.9% USD m 1.4% 1.10.9%% 7.3% U1,571SUDS mD m 1.6% 0.90.9%% 0.90.3% % RussiaUSD m investment volume dynam144ics*% 1,376 6.4%Inves%tors by source of capi3.9ta1.1%l % 39% 2,181 1.61.6% 1.4% 0.9% 0.90.9%0.3% % 6.41.6% % 1.41.4%%H1 2017.16 %3.91.11.1%% 0.9% H1 2017 39% 2,181 6.46.4%% 1.4% 3.93.9%1.1% % 0.30.3%% USD m 3939% % 2,1812,181 6.4% 7.1% 3.9%0.9% % 0.3% 1,571 39% 2,181 1.6% 7.37.17.1%% 0.9% 1,376 % 7.37.1%%1.1% 1,571 144% 565 1.4 7.3%% 0.3% 1,571 % 1,376 6.4% 7.3 3.9% 1,57139% 2,181 144 1,3761,376 H1 2016 7.3% H1 2017 1,571 144144% % H1 2016 90.7%7.1% H1 2017 78.6% 144% 1,376 H1 H2011 2016 6 H1 H2011 2017 7 1,571 565 H1 2016 7.3% H1 2017 565 1,376 Russia Finland UAE USA Global H1 2016 H1 2017 565565144Q2% 2016 Q2 2017 565 90.790.7H1 %2016 % 78.678.6H1 201%7% 90.790.7%China% UK South78.678.6 Korea%% Germany *Investment deals excluding deals with land plots, joint ventures, sales of % % residential real estate to end-users. 90.7 78.6 H1 2016 H1H1 20172016 H1 2017 Q2 2016 565Q2 2016Q2 2017 Q2 2017 RussiaRussia FinlandFinland UAEUAE USAUSA Global RussiaRussia FinlandFinland UAEUAE USAUSA GlobalGlobal H1H1 2016 2016 H1H1 2017 2017 Q2Q2 2016 2016 Q2Q2 2017 2017 China UK South Korea Germany *InveH1stme 2016nt deals excludinH1g 2017 deals with land plots, joiQ2nt v 2016entures, sales ofQ2 2017 China Russia90.7UK %FinlandSouth KoreaUAE USAGermany78.6Global% *Investment dealsIn evxceludinstgme deals wnith landvo plolumets, joint vbenrtuereas, ksalesdo ofw n by sector ChinaChina PriUKmeUK yiSoutheSouthlds Korea Korea in MGermanyoGermanyscow, Q2 2017 *In*v reIenssidevtmeestmenntital dn etr ealalsde alsexstc ealudinxtecludin tog ednd-usge alsde alsweirt swh. ilandth land plo plots, joits, njoit vnetn vteunretusr, esaless, sales of of China UK South Korea Germany residential real e streaside tr*eIn sidetnvoeti sealntmend-usti raleal nr teale dester aesalstst.ea ettoxe c etludinond-us end-usg edresalse. rs .with land plots, joint ventures, sales of Source: JLL Source: JLL H1I rneside v2016enstialtme real estnH1atte vt2017oo end-uslumeers. breakQ2do 2016wn by secQ2 2017tor PriRussiame yieldsFinland in MoscUAEow, Q2 201USA 7 Global
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1 % e
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H 8.3 H ai l % % H 201 7 % % minOfficeOffice % max
201 7 32.3 1 32.3% 1 H
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1 5.4
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InH vestment volume breakdown by region Investments by deal size (by volume) 201 6 ria l InI1 vnevsetsmetmen9t.n1 vt% ovloumelume b rberaekadkodwown nb yb yre rgiegionon InIvnevsetsmetmentsnts b yb yd edaleal si zsiez e(b (yb yv ovloumelume) ) H Source: JLL Source: JLL ndus t I 201 7 % Investment volume breakdown by region Investments by deal size (by volume)
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1 5.4
H 82% 882 82 INVESTMENT%% VOLUME BREAKDOWN BY REGION 9 INVESTMENTS BY DEAL SIZE (BY VOLUME) Investment v82olume% breakdown by region Investments by deal size (by volume) Investment 73vol%ume breakdown by region Investments by deal size (by volume) % % 51% 82 7373% 5151% % 73% 51% 82% 82% 73% 51% 31% 73% % % 73 18% 3131% 51%% 26% 31% 1818%% % % 12 2626% % 22% 18 % 9% 20% 1212% 26% 22% % 6% % 99%% 20% 22 16% 12 20% 22% 31% 66%% 9% 11% 20% 11% 1616% % % % 31% 6% 18% 6 1111% % 6 1111% % 31% 16% 18% 6%6% 11% 6%626% % 11% H1 2016 H1 2017 18H1 201%6 H1 2017 H1 2016 H1 2017 H1 2016%6 H1 2017 H1 201%6 H1 2017 H1 2016%6 H1 2017 H1 2016 H1 2017 H1 2016 H1 2017 12% %26 % H1 H2011 2016 M6 osHco1w H2011 2017 7 H1 H2011 2016St. 6PeteHr1sbu H2011r g2017 7 12H1 H2011 %2016 6RegHion1 Hs2011 2017 7 9% H1 201H1 <2016 USD20mH61 201H1 2017 267H1 201H1 2016 21-50H61 201H1 2017 7H1 201H1 2016 51-100H61 201H1 2017 7H1 201H1 2016101-300H61 201H1 2017 7H221 201H1 2016 >H6 1300 201H1 2017 7 % % 2220% % H1 M201osM6cosowcowH1 2017 HSt1.6 PS201te.t %Pe6ersbutersburgH12r1g 2017 H1 R201egRion6egions9sH1 2017 < HUSD20m1< 201 USD20m6 H1 2017 H21-501 20121-506 20H1 201% 7 H51-1001 20151-100226 H%1 2017 101-300H1 101-3002016 H1 2017 H>1 201300> 6300H1 2017 % 9% % 16% Moscow 6 St. Petersburg Regions < USD20m 2021-50 % 51-100 101-300 > 30016% 6% 11% 11 11% 1116% Contacts: 611% % 6% 6% 11% 6% ConContatactscts: : 6% 6% HOlesyaConH1 1201 2016 Dzuba6taHc1ts H2011 :2017 7 H1 201H61 Ekat2016Her1 ina201 A7Hn1d 201reev7Ha1 2016 H1 H2011 2016 7 H1 2017 H1 2016 H1 2017 HH11 201 2016 H11 201 +20177 (749H5)1H 2011 7 2013676H 810 201H010 7201H71 201H61 201H1 6201H71 201H1 2017 6HH11 201 20167 H1 2017 H1 2016 H1 2017 Olesya Dzuba Ekaterina Andreeva H1 2016 H1Olesyao l201esya7M.d DzubaosMzuba@ecosowcoH w1 u.j201ll.com6 H1S 201t. Pe7EkateteSkrtasbu. terPerertina.andginaerHsbu 1A [email protected] H1R 201egciono7ms Regions H1 2016
Moscow shopping centre market | Q2 2017 Moscow shopping centre market | Q2 2017 Retail market, Q2 2017 MosM• Therecoo werews noc completionso shoppw shoppon the Moscowi nretailig marketng • Newcomers generally prefer to start their operations in in H1 2017. The 236,700 sq m* of new supply announced shopping centres: 71% (17 of 24) did so in H1 2017. Pre- for delivery in H2 2017 will put the annual volume at half of mium and luxury retailers prefer to open their fi rst stores in centclastre year’sen leveltmr ande willa mmarkrk aa four-yearertk elow.t The main pro- street retail (six of seven retailers opened stores in the main • There were no cojectsmpl eexpectedons on th ethis Mo yearscow arereta iVegasl marke Kuntsevot in H1 201 7(113,400. The 236,7 sq00 m),sq m* ofMoscow new sup pretailly ann ocorridors).unced for d eEuropeanlivery in H2 20retailers17 will p uweret the athennu amostl volume at half o•Vidnoef Tlahsetr ey ewar eParkr’es nleov coe(45,000lm apnlde wionl ls sq mona tm)rhke a M andfouscro- ywArenae raerta loil wm Plaza.a Therket imn (20,000 Ha1in 201 pro7j.e T csqhtes 236,7expm).e0c0te sdq activetm*his o yf en aeinrw a srtheuep Vpl egypast aansn oK uusixnntsce demonths, fvoor (113,4deliver y0accounting i0n sHq2 m20)1, 7V wiidnl l forpoue tP taboutaherk a (45,0nnu a80%l 00 sq ofm ) and Arena Plaza (20,0volum0e0 a st qh amlf )o.f last year’s level and will mark a four-year low. The main projects expected this year are Vegas Kuntsevo (113,400 sq m), Vidnoe Park (45,000 sq m) •a nThed Are nvacancya Plaza (20,0 rate00 sq inm) . existing shopping centres declined new openings. • The vacancy ratefrom in ex 7.2%is ng s hoto p6.4%ping c einnt rQ2es d2017.ecline dThe from lack 7.2% of to completions 6.4% in Q2 201 and7. T he la•c Rentsk of com inp lshoppingetions and scentresignifican tremained new retail vstableolume dduringelivered the to t hfie rst market over the• p Thaset vtahcraenec yy reaaters i n(a ebxiosunt g1 s.6ho mpp sinqg m ce)n enctreso duercaligneed frreotam i7le.2r%s ttoo e6.x4p%a nind Q t2h 201eir p7.r Tehse nlaccek oinf coMmospcleotwio nssh aonpdp siinggn ificecannttr enes wo preetaniel dvo ilnu me20 1d4el-i20ver1e6d. to the signifimarket ocantver th enew past tretailhree ye avolumers (about 1delivered.6 m sq m) enc toou therage d rmarketetailers t oover expa nd thalfheir p rofes ethence i nyear, Mosco wat s hRUBoppin g195,000 centres op eperned i nsq 20 1m4-20 per16. year for a •In H1 2017, 24 n•Intheew H i n1past t201ern7 athree, 2o4 nnaelw yearsr eintateirlen ar(abouts oanpapl ereata r1.6eilde ros millionnap tpheea rReud sqssi ona m)tnhe m Rencouragedaurssikeatn. Tmhaerk aect. T re-hey a ics cosingleym isp coarma bretailplaer atbol e Hgallery t1o 201H1 2016, unitw6,h weh nofe n2 62100 6n neew wsq bbrr am,nd ssand eenntet ertheerde dth taverageeh Reu Rssuiassn ima nrenta rmkeat .r inke t. • Newcomers gen•tailerse Nralewlyco p mtoreef reexpands rg teon estarallry t their ptrheefeirr presenceotop staerart tohnesir iinonp seMoscowhora popnisn ign cs shoppinghoenptpreinsg: c7e1n%t rcentres e(s1:7 7 1o%f 2(1 47) odfiretail d2 4s)o d ind gallery sHo1 in 201 H1 7201 at. P 7rRUB.e Pmreium m74,000iu man adn dlu l uxperxuurryy rrsqeeta iimlleerr ssper p preref eyear.fre tro t opeo ope(10–18n thne tirh fierisr t fir)s t stores in street ropenedestatoirle (ss inx sointfr es e2014-2016.tv reenta rile (tasixi loefr se opvene nreetadi lsetros ropese inne dth seto mreas iin tMheo mscaoinw M reostacoilw c orerrtaidil ocorsrr)i.d Eoursr)o. pEueraonp eraenta rieletarisle wrse wrer eth teh em moosstt aac vee inin t hthe ep apsat sstix s mixo mntohns,t hs, accoun ng for abaoccout u8n0%ng o ffo nr aebwo uopt 8e0n%in ogf sn.ew openings. • 24 new international retailers appeared on the Russian • Rents in shoppin•g R ecnetnst irne ssh roepmpinagin ceedn tsrteasb relem dauinreind gs ttahbele fi drusrti nhga tlhf eo ffi rtshte h aylef aorf ,t haet RyeUaBr,195,0 at RUB0195,00 per0 0s qp emr spqe mr ypear ry efoarr fao rs ain sginleg lere rtaetaili lga gallleery unnitit o of f1 100 0sq s mq ,m an, da nthde the average rent in rmarketeataveirl agagel lreinerny t H1aint rRe Uta2017.Bil 74,0galle r0They0 a pt eR Uractivity Bsq74,0 m 0p0e pris eyr e comparablesaqr m. per year. to H1 2016, when 26 new brands entered the Russian market.
10 SHOPPING CENTRE SUPPLY** 11 SHOPPING CENTRE COMPLETIONS Shopping cSehnotprpei nsgu cpepnltyr*e supply* ShoSphpoipnpgin cge cnetnrter ec coommppllee onnss '000 sq'000 m sq m 3 objects 3 objects 84k sq m shoppshopping ing 84k sq m centres 119119centres 19% 21 objects 19% 21 objects 5m sq m 519 193k sq m 5m sq m 519 193k sq m -54% -54% 13 objects 436 13 objects 249k sq m 436 249k sq m 34 objects 34 objects 793k sq m 237 793k sq m 237 34 objects 180 -100% 34 objects 1,698k sq m -100% 1,698k sq m 180 14 objects 0 14 objects1,982k sq m 1,982k sq m 0 Superregional, Community, Neighbourhood, Q2 2016 Q2 2017 2015 2016 2017F above 75k sq m GLA 15–35k sq m GLA 5–15k sq m GLA Superregional, Community, Neighbourhood, Fact Forecast above 75k sq m GLARegional, 15–35k sq m GSLpAeciality, 5–15k sq mO uGtlLeAt centre 35–75k sq m GLA 7.5–25k sq m GLA Fact Forecast Regional, Speciality, Outlet centre 35–75k sq m GLA**Moscow quality shopping7.5– centre25k sq stock m G LfiguresA were revised in Q2 in accordance with Source: JLL
**Moscow quality shopping centre stock figures were revised in Q2 in accordance with Source: JLL Shopping centre density in Russian ci es Prime rent: European comparison
Shopping csqe m/perntr e1,000 d einhabitantsnsity in Russian ci es PrimUSD/sqe re m/yearnt: European comparison 3,381 Krasnodar 798 London sq m/per 1,000 inhabitants USD/sq m/year Samara 568 Moscow 3,300 3,381 Krasnodar Barnaul 559798 LondonParis 2,623 Samara Yekaterinburg 568 556 MoscowDubai 2,461 3,300 * Hereinafter we use gross leasing areas (GLA) Barnaul Tyumen 559 500 BirminghamParis 2,399 2,623 Dublin Yekaterinburg AEB RealOrenburg Estate Monitor |556 3/2017480 Dubai 2,2592,461 5 Manchester Tyumen Ryazan 500 439 Birmingham 2,036 2,399 St. Petersburg Munich Orenburg 480 426 Dublin 1,916 2,259 Voronezh Brussels Ryazan 439 414 Manchester 1,8252,036 Nizhniy Novgorod 414 Antwerp 1,825 St. Petersburg 426 Munich 1,916 Yaroslavl 405 Leeds 1,818 Voronezh 414 Brussels 1,825 Warsaw Moscow 403 1,779 Nizhniy Novgorod 414 Antwerp 1,825 Novokuznetsk 400 Berlin 1,711 Yaroslavl 405 Leeds 1,818 Lipetsk Lisbon 1,642 391 Warsaw Moscow 403 1,779 Rostov-on-Don 388 Prague 1,574 Novokuznetsk 400 Berlin 1,711 Lipetsk 391 Lisbon 1,642 Rostov-on-Don 388 Prague 1,574 Moscow shopping centre market | Q2 2017 Moscow shopping centre market | Q2 2017 MoscMoows cshoppow shopping ing centrcee nmtraer kmetarket • There were no comple ons on the Moscow retail market in H1 2017. The 236,700 sq m* of new supply announced for delivery in H2 2017 will put the annual • There were no compvleoluomnse o ant hthaelf Mofo lascsot wye rareta’si l emvearl kaentd i nwi Hll1 m 201ark7 a. Tfhoeu r236,7-year 0lo0w sq. Them* omf aninew p rsoujpepctlys aexpnneocutnecde tdh fios ry deaerli vaerrey V ineg Ha2s 20Ku1nts7 wievlol p(113,4ut the0 a0n snqu aml ), Vidnoe Park (45,000 sq m) volume at half of lasta ynedar A’sre lenvae Pl laanzda wi(20,0ll m0a0rk s qa fmou).r-year low. The main projects expected this year are Vegas Kuntsevo (113,400 sq m), Vidnoe Park (45,000 sq m) and Arena Plaza (20,000 sq m). • The vacancy rate in exis ng shopping centres declined from 7.2% to 6.4% in Q2 2017. The lack of completions and significant new retail volume delivered to the • The vacancy rate in emxiasrknegt sohoveprp tihneg pcaesntt rtehsr edee cyleinearsd (farboomu 7t .12.%6 mto s6q.4 m%) iencn Qo2 u201rag7e.d T rheeta lailcekr so tfo co emxppalnetdio tnhse iarn pdr essigennicfieca in tM neowsc orewta sihl vooplpuimeng cdeenlitvreerse odp teon tehde in 2014-2016. market over the past three years (about 1.6 m sq m) encouraged retailers to expand their presence in Moscow shopping centres opened in 2014-2016. •In H1 2017, 24 new interna onal retailers appeared on the Russian market. The ac y is comparable to H1 2016, when 26 new brands entered the Russian market. •In H1 2017, 24 new interna onal retailers appeared on the Russian market. The ac y is comparable to H1 2016, when 26 new brands entered the Russian market. • Newcomers generally prefer to start their opera ons in shopping centres: 71% (17 of 24) did so in H1 2017. Premium and luxury retailers prefer to open their first • Newcomers generallsyt porefse irn t sot rstaeertt r tehtaeiirl (ospixe oraf soenves nin r sehotaipleprisn gop centerde ss:t o7r1e%s (in1 7th oef m24a)i nd iMd soos cino wH1 r e201tail7 c.o Prrreidmoirsum). Eaunrdo lpuexaunry r eretatailielerrss w pererefe trh teo mopeosnt atchevire fi irns t he past six months, stores in street retaila (ccosix oufn senvge nfo rre atabioleurts 8op0%en oefd n setwor eops ienn tinhges m. ain Moscow retail corridors). European retailers were the most ac ve in the past six months, accoun ng for about 80% of new openings. • Rents in shopping centres remained stable during the first half of the year, at RUB195,000 per sq m per year for a single retail gallery unit of 100 sq m, and the • Rents in shopping ceanvtreersa grem reanint eind rsetatabille ga dullerirnyg a tth ReU fiBrs74,0t ha0lf0 o pf tehre s qy emar p, aetr RyeUaBr195,0. 00 per sq m per year for a single retail gallery unit of 100 sq m, and the average rent in retail gallery at RUB74,000 per sq m per year.
Shopping centre supply* Shopping centre comple ons Shopping centre supply* Shopping centre comple ons '000 sq m 3 objects '000 sq m 3 objects 84k sq m shopping 84k sq m shopping centres centr119es 19% 21 objects 119 5m sq m 19% 519 21 objects 193k sq m 5m sq m 519 193k sq m -54% -54% 13 objects 436 13 objects 249k sq m 436 249k sq m 34 objects 34 objects 793k sq m 237 793k sq m 237 34 objects objects 180 -100% 34 1,698k sq m -100% 1,698k sq m 180 14 objects objects 14 1,982k sq m 0 1,982k sq m 0
Superregional, Community, Neighbourhood, Superregional, above 75k sq mCo GmLmA unity, 15–35k sq mN GeiLgAhbourhood, 5–15k sq m GLA above 75k sq m GLA 15–35k sq m GLA 5–15k sq m GLA Fact Forecast Fact Forecast Regional, Speciality, Outlet centre Regional, 35–75k sq m GSpLAeciality, 7.5–25k sq mO GutLlAet centre 35–75k sq m GLA AEB Real Estate7.5 –Monitor25k sq m G|L A3/2017 Moscow market overview | Retail market **Moscow quality shopping centre stock figures were revised in Q2 in accordance with **Moscow quality shopping centre stock figures were revised in Q2 in accordance with
12 SHOPPING CENTRE DENSITY IN RUSSIAN 13 PRIME RENT: EUROPEAN COMPARISON Shopping cenCITIESSthroep dpeinsig tcye innt Rreu dssieannsi tcyi iens Russian ci es Prime rent: EuPrroimpeea rne cnot:m Epuarroipsoenan comparison sq m/per 1,000 inhabitantssq m/per 1,000 inhabitants USD/sq m/year USD/sq m/year Krasnodar London 3,381 3,381 Krasnodar 798 798 London Samara Moscow 3,300 Samara 568 568 Moscow 3,300 Barnaul Paris Barnaul 559 559 Paris 2,623 2,623 Yekaterinburg Dubai Yekaterinburg 556 556 Dubai 2,461 2,461 Tyumen Birmingham Tyumen 500 500 Birmingham 2,399 2,399 Orenburg Dublin 2,259 Orenburg 480 480 Dublin 2,259 Ryazan Manchester Ryazan 439 439 Manchester 2,036 2,036 St. Petersburg Munich St. Petersburg 426 426 Munich 1,916 1,916 Brussels Voronezh Voronezh 414 414 Brussels 1,825 1,825 Antwerp Nizhniy Novgorod Nizhniy Novgorod 414 414 Antwerp 1,825 1,825 Leeds Yaroslavl Yaroslavl 405 405 Leeds 1,818 1,818 Moscow Warsaw Warsaw Moscow 403 403 1,779 1,779 Berlin Novokuznetsk Novokuznetsk 400 400 Berlin 1,711 1,711 Lisbon Lipetsk Lipetsk 391 391 Lisbon 1,642 1,642 Rostov-on-Don Rostov-on-Don388 388 Prague Prague 1,574 1,574
Source: JLL Source: JLL Moscow shopping centre market | Q2 2017 MoscowMoscow shopping shopping centre centre market market | Q2 2017 | Q2 2017 New retailers on the Russian market: New14N re ewt aNEW rileetras iRETAILERSolenr st hoen R tuhse sON iRanu THE smsiaa rnRUSSIANk emt:arket MARKET:: 15 AVAILABILITY enetrnitersie asn adn de xeitxsits AAvvaaiillaabbiliiltityy ENTRIESentries a ANDnd e EXITSxits Availability 6161 61 OverallOverall SC SC vacancy vacancy rate rate NumbNeurm obfer of 5858 Overall SC vacancy rate interninateornaalNonuaml ber of 583 3 1 brandbsrands interna onal 4 4 3 whichwhich 4 4 brands 4 entereendt ethreed wthheich 3 3 4 markmetarket 8080 bps bps % entered the 3 %% . % 4 4 .. 6 bps64.4 market 7722 % 80 % 14 . 414 4747 Q1 2017 7.2 Q2 2017 6 4 14 47 4040 Prime SC vacancy rate* 16 6 Prime SC vacancy rate* 16 40 3 3 1 Prime SC vacancy rate* 16 1 1 4 3 1 4 2 8 28 1 4 5 2 bps % 28 1 2 5 % 00 bps 0.6 % 1 2 3 . . 1 5 0 6 % 0 6 1 2 28 3 . 2 24 0Q1 20176 0 bpsQ2 2017 % 2 % 0.6 1 3 24 . 5 1 0 6 8 5 2 1 24 3 18 3 185 1 1 4 18 32 3 28 5 4 32 1 1 128 26 Source: JLL 13 3 2 4 32 22 1 28 26 3 17 2 22 1 Pricing* 17 1 26 3 2 2211 16Pr ici nPRICING**g* 17 9 9 11 Pricing* 11 Prime rent, RUB/sq m/year 9 1 1 1 Number of 4 1 Prime rent, RUB/sq m/year 1 1 1 1 1 Numbineter ronfa onal 4 1 Prime rent, RUB/sq m/year brands 1 11 1 1 interna onal 7 1 which lefNtumber of 4 2 1 2 brands 1 195, 000 0% 195, 000 the markineterna onal 7 1 which left brands 195, 000 0% 195, 000 the market 7 6 2011which lef2t012 2013 2014 2015 2016 H1 2017 1Q1 201795, 000 0% Q21 201795, 000 the market 2011 2012 2013 2014 2015 2016 H1 2017 Average rent, RUB/sq m/year Fashion,201 Footwear,1 20 Accessories12 2013 2Jewelry014 & Watches2015 2016 H1 2017 Average rent, RUB/sq m/year Fashion,Restaurants Footwear, & Cafes Accessories JewelryFurniture & Watches & Interior Average rent, RUB/sq m/year Fashion, Footwear, Accessories Jewelry & Watches 74 ,000 0% 74 ,000 RestaurantsCosmetics & & Cafes Perfume FurnitureGoods for & InteriorChildren Restaurants & Cafes 74 ,000 0% 74 ,000 Furniture & Interior CosmeticsInternational & Perfume retailer GoodsOther for Children Q2 2017 **Rents are givenQ17 2017for4 a single , 0unit of0 100 sq0 m GLA located0 on% a ground7 floor4 of a retail ,0 00 activityCosmetics trend & Perfume Goods for Children International retailer NOtherTotal gallery. Rents exclude VAT and OPEX. Higher level rents that exceed the market level **Rents are given for a single unit of 100 sq m GLA located on a ground floor of a retail activity trendInternational retailer are registered occasionally. N Total Other gallery. Rents exclude VAT and OPEX. Higher level rents that exceed the market level activity trend **Rents are given for a single unit of 100 sq m GLA located on a ground floor of a retail N Total are registeredgallery. occasionally. Rents exclude VAT and OPEX. Higher level rents that exceed the market level are registered occasionally. Source: JLL Source:Shop JLLping centre density in Moscow Vacancy rate in Moscow districts dSihstorpicptsin (gsq c emn tpreer d1e,0n0s0it yin ihna Mbitoasnctosw) Vacan6cy rate in Moscow districts districtSs h(soqp mpin pge cr e1n,0AEBtr0e0 Reald inehn aEstatesibtiyt ai nnMonitor tMs)os c| o3/2017w Vacancy rate in Moscow districts districts (sq m per 1,000 inhabitants) 592 1.7% sq m North- North- 592 Northern Eastern 335 1.7% Northern Eastern 6.2% 4sq0 m1 sq m 10.5% sq m 592 1.7% North- sq m North- Northern Eastern 335 Northern Eastern North- 6.2% 401 North- EasternNorth- 155sq m 10.5% North- Eastern 1.6% sq m Western sq m % Western Northern Eastern 527 Northern Eastern 335 5.6 % 6.2% sq m 401 sq m 10.5 sq m North- 155 North- Central Eastern 1.6% Central Eastern 450sq m 10.1% 366527 Western North- sq m 5.63.3% % Western sqsq mm Eastern 155 North- Eastern 1.6% 527 Western sq m 5.6% WesternWesCentraltern South- sq m Central South- 450 Eastern 10.1% 470366 Western Eastern sq m 3.39.3% % Central % sqsq mm Central 496 450 6.5 10.1% sq m sq m % South- 366 South- 3.3 Western sq m Western % South- Eastern 667470 South- Eastern 496 9.314.0 % WesternSouthern South-6.5% sqsq mm Southern South-sq m 9.3% Western Eastern 470 Western Western Eastern 496 6.5% 667 sq m sq m 14.0 % South- sq m South- NovomoskovskyWestern Southern 667Novomoskovsky Western Southern 14.0 % South- sq m South- Western Southern Western Southern Novomoskovsky Novomoskovsky Novomoskovsky Novomoskovsky
Contacts:
Olesya Dzuba Oksana Kopylova Margarita Shebanova +7 (495) 737 8000 Coolnesyta.dazcutbas@:eu.jll.com [email protected] [email protected] www.jll.ru Contacts: Olesya Dzuba Oksana Kopylova Margarita Shebanova +7 (495) 737 8000 [email protected] [email protected] [email protected] Olesya Dzuba Oksana Kopylova Margarita Shebanova www+7.j l(l4.r9u5) 737 8000 [email protected] [email protected] [email protected] www.jll.ru Moscow shopping centre market | Q2 2017
New retailers on the Russian market: entries and exits Availability
61 Overall SC vacancy rate Number of 58 interna onal 3 brands 4 which 4 entered the 3 bps market % 80 . % 4 7.2 6 4 14 47
40 Prime SC vacancy rate* 16 3
4 28 1 5 bps % 2 % 0 0.6 1 3 0.6 2 24 5 1
3 18
4 32 28 1 1 26 3 2 22 17 Pricing*
9 11 Prime rent, RUB/sq m/year 1 1 1 1 Number of 4 1 interna onal 1 brands 7 Moscow shopping centre market | Q2 2017 which left 195, 000 0% 195, 000 the market
2011 2012 2013 2014 2015 2016 H1 2017 New retailers on the Russian market: Average rent, RUB/sq m/year entries and exits AvFashion,ailab Footwear,ility Accessories Jewelry & Watches Restaurants & Cafes Furniture & Interior 61 74 ,000 0% 74 ,000 OverallCosmetics SC vacancy & Perfume rate Goods for Children Number of 58 interna onal 3 International retailer Other brands 4 **Rents are given for a single unit of 100 sq m GLA located on a ground floor of a retail 4 activity trend which N Total gallery. Rents exclude VAT and OPEX. Higher level rents that exceed the market level entered the 3 bps are registered occasionally. market % 80 . % 4 Moscow market overview | Retail7 market.2 6 4 AEB Real Estate Monitor | 3/2017 14 47
40 Prime SC vacancy rate* 16 Shopping centre density in Moscow 3 17 VACANCY RATE IN MOSCOW DISTRICTS districts (sq m per 1,000 inhabitants) 4 Vacancy rate in Moscow districts 28 1 5 bps % 2 % 0 0.6 1 3 0.6 2 24 592 5 1 1.7% sq m 18 3 North- North- Northern Eastern 32 Northern Eastern % 335 4 % 6.2 401 sq m 28 1 10.5 sq m 1 26 3 22 2 North- Eastern 155 17 Pricing* North- Eastern 1.6% 527 Western sq m 5.6% Western sq m 9 11 Central Central 450 Prime rent, RUB/sq m/year 10.1% 366 sq m 1 1 1 3.3% sq m Number of 4 1 1 1 Western South- South- interna onal Eastern 470 Western Eastern brands 7 9.3% % sq m 496 which left 195, 000 0% 195, 06.500 sq m the market 667 14.0 % South- sq m South- 2011 2012 2013 2014 2015 2016 H1 2017 Western Southern Western Southern Average rent, RUB/sq m/year Fashion, Footwear, Accessories Jewelry & Watches Novomoskovsky Novomoskovsky Restaurants & Cafes Furniture & Interior 74 ,000 0% 74 ,000 Cosmetics & Perfume Goods for Children Moscow shopping centre market | Q2 2017 International retailer Other activity trend **Rents are given for a single unit of 100 sq m GLA located on a ground floor of a retail New retailers on the Russian market: N Total gallery. Rents exclude VAT and OPEX. Higher level rents that exceed the market level entries and exits Availability are registered occasionally. Source: JLL 61 Overall SC vacancy rate Number of 58 interna onal 3 Contacts: brands 4 Shopping centre density in Moscow which 4 18 SHOPPING CENTRE DENSITY IN MOSCOW entered the Olesya Dzuba Oksana Kopylova Margarita Shebanova 3 bps +7 (495) 737 8000 market % Va80cancy rate in .Mos%cow districts DISTRICTSdistricts ( (SQsq mM PERper 1,000 1,00 INHABITANTS)0 inhabitants) 4 7.2 6 4 [email protected] [email protected] [email protected] www.jll.ru 14 47
40 Prime SC vacancy rate* 16 3 592 1.7% sq m 4 North- North- 28 1 5 bps No%rthern Eastern Northern Eastern 335 2 % 0 0.6 6.2% 401 sq m 1 3 0.6 10.5% sq m 2 24 5 1 North- 18 North- Eastern % Eastern 155 3 1.6 527 Western sq m 5.6% Western sq m 4 32 28 1 Central Central 1 26 3 450 2 22 10.1% 366 sq m 17 Pricing* 3.3% sq m 9 11 Western South- South- Eastern 470 Western Eastern Prime rent, RUB/sq m/year9.3% % sq m 496 1 1 1 6.5 sq m Number of 4 1 1 1 interna onal 667 South- brands 7 14.0 % South- sq m which left 195, 000 0% 195,W 0este0rn 0Southern Western Southern the market
2011 2012 2013 2014 2015 2016 H1 2017 Average rent, RUB/sq m/year Novomoskovsky Novomoskovsky Fashion, Footwear, Accessories Jewelry & Watches Restaurants & Cafes Furniture & Interior 74 ,000 0% 74 ,000 Cosmetics & Perfume Goods for Children
International retailer Other activity trend **Rents are given for a single unit of 100 sq m GLA located on a ground floor of a retail N Total gallery. Rents exclude VAT and OPEX. Higher level rents that exceed the market level are registered occasionally.
Source: JLL Contacts: Shopping centre density in Moscow AEB Real Estate Monitor | 3/2017 7 Vacancy rate in Moscow districts districts (sq m pOleersy 1a ,D0z0ub0a inhabitants) Oksana Kopylova Margarita Shebanova +7 (495) 737 8000 [email protected] [email protected] [email protected] www.jll.ru
592 1.7% sq m North- North- Northern Eastern 335 Northern Eastern 6.2% 401 sq m 10.5% sq m
North- Eastern 155 North- Eastern 1.6% 527 Western sq m 5.6% Western sq m Central Central 450 10.1% 366 sq m 3.3% sq m Western South- South- % Eastern 470 Western Eastern 496 9.3 6.5% sq m sq m 667 14.0 % South- sq m South- Western Southern Western Southern
Novomoskovsky Novomoskovsky
Contacts:
Olesya Dzuba Oksana Kopylova Margarita Shebanova +7 (495) 737 8000 [email protected] [email protected] [email protected] www.jll.ru Moscow officeMoscow market office | Q2 2017market | Q2 2017
Moscow officeMoscow market office | Q2 market 2017 | Q2 2017 MoAEBMs Realcoo Estatesw cMonitoro |w 3/2017 Moscow market overview | Offi ce market oMffioMocsecffioo smarcwceo wmarketket offioOfficecffie cmar emarket, mark eQ2tk 2017et • In Q2 2017,• Inno Q2 business 2017, noce nbusinesstres wer ece cnompltres ewteed.re cTheompl oveetred.all H1The 2017 over vallolume H1 2017 was v21,100olume wsqas m, 21,100 88% l osqw erm, than 88% inlo wH1er 2016. than in H1 2016. • In Q2 2017, no business centres were completed. The • About 80% of the deals in H1 2017 were closed by Rus- • About 542,000• About sq m542,000 are expec sq mted a rfeor e xpecdelivteedry finor 2017. deliv eMory inst 2017.of these Mo psrtojects of these are plorojectscated inar eMos loccaotedw Citin yMos, inccludingow Cit IQ-quay, includingrter, FIQ-quaederarter, Federa overall H1 2017 volume was 21,100 sq m, 88% lower sian companies. • EIna sQ2t, O 2017,K•O In Phase E Q2noas t,2017,business II.OKO noPhase cebusinessn tII.res w ceernet cresompl weerteed. compl Thee oted.ver allThe H1 o v2017erall vH1olume 2017 w vasolume 21,100 was sq 21,100 m, 88% sq lo m,wer 88% than lo winer H1 than 2016. in H1 2016. than in H1 2016. • Some 35.3% of the overall take-up was recorded in • TAboutake-up 542,000• in About• Q2 Ta k2017 e-up sq542,000 m win aas rQ2e 283,500esq xpec2017 m at edrwe sq as eforxpec m,283,500 deli 41%tedve frhigher orysq in deli m, 2017. vthan41%ery Mo inhigherin 2017.sQ1.t of Thethan these Mo o sinvt e p ofQ1.rrallojects these H1The 2017 a oprvreojectse lor tallcaak tH1e-uped ar 2017ein low Mosasca t t22%aedckoe-up win l oCitMosw wyeras, cin Yo 22%ocwludingY. CitAs loy the,w inIQ-quaerc demand ludingYoY. rAste IQ-qua rthe, cFede demandrrtaer, Fede c ra • About 542,000 sq m are expected for delivery in 2017. decentralised locations outside the Third Transport Ring. normalises,East, OKOE Phasea snormalises,thet, O shaK II.O rPhasee of the rene II. shag rea of reneg rena ewals in rH1en edeclinedwals in H1 to 19%declined (49% t oin 19% 2016). (49% in 2016). Most of these projects are located in Moscow City, IQ- • The vacancy rate stayed roughly unchanged at 15%. In • AboutTake-up 80%• in T• aQ2 ofkAboute-up deals2017 in 80% inwQ2as H1 of2017 283,500 2017deals w as win e sq 283,500H1re m, closed 2017 41% sq w bhigher eym,r Russiane 41%closed than higher c bompanies.iny Q1.Russian than The in co Q1.ompanies.verall The H1 o v2017erall tH1ake-up 2017 w tasak e-up22% wloaswer 22% YoY l.o Aswer the Yo demandY. As the cdemand c normalises,quarter, Federation the share of East, rene gOKOa Phase II.renewals in H1 declined tClasso 19% A,(49% the in vacancy 2016). rate declined by 0.7 ppt, to 16.7%, • normalises,Some 35.3%• Somethe of thesha 35.3% roev eofrall rofene t theakge-up ovae wrallas t raekce-uporrdeden we aswinals rdecee cino rH1ndedtr alideclined inzed dece loc natotr ali19%zed (49% loca in the 2016). Third Tr ansporthe Thitr dRing. Transport Ring. • Take-up in Q2 2017 was 283,500 sq m, 41% higher in Class B+ to 15.6%. • About 80%• About of deals 80% in of H1 deals 2017 in wH1er 2017e closed we rbey closed Russian b yc ompanies.Russian companies. • The vacancy•than The rate vin astc aQ1.ancyyed Therroughlyate soverallta yunchaned r oughlyH1g ed2017 aunchant 15%. take-up gIned Class a twas 15%. A , 22%the In Classv alowercancy A, therate •v adeclinedRentalcancy r arates btey declined0.7 have ppt, t remainedboy 16.7%, 0.7 pp t,in stable tClasso 16.7%, B+ in t Q2.ino 15.6%.Class Prime B+ trentso 15.6%. at • Some 35.3% of the overall take-up was recorded in decentralized loca the Third Transport Ring. • RSomeental 35.3%rates•YoY. Rh ofeanv ttheeAsal r emained r theaotvese r demandallha vt aestk rablee-upemained composition in w asQ2. rse tPablecrimeorded in rnormalises, e Q2.innts dece Parimet USD600ntr alire thenzedts – a loshare750t cUSD600a (RUB35 of – 750,USD000 (RUB35 –the 600-750 44,000), Thi,r000d T Classr(RUB anspor– 44,000), A 35,000-44,000), rte Ring.nts Class at USD400 A rents – a Class670t USD400 (RUB24,000 A rents – 670 at (RUB24,000 – USD – • 40,000),The vac•ancy Class Therenegotiations40,000), r v aB+atec ancyasta RUB12,000 yClassed ra treoughly B+ sandta ayted –RUB12,000 renewalsunchan 25,000.roughlyged unchan in – a 25,000.tH1 15%. gdeclineded In a tClass 15%. to A In , 19%the Class v a(49% cAancy, the r vaate400-670c ancydeclined rate (RUBbdeclinedy 0.7 24,000-40,000),pp t,by t o0.7 16.7%, ppt, t ino 16.7%,Class Class B+ in B+ t Classo 15.6%. at B+RUB to 15.6%.12,000- • Rental r•a tResinen h t2016).aalv era rtemainedes have r emainedstable in Q2.stable Prime in Q2. ren Ptsrime at USD600 rents at – USD600 750 (RUB35 – 750,25,000.000 (RUB35 – 44,000), ,(00019–27 – Class44,000), )A re Classnts a tA USD400 rents at – USD400 670 (RUB24,000 – 670 (RUB24,000 – – 40,000), Class40,000), B+ a Classt RUB12,000 B+ at RUB12,000 – 25,000. – 25,000. New supply19New NEW supply SUPPLY 20Office OFFICE take-upOffice TAKE-UP take-up
'000 sq m '000 sq m '000 sq m '000 sq m New supplyNew supply Office Officetake-up take-up 4% 4% 542 542 1,100 1,100 '000 sq m '000 sq m 71% 71% '000 sq m '000 sq m 1,057 1,057 4% 4% 1,100 542 542 1,100 71% 1,057 3711%7 317 1,057 578 578-22% -22% 175 175 317 317 -88% -88% 578 578 -22% 175 175 450-22% 450 -88% 21-88% 21 450 450 H1 2016 H1H121 2016 2017 21H1 2017 2016 2017F2016 2017F H1 2016 H1 20172016 H1 2017 2016 20162017F 2017F Fact ForecastFact Forecast Fact ForecastFact Forecast H1 2016 H1 2016H1 2017 H1 2017 2016 20162017F 2017F H1 2016 H1 H12016 2017 H1 2017 2016 2016 2017F 2017F Source: JLL Source: JLL Vacancy Vacancy ratesFact by ratesFact Forecast class byForecast class Fact FactForecast Forecast Vacancy rates by class Vacancy16.7 %21 rates16.7 VACANCY% by class RATES15.6 BY% CLASS15.6% 12.5% 12.5% 15.0% 15.0% 20.9% 20.9% 16.3% 16.3% 10.1% 10.1% 15.6% 15.6% 16.7%16.7% 15.6%15.6% 12.5%12.5% 15.0%15.0% Q2 2017 Q2 2017 20.9%20.9% 16.3%16.3% 10.1%10.1% 15.6%15.6% Class A Class A Class B+ Class B+ Class B- Class B- Overall Overall Q2 2017 Q2 2017 Q2 2016 Q2 2016
Class A Class A Class B+ Class B+ Class B- Class B- Overall Overall Q2 2016 Q2 2016
Source: JLL 18.1718.17 m sq m m sq m
Class А Class А Class В+ Class В+ Class В- Class В1- 8.1178.17
7 7 m sq m
1 1 m sq m 0 3.9 m sq0 m3.9 m s+q1.4 m %* +1.4%* 9.3 m sq m9.3 m sq m +1.2%* +1.2%* 4.9 m sq m4.9 m sq m+0.0%* +0.0%* 2 Cl2 ass А Class А Class В+ Class В+ Class В- Class В- Q Q 7 7 1 1 80 AEB Real Estate Monitor | 3/2017 0 0 m sq23 0,m0.090 m sq m+21.4,00%04,*000+1.4%* 4,0006,000 6,0008,000 m sq9 8m,.0300 1m0, 0s0q0 m 10,00+101.22,00%0 * +1.212%,0*0104,000 m sq14 m,0.09106 ,m00 s0q m +0.016,0%010*8,00+00.0%* 18,000 3.9 2 9.3 4.9 2 Q
Q '000 sq m '000 sq m *Growth year over*Growth year year over year 0 0 2,000 2,000 4,000 4,000 6,000 6,000 8,000 8,000 10,000 10,000 12,000 12,000 14,000 14,000 16,000 16,000 18,000 18,000 '000 sq m '000 sq m *Growth year*Growth over year year over year Moscow office market | Q2 2017 Moscow office market
• In Q2 2017, no business centres were completed. The overall H1 2017 volume was 21,100 sq m, 88% lower than in H1 2016. • About 542,000 sq m are expected for delivery in 2017. Most of these projects are located in Moscow City, including IQ-quarter, Federa East, OKO Phase II. • Take-up in Q2 2017 was 283,500 sq m, 41% higher than in Q1. The overall H1 2017 take-up was 22% lower YoY. As the demand c normalises, the share of reneg a renewals in H1 declined to 19% (49% in 2016). • About 80% of deals in H1 2017 were closed by Russian companies. • Some 35.3% of the overall take-up was recorded in decentralized loca the Third Transport Ring. • The vacancy rate stayed roughly unchanged at 15%. In Class A, the vacancy rate declined by 0.7 ppt, to 16.7%, in Class B+ to 15.6%. • Rental rates have remained stable in Q2. Prime rents at USD600 – 750 (RUB35,000 – 44,000), Class A rents at USD400 – 670 (RUB24,000 – 40,000), Class B+ at RUB12,000 – 25,000.
New supply Office take-up
'000 sq m '000 sq m 4% 542 1,100 71% 1,057 317 578 175 -22% -88% 450 21
H1 2016 H1 2017 2016 2017F H1 2016 H1 2017 2016 2017F
Fact Forecast Fact Forecast
Vacancy rates by class
16.7% 15.6% 12.5% 15.0% Moscow20.9% market overview |16.3 Offi ce% market 10.1% 15.6% AEB Real Estate Monitor | 3/2017 Q2 2017
Class A Class B+ Class B- Overall Q2 2016
22 MOSCOW OFFICE STOCK BY CLASS 18.17 m sq m Class А Class В+ Class В- 7 1 0 3.9 m sq m +1.4%* 9.3 m sq m +1.2%* 4.9 m sq m +0.0%* 2 Q
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 '000 sq m *Growth year over year
Source: JLL Moscow office marketMoscow | Q2 officeoffice 2017 market market | | Q2 Q2 2017 2017
23 TRANSACTED SPACE BY CLASS, LOCATION AND SECTOR, H1 2017
By class ByBy classclass By business sByectorBy business business se ctorsector By submarketsBy submarketsBy submarkets
Class А Mining & Class А Class А Mining & Mining & Explora Manufacturing Explora Explora 5%Manufacturing3% Manufacturing 17.9 % % 32.9%% 5% 3% 5% 3% 17.9 % 17.9 % 32.9 32.9 Public Public Public Business Services 14.9% Adminis 5% Business22 Services% Business Services CBD 14.9% 14.9% Class В+ Adminis 5Admini% s 5% 22% 22% CBD CBD Class В+ Class В+ Moscow City Moscow City Moscow City 59.6% Wholesale Banking & 59.6% 59.Wholesale6% Wholesale& Retail 13 % Banking38 & % FinanceBanking & & Retail 13% & Retail 13% 38% Finance 38% Finance 31.9 % Class В- 31.9 % 31.9 % Class В- Class В- Service Service IndustriesService 1% 1% 35.3% From GR to TTR % % 7.5% Industries 1% Industries 11%%12% 1% From GR to TTR From GR3 to5 .TTR3 35.3 7.5% 7.5% 12% 12% Other Outside TTR Other Other Outside TTR Outside TTR Source: JLL Office property cycle in Moscow Asking rents* Office property24Office OFFICE cycleproperty PROPERTY in Moscow cycle CYCLE in Moscow IN MOSCOW Asking25 ASKING rents*Asking RENTS* rents* RUB / sq m / year Rental growth RUB / sq m / yearRUB / sq m / year Rental growthRental slowing growth slowing slowing 35-44K 35-44K 35-44K24-40K 24-40K 24-40K Rental growth Rents K Rental growthRental growth Rents fallingRents 12-25 Prime** falling falling Cla1ss2 A -25K 12-25K Prime** Prime** 8-12K Class A Class A Class 8B+-12K 8-12K Q3 2017 Class B+ Class B+ Class B-
Q3 2017 Q3 2017 Q2 2017 Class B- Class B- Q2 2017 RentsQ2 2017 *Asking rents (including pre-lets) exclude VAT. **Prime rents refer to rents in high quality buildings in the Central Business *Asking rents (including*Asking pre-lets) rents (includingexclude VAT. pre-lets) exclude VAT. Rents Rents District (CBD). **Prime rents refer**Prime to rents rentsin high refer qua tolit yrents building in highs in quthea litCentraly building Busins iness the Central Business District (CBD). District (CBD). Source: JLL Source: JLL Moscow office submarkets, Q2 2017 Moscow officeMoscow submarkets, office submarkets, Q2 2017 Q2 2017 AEB Real Estate Monitor | 3/2017 9IQ quarter 123,000 sq m A CBD* Moscow City Fro m G R to TTR** Outs ide TTR*** IQ quarter IQ quarter 123,000 sq m A123,000 sq m A Stock,CB Dsq* m Mosc3,985,747ow CiBtyD* Fro m934,080M G oRs tcoo wTT CRi*ty* OuFt4,481,440rs oid me TG TRR t*o* T *TR** 8,767,410Outs ide TT R*** Federation Tower East 205,000 sq m B+ Stock, sq m Stock,3,985,747 sq m 934,0803,985,747 4,481,440934,080 8,767,4104,481,440 8,767,410 Availability, sq m 529,093 154,744 554,918 1,487,413 Federation Federation Tower East Tower East 205,000 sq OKOm B (phase+205,000 II) sq m B+ 20,500 sq m B+ Availability, sq m VAvailability,a529,093cancy rate ,sq % m154,744529,09313.3 554,918154,74416.6 1,487,41312.4554,918 1,487,41317.0 OKO (phase II) OKO (phase II) Park ofB Legends+ B+ 20,500 sq m 20,500 sqB +m 13.3 16.6 13.3 12.416.6 17.012.4 17.0 40,200 sq m Vacancy rate, % TVaakcea-up,ncy srqat me, % 46,189 7,801 108,522 120,965 Park of Legends Park of Legends + Oasis + 40,200 sq m29,000B 40,200 sq m sqA m B Take-up, sq m *The Tak46,189 eCentral-up, sq Businessm 7,801 District46,189 submarket108,5227,801 comprises the120,965 area108,522 within and in120,965 close proximity to the Garden Ring and Tverskaya-Yamskaya Street. Oasis Fili Grad Oasis A + A *The Central Business**The* EDistrictxc Centralludes submarketM oBusinessscow Cit y.comprisesDistrict submarket the area compriseswithin and the in close area within and in close 29,000 sq m25,50029,000 sq m sqB m proximity to the Garden proximity Ring toand the Tverskaya-Yamskaya Garden Ring and Tverskaya-Yamskaya Street. Street. *** Including outside MKAD projects. Fili Grad NeopolisFili Grad + А + ** Excludes Moscow* C*i tEy.xcludes Moscow City. 25,500 sq m63,200B 25,500 sq m sq m B
*** Including outside* *M* KInAcDlu pdrionjge octus.tside MKAD projects. Neopolis Neopolis 63,200 sq m А 63,200 sq m А Contacts:
Olesya Dzuba Alexander Bazhenov Karina Garnaga +7 (495) 737 8000 ContactsContactso:lesya.dzuba@eu.:jll.com [email protected] [email protected] www.jll.ru
Olesya Dzuba Olesya DzubaA lexander BazhenovAlex ander BazhenovK arina Garnaga Karina Garnaga +7 (495) 737 800+07 (495) 737 8000 [email protected]@[email protected]@[email protected]@eu.jll.com www.jll.ru www.jll.ru Moscow office market | Q2 2017
By class By business sector By submarkets
Class А Mining & Explora Manufacturing 32.9% 5% 3% 17.9 % Public Business Services 14.9% Class В+ Adminis 5% 22% CBD Moscow City 59.6% Wholesale Banking & & Retail 13% 38% Finance 31.9 % Class В- Service % Industries 1% 1% From GR to TTR 35.3 7.5% 12% Other Outside TTR
Office property cycle in Moscow Asking rents*
RUB / sq m / year Rental growth slowing 35-44K 24-40K Rental growth Rents falling 12-25K Prime** Class A 8-12K Class B+
Moscow office market | Q2 2017 Q3 2017 Class B- Q2 2017 *Asking rents (including pre-lets) exclude VAT. By class By business sector By submarketsRents AEB Real Estate Monitor | 3/2017 Moscow market**Prime overview rents | Offi refer ce tomarket rents in high quality buildings in the Central Business District (CBD). Class А Mining & Explora Manufacturing 32.9% 5% 3% 17.9 % Public Business Services 14.9% Class В+ Adminis 5% 22% CBD Moscow City 59.6% Wholesale Moscow Banking & office submarkets, Q2 2017 & Retail 13% 38% Finance 31.9 % Class В- 26 MOSCOW OFFICE SUBMARKETS, Q2 2017 Service Industries 1% 1% 35.3% IQ quarter From GR to TTR 123,000 sq m A 7.5% 12% CBD* Moscow City Fro m G R to TTR** Outs ide TTR*** Other Outside TTR Stock, sq m 3,985,747 934,080 4,481,440 8,767,410 Federation Tower East Office property cycle in Moscow Asking rents* 205,000 sq m B+ Availability, sq m 529,093 154,744 554,918 1,487,413 RUB / sq m / year OKO (phase II) Rental growth 20,500 sq m B+ slowing Vacan35cy ra-te44, % K 13.3 16.6 12.4 17.0 Park of Legends K 40,200 sq m B+ Take-up, sq m 46,18924-40 7,801 108,522 120,965 Rental growth Rents Oasis falling 12-25K A *The Central Business District submarket comprises the area within and in close 29,000 sq m Prime** proximity to the Garden RingClass and A Tverskaya-Yamskaya Street. 8-12K Fili Grad Class B+ + ** Excludes Moscow City. 25,500 sq m B Q3 2017 Class B- *** Including outside MKAD projects. Q2 2017 Neopolis 63,200 sq m А Rents Source: JLL*Asking rents (including pre-lets) exclude VAT. **Prime rents refer to rents in high quality buildings in the Central Business District (CBD). 27Contacts KEY NEW SUPPLY: IN 2017
Olesya Dzuba Alexander Bazhenov Karina Garnaga +7 (495) 737 8000 Moscow office submarkets, Q2 2017 [email protected] [email protected] [email protected] www.jll.ru
IQ quarter 123,000 sq m A CBD* Moscow City Fro m G R to TTR** Outs ide TTR***
Stock, sq m 3,985,747 934,080 4,481,440 8,767,410 Federation Tower East 205,000 sq m B+ Availability, sq m 529,093 154,744 554,918 1,487,413 OKO (phase II) 20,500 sq m B+ Vacancy rate, % 13.3 16.6 12.4 17.0 Park of Legends 40,200 sq m B+ Take-up, sq m 46,189 7,801 108,522 120,965 Oasis A *The Central Business District submarket comprises the area within and in close 29,000 sq m proximity to the Garden Ring and Tverskaya-Yamskaya Street. Fili Grad + ** Excludes Moscow City. 25,500 sq m B
*** Including outside MKAD projects. Neopolis 63,200 sq m А
Source: JLL Contacts:
Olesya Dzuba Alexander Bazhenov Karina Garnaga10 +7 (495) 737 8000 AEB Real Estate Monitor | 3/2017 [email protected] [email protected] [email protected] www.jll.ru TRENDS
The low transactions’ volume in Q1 2017 did not represent the real market situation. In Q2, the market compensated for the decrease of Q1. In H1 2017, the take-up was 25% higher than the same indicator in 2016, which means that the demand in the Moscow region is stabilizing. However, the record-high figures of 2015-2016 will not be reached in 2017. We expect the transactions’ volume in class A and B to be around 1 million sq m, which is 10% lower than the average indicator in 2012- 2016.
Considering that the supply is growing slower than the demand, the vacancy rate is expected to decrease by the end of the year and we will see the prerequisites for rental rate growth.
Despite the strong demand and low new construction volume, the rental rate in the Moscow region Moscow market overview | Warehouse market has decreased again inAEB Q2 Real 2017 Estate. The Monitor renta |l 3/2017rate decline is most likely caused by several developers who are willing to take advantage of the low cost of construction and to dictate their terms to the market.
In the regions, the demand for warehouse space is noticeably stronger than in Moscow. In the first TRENDS half of the year the take-up was higher than the annual indicator in 2016. There is a possibility that a record high transactions’ volume will be reached. Since the existing supply is not able to meet such a The low transactions’ volume in Q1 2017 did not represent the real market situation. In Q2, the market Warehouse market high demand both by volume and by geographical coverage, the rental rate in some regions is compensated for the decrease of Q1. In H1 2017, the take-up was 25% higher than the same indicator in 2016, which means that the demand in the iMncosreacoswing reg andion vais sctanabciliyz irngate. Hiso fwaellivnger,. the rTRENDSecord-high figures of 2015-2016 will not be reached in 2017. We expect the transactions’ volume in TRENDS. MOSCOW REGION cThelass low A transactionsand B to be’ volumearound in 1 Q1 m illi2017on sdidq mnot, w representhich is 10 %In l othewe rregions, than the the ave demandrage ind forica warehousetor in 201 2space- is no- 2016the real. market situation. In Q2, the market compensated ticeably stronger than in Moscow. In the fi rst half of the We expect the vacancy rate to decrease by 0.5 p.p. by the end of the year and to be 9-9.5%. This for the decrease of Q1. In H1 2017, the take-up was 25% deyearcli nethe wtake-upill happen was behighercau sthane the the tr anannualsac tiindicatoron volu mine is expected to be around 1 million sq m which is Chigheronside thanring the tha samet the indicator supply iins g2016,rowi ngwhich slo wmeanser than that the de2016.mand There, the is v aac anpossibilitycy rate ithats ex ape recordcted t ohigh transac- decrease by the end of the year and we will see the premrequuchi shitieghes for rt hanrent athel ra texpece growtedth. construction volume in 2017 (595,000 sq m). the demand in the Moscow region is stabilising. However, tions’ volume will be reached. Since the existing supply is Dthees record-highpite the str ongfi gures dem ofand 2015-2016 and low willne wnot c onbes reachedtruction voInotnlu Qm able2e,, tt hetohe meet rrenentta asuchll rraatt ea highdein tchr edemandea Msoedsc bo bothyw 10reg by%ion volumeand w aands RU B 3,300 per sq m per year, excluding VAT, hain s2017. dec rWeeas edexpect aga ithen in transactions Q2 2017. T’ hevolume rent ainl raclasste de Ac lineOby PEi sgeographical mX oandst li kuetliliy coverage,tcieaus.s Ited is b ttheyhe s erentallovwereas lrate tde figuv inerl opeesome rears cregions hed s ince 2009 on the Moscow market. wandho Ba rtoe wbeilli aroundng to t a1k emillion advan sqtage m, whichof the islo w10% co slowert of c onisst rincreasinguction and and to vacancydictate trateheir iste falling.rms to the VACANCY RATE, CLASS A mthanark theet. average indicator in 2012-2016.
1TRENDS.4% MOSCOW REGION In the regions, the demand for warehouse space is noticeably s1t3r,5%onger than in Moscow. In the first Considering that the supply is growing slower than the We expect the vacancy rate to decrease by 0.5 p.p. by the half of the year the take-up was higher than the annual 1i2nd% icator in 2016. There is a possibility that a rdemand,ecord h ighthe t rvacancyansacti onrates’ viso luexpectedme will beto rdecreaseeached. Sbyin ceend the ofe xtheist iyearng s uppand ltoy ibes no 9-9.5%.t able Thisto m 1declineee0,0%t su1 cwill0h,0% a happen 10% 9,5% htheigh end de mofand the boyearth andby v weolu mwille andsee theby geogprerequisitesraphica lfor co vebecauserage, th thee ren transactiontal rate in volume some riseg expectedions is to be around irentalncrea ratesing growth.and vacancy rate is falling. 18% million sq m which is much higher than the expected 7,0% construction6% volume in 2017 (595,000 sq m). TRENDS. MOSCOW REGION Despite the strong demand and low new construction vol- 4% 3,9% Wume,e expe the crentalt the ratevac anin cthey r aMoscowte to de regioncreas ehas by decreased 0.5 p.p. by Inthe Q2, end the of trentalhe yea rater and decreased to be 9 -by9. 510%%. T andhis was RUB 2% 1,0% 1,0% deagaincline in wQ2ill happen2017. The be rentalcause rate the declinetransac istion most vo lulikelyme is e3,300xpec tpered sqto mbe per ar oundyear, excluding1 millio1,n5 VAT,s%q m OPEX whi chand is utilities. mcauseduch h byighe severalr than developers the expec whoted consare willingtruction to vtakeolu mad-e in 2017It0% is the (595 lowest,000 fis qgure m) .reached since 2009 on the Moscow 2009 2010 2011 2012 2013 2014 2015 2016 2017F vantage of the low cost of construction and to dictate market. (28, 29 ) In Q2, the rental rate decreased by 10% and was RUB 3,300 per sq m per year, excluding VAT, their terms to the market. OPEX and utilities. It is the lowest figure reached sinceS 2009ourc eo:n C theus hMmoansco &w Wmaakrkeefit.e l d
V28A C AVACANCYNCY RA TRATE,E, CL CLASSASS A A N29ET NETREN RENTALTAL RA RATE*,TE*, C CLASSLASS A,A (RUB/SQ(RUB/SQ M/YEAR). M/YEAR )
4,500 14% 4,500 13,5% 4,299 12% 10,0% 10,0% 4,250 4,150 10% 9,5% 4,198 4,000 8% 3,820 7,0% 3,750 6% 3,650
3,500 4% 3,9% 3,341
3,250 2% 1,0% 1,0% 3,331 3,300 1,5% 0% 3,000 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2009 2010 2011 2012 2013 2014 2015 2016 2017F Source: Cushman & Wakefi eld * Rental rate excluding OPEX, utilities, VAT Source: Cushman & Wakefield Source: Cushman & Wakefi eld NET RENTAL RATE*, CLASS A (RUB/SQ. M/YEAR)
4,500 4,500 4,299
4,250 4,150 4,198 4,000 3,820
3,750 3,650
3,500 3,341
3,250 3,331 3,300
AEB3,000 Real Estate Monitor | 3/2017 11 2009 2010 2011 2012 2013 2014 2015 2016 2017F Distributor - 14.0% Distributor - 21.2%
Logistic - 13.5% Other - 3.6% Logistic - 13.0% Other - 4.2% Producer - 17.9% Producer - 23.1%
Retailer - 51.1% Retailer - 38.5%
Q3 2015 – Q2 2016 Q3 2016 – Q2 2017
Source: Cushman & Wakefield
* Rental Rate excluding OPEX, utilities, VAT Source: Cushman & Wakefield
NEW CONSTRUCTION AND DEMAND. MOSCOW REGION NEW CONSTRUCTION AND DEMAND. REGIONS CAEBo nReals tEstateruct Monitorion v |o 3/2017lume in 2017 is lower than in Moscow2016 market. In Hoverview1, 12 | Warehouse4,000 marketsq m of warehouse space was Iadden H1d, 1 t2o0 t,h0e0 0m saqrk met, o wf hqiucahl iitsy awlmaroehsto 4u stiem sepsa lcees sw tahas nc oinn s201truc6t.e d – down 60% year-on-year.
4W20e ,exp000e scqt tmhe o nf ewwa rcehouonstsruec spationc teo wreilal cbhe 54add0,e00d 0to s tqh em m ina r201ket 7–, 1w0h%ic hh iigs h3e0r% th laonw tehre t halasnt iyne 201ar 5 and inNEWdic aCONSTRUCTIONtor. AND DEMAND. 201MOSCOW6. REGION Construction volume in 2017 is lower than in 2016. In H1, In the Moscow region, in Q2 2017, the take-up figure showed IIn124,000n tthhee sq rM emg oofis owarehousecnosw, t hr espaceeg dio ewasnm, addedainn Qd to 2f othe 201r market,wa7r,eh thbetteroeu tsa resultsek ep-r thanuepm infi isQ1geu 2017.sr eis Thes sht indicatororownegd .managed Ibne Htte 1tor over2re0-s1u7l,t sth teha trna nins aQc1ti o201n v7o.l uTmhe was hiwhichnigdhic eisa ralmostt othra m4n times anageth eless 20 thand1 in6to 2016. ann oveuracol imndei caa ttworcomeo. -Itfo ail stwo-foldd plaogs lag sfri bofromlme 2016. t201ha Int 6 aH1. rI2017,enc Ho ther1d total201 hi gvolumeh7 ,t at hkee -tuopta wl vilol lbuem ree aocf hleeads ien an20d1 7. of lease and sale transactions was 496,000 sq m, which is sWea lexpecte transa the newc constructiontions w atos reach 49 6540,000,000 sq s mq in m ,25% wh lowerich than is the25 same% lindicatorower in t 2016.han ( 30,th e31 s)ame indicator in 2016. N2017,EW which C Ois 30%NS lowerTR thanUC inT 2015IO Nand, 2016.CLASSES A AND B, ‘000 SQ. M NEW CONSTRUCTION, CLASSES A AND B, ‘000 SQ. M 1,2300 0 NEW CONSTRUCTION, CLASSES A AND B, ‘000 SQ M
1,01,8000
1,600 800 1,400
1,26000 1,000 400 800 600 200 400
200 2010 2011 2012 2013 2014 2015 2016 2017F 0 2008 2009 2010Actua2l 0Co11nstru2c0tion12 2013Forecast2014 2015 2016 2017F Actual Construction Forecast SSource:our Cushmance: C & Wakefieldushman & Wakefield Source: Cushman & Wakefield T31A K TAKE-UP,E-UP, CLASSESCLASS A ANDES B, A ‘000 A NSQD M B, ‘000 SQ. M TAKE-UP, CLASSES A AND B, ‘000 SQ M
1,400 700 1,200 600 1,000 500 800 400 600 300 400 200 200 100 0 0 2010 2011 2012 2013 2014 2015 2016 2017F 2010 2011 2Take012 - up2013 2014Forecast2015 2016 2017F Take-up Forecast Source: Cushman & Wakefield Source: Cushman & Wakefield Source: Cushman & Wakefield
12 AEB Real Estate Monitor | 3/2017 NEW CONSTRUCTION AND DEMAND. MOSCOW REGION
For the second year in a row, the demand for warehouse premises from the retail segment is decreasing. Compared to 2015, the share of deals with retailers declined from 50% to less than 40% in 2017. Meanwhile, there is a steady increase in demand for warehouse space from manufacturing companies and distributors – the share is 21% and 23% respectively.
At the beginning of 2017, the demand from food retailers had decreased from 33% to 22%, meanwhile the demand from other segments had increased.
TAKE-UP STRUCTURE Moscow market overview | Warehouse market AEB Real Estate Monitor | 3/2017
Distributor - 21.2% ForD theistributor second - 14. year0% in a row, the demand for warehouse manufacturing companies and distributors – the share is
premisesLogistic from- 13.5 %the retail segment is decreasing. Com- 23% and 21% respectively. paredOther to - 2015,3.6% the share of deals with retailers declined Logistic - 13.0% from 50% to less than 40% in 2017. Meanwhile, there is AtOther the - 4beginning.2% of 2017, the demand from food retail- Producer - 17.9% a steady increase in demand for warehouse space from ersProd decreaseducer - 23.1 %from 33% to 22%, meanwhile the demand from other segments increased. (32 ) 32 TAKE-UP STRUCTURE
DistributorRetaile -r 14.- 510.%1% Distributor - 21.2% Retailer - 38.5% Logistic - 13.5% Other - 3.6% Logistic - 13.0% Q3 2015 – Q2 2016 Q3 2016 – Q2 2017Other - 4.2% Producer - 17.9% Producer - 23.1%
SRetaioulerrc -e51:. 1C%ushman & Wakefield Retailer - 38.5%
Q3 2015 – Q2 2016 Q3 2016 – Q2 2017
NSource:EW Cushman CO N& WakefieldSTRUCTION AND DEMAND. REGIONS
In H1, 120,000 sq m of quality warehouse space was constructed – down 60% year-on-year. NEW CONSTRUCTION Source: Cushman & Wakefield 4AND20, 0DEMAND.00 sq m oREGIONSf warehouse space will be added to the market – 10% higher than the last year iInn dH1,ic a120,000tor. sq m of quality warehouse space was con- In the regions, the demand for warehouse premises is structed – down 60% year-on-year. strong. In H1 2017, the transaction volume was higher NEInW th CeO rNegSiToRnsU,C thTeIO dNe mANanDd D fEorM wAaNrDeh. oRuEsGeI OpthanrNeSm theise 2016s is annualstron indicator.g. In H It1 is2 possible017, th thate t raa recordnsac tion volume was 420,000 sq m of warehouse space will be added to the high take-up will be reached in 2017. (33, 34 ) higher than the 2016 annual indicator. It is possible that a record high take-up will be reached in 2017. In marketH1, 1 –2 010%,00 higher0 sq mthan of the qu lastalit yyear wa indicator.rehous e space was constructed – down 60% year-on-year. NEW CONSTRUCTION, CLASSES A AND B, ‘000 SQ. M 42330, 00 NEW0 sq CONSTRUCTION, m of warehou sCLASSESe space A wANDill b B,e add‘000e SQd tMo the market – 10% higher than the last year ind1,2ic00ator.
In 1,0th0e0 regions, the demand for warehouse premises is strong. In H1 2017, the transaction volume was higher than the 2016 annual indicator. It is possible that a record high take-up will be reached in 2017. 800
NE6W00 CONSTRUCTION, CLASSES A AND B, ‘000 SQ. M
1,200400
1,000200
800 0 2010 2011 2012 2013 2014 2015 2016 2017F 600 Actual Construction Forecast 40Source:0 Cushman & Wakefield Source: Cushman & Wakefield 200 AEB Real Estate Monitor | 3/2017 13 T0 AKE-UP, CLASSES A AND B, ‘000 SQ. M 2010 2011 2012 2013 2014 2015 2016 2017F Actual Construction Forecast 1,400
Sou1,2rc0e0 : Cushman & Wakefield
TA1,0KE00-UP, CLASSES A AND B, ‘000 SQ. M 800
1,400600
1,200400
1,000200
800 0 600 2010 2011 2012 2013 2014 2015 2016 2017F Take- up Forecast 400 S200ource: Cushman & Wakefield 0 2010 2011 2012 2013 2014 2015 2016 2017F Take- up Forecast Source: Cushman & Wakefield Source: Cushman & Wakefield
* Rental Rate excluding OPEX, utilities, VAT
NEW CONSTRUCTION AND DEMAND. MOSCOW REGION
Construction volume in 2017 is lower than in 2016. In H1, 124,000 sq m of warehouse space was added to the market, which is almost 4 times less than in 2016.
We expect the new construction to reach 540,000 sq m in 2017, which is 30% lower than in 2015 and 2016.
In the Moscow region, in Q2 2017, the take-up figure showed better results than in Q1 2017. The indicator managed to overcome a two-fold lag from 2016. In H1 2017, the total volume of lease and sale transactions was 496,000 sq m, which is 25% lower than the same indicator in 2016.
NEW CONSTRUCTION, CLASSES A AND B, ‘000 SQ. M
1,800
1,600 1,400
1,200
1,000
800 600
400
200
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F AEB Real Estate Monitor | 3/2017 Moscow market overview | Warehouse market Actual Construction Forecast Source: Cushman & Wakefield
TA34K E TAKE-UP,-UP, C CLASSESLASSE A ANDS A B, A ‘000ND SQ B M, ‘000 SQ M
700
600
500
400
300
200
100
0 NEW CO20N10STRU2011CTI2O012N AN20D13 DE2M014AND2.0 15REG2I0O16NS2 017F Take-up Forecast In Source:the rCushmanegio n& Wakefields, large federal retailers are stimulating the development of logistics. For the third year in Sa orouwrc, eth: eC duesmhanmad nis & m Wainalyk esfuppieldo r ted by retail chains. The share of retailers in the total volume of traInn stheac regions,tions ilarges m ofederalre tha retailersn 50 %are. stimulatingHoweve ther, thewarehouse region aschemesl mar karee tnot is present,not al wsoa sometimesys able a t fedo m- eet the requests; there are some regions where quality warehouse schemes are not present, so sometimes a federal NEdevelopmentW CON ofS logistics.TRUC ForT ItheO Nthird A yearND in D a Erow,M AtheN Deral. M operatorOSC canO Wbecome RE aG warehouseION developer. opdemanderator is c mainlyan b esupportedcome bya wretailar ehochains.us Thee d shareeve oflop er. retailers in the total volume of transactions is more than In the regions, food retailers are the largest warehouse FIno 50%.trh eth rHowever,ee gsieocnson the, fd ooregional yed rae rtmarket ainile ar s isr aonotrwe always ,t hthee l a abledrge etoms tan wconsumersadr ehofor uw –s atheirer ehoc osharensuu insm ethee p rtake-upsr e- mthi ecomprisessier ss hfaror 30-40%.em in t hthe e r teatkaeil- uspe gment is dcoemeetmcrper atheises irequests;sn g30. -C4 0othere%m.p arear esomed t oregions 201 where5, t hqualitye sh a(r35e o)f deals with retailers declined from 50% to less than 40% in 2017. Meanwhile, there is a steady increase in demand for warehouse space from manufacturing TAKE-UP STRUCTURE co35m pa TAKE-UPnies an STRUCTUREd distributors – the share is 21% and 23% respectively.
At Dtihstributore be -g5.i2n%ning of 2017, the demand frDoistributorm foo - 10d. 1r%e tailers had decreased from 33% to 22%, meaLognistwic -h16il.e8% the demand from other segments had increased. Logistic - 18.0% Other - 0.5% Other - 0.1% TAPKrodEuc-erU - P24 .2S%TRUCTURE Producer - 16.9%
Retailer - 53.2% Retailer - 55.0%
Q3 2015 – Q2 2016 Q3 2016 – Q2 2017
Source: Cushman & Wakefield Source: Cushman & Wakefield
NE14W CONSTRUCTION. MOSCOW AND REGIONS AEB Real Estate Monitor | 3/2017
TOTAL DISTANCE AREA, PROJECT HIGHWAY REGION FROM DELIVERY CITY, KM ‘000 SQ M
FM Logistic Electrougli Gorkovskoe Moscow 29 50 Q1
Mikhailovskaya Sloboda Novoryazanskoe Moscow 20 46,97 Q2-3
Technopark Uspenskiy Gorkovskoe Moscow 44 48,23 Q2
LK-Vnukovo II Kievskoe Moscow 17 49,18 Q2
Logopark Synkovo Simfeloropolskoe Moscow 28 13,3 Q2
SK Oktavian Toksovskoe St. Petersburg 18 18,11 Q1
A Plus Park Perm Kranokamskaya road Perm 19 26,37 Q2
Vladivostok – port Aviapolis Yankovskiy Vladivostok 48 46,82 Q1, Q3. Vostochniy
A Plus Park Kazan Mamadyshskiy trakt Kazan 3 58,31 Q3-4
Source: Cushman & Wakefield Moscow market overview | Warehouse market AEB Real Estate Monitor | 3/2017
NEW CONSTRUCTION. MOSCOW AND REGIONS
DISTANCE TOTAL PROJECT HIGHWAY REGION FROM CITY, AREA, DELIVERY KM ‘000 SQ M
FM Logistic Electrougli Gorkovskoe Moscow 29 50 Q1
Mikhailovskaya Sloboda Novoryazanskoe Moscow 20 46,97 Q2-3
Technopark Uspenskiy Gorkovskoe Moscow 44 48,23 Q2
LK-Vnukovo II Kievskoe Moscow 17 49,18 Q2
Logopark Synkovo Simfeloropolskoe Moscow 28 13,3 Q2
SK Oktavian Toksovskoe St. Petersburg 18 18,11 Q1
A Plus Park Perm Krasnokamskaya road Perm 19 26,37 Q2
Vladivostok – port Aviapolis Yankovskiy Vladivostok 48 46,82 Q1, Q3 Vostochniy
A Plus Park Kazan Mamadyshskiy trakt Kazan 3 58,31 Q3-4
Source: Cushman & Wakefield
AEB Real Estate Monitor | 3/2017 15 AEB Real Estate Monitor | 3/2017 Moscow market overview | Hospitality market
Hospitality – Moscow hotels in Q2 2017
The upscale segment demonstrated a slightly positive trend Average occupancy across all market segments of Moscow !"#in rouble$% ADR &(average'(%& daily+)* *rate),"#-" compared.*/" to Q2& 20160( and#* hotels%1*2 dropped3* by34 3%5 (67%)6* as compared to the same pe- showed a 1% increase (RUB 12,614). Rouble RevPAR (revenue riod of 2016. During Q2 2017, US dollar ADR and RevPER Tperhe upavailablescale s room)egmen vicet de mversaonst rshowedated a s-3%lightl decreasey positiv ande tr ewasnd i n roubdecreasedle ADR by (a v5%era gande d a9%ily rrespectivelyate) compa re(USDd to Q1062 201 and6 USDand shoRUBw e8,049.d a 1% US in dollarcrease fi ( RguresUB 12of ,61ADR4 increased). Rouble Rbye v20%PAR and (re vto-enue70 pe ).r aAtva theilab samele roo mtime,) vi ceADR ve rsnominateda showed ina -roubles3% dec decreasedrease and wtalledas R UUSDB 8 218,049 along. US dowithlla USr fi dollargures RevPar,of ADR which increa rosesed by by 15% 20% anbyd w20%as U amountingSD 218 al ongto RUB with 6,119 US d oalongllar R withevP aRevPARr, which which rose by 15% (USD 139 ). The overall occupancy decreased by 1% (64%). (USD 139). The overall occupancy decreased by 1% (64%). demonstrated 23% decrease (RUB 4,068). Business hotels showed the following results in January-June 2017: US dollar RevPAR increased by 16% (USD 72) which wBusinessas compo hotelssed o fshowed a 1% otheccup followingancy in cresultsrease ( in71 January-June%) and a 14% inComparingcrease in A theDR results nomin aofte dQ1 in 2017 US dotoll thears previous(USD 10 year,1). T hwee rouble RevPAR decreased by 2% (RUB 4,143) in line with a 4% ADR drop (RUB 5,822). 2017: US dollar RevPAR increased by 16% (USD 72) which can still observe the US dollar extreme growth unlike rou- Awas dec composedrease in ind ofica at o1%rs w occupancyas observed increase in the m (71%)idscale andseg mae nt. bleAD fiR guresand R evwhichPA Rstarted nomi nashowingted in rao ubdownshiftingles droppe dtrend. by 1 3This% a14%nd 14 increase% respec inti ADRvely nominatedamounting in to US R UdollarsB 3,8 (USD41 and 101). RU TheB 2 ,812might. The beUS explained dollar AD byR theinc rUSD/RUBeased by exchange3% (USD rate66) , dropso d ibyd RevPAR which rose by 1% (USD 49). Overall occupancy decreased by 1% (73%). rouble RevPAR decreased by 2% (RUB 4,143) in line with 4% 18% in January-June 2017 compared to the corresponding TADRhe e cdropono m(RUBy se g5,822).ment of Moscow hotels, which is mostly represperiodented byin 2016. Sovie Moreover,t-era objec suchts sho differencewed AD Rin iindicesn the a mmayoun havet of RUB 2,189 for the six months of 2017 (6% decrease as compared to the corresponding period of 2016). Occupancy also occurred because all average rates are now calculated demonstrated 5% growth (58%) resulting in 3% increase in RevPAR – RUB 1,262 . A decrease in indicators was observed in the midscale seg- using a larger set of hotels than last year, and the average fi g- Ament.verag eADR occ upandan cRevPARy across nominatedall market sine groublesments o fdropped Moscow by ho teluress dropp in 2017ed by are 3% calculated (67%) as includingcompare dthe to economythe same segment.period of 2016. During Q2 2017, US dollar ADR and RevPER decreased by 5% and 9% respectively (USD 106 and USD 70 ). At th13%e sa andme ti14%me, respectivelyADR nom iamountingnated in r otoub RUBles 3,841decrea andsed RUBby 20% amounting to RUB 6,119 along with RevPAR, which d2,812.emons tTherate dUS a 2dollar3% d ADRecrea increasedse (RUB 4by,06 3%8). (USD 66), so did The absolute gap in RevPAR between the market segments RevPAR which rose by 1% (USD 49). Overall occupancy de- demonstrated the following results: Comparing the results of Q1 2017 to the previous year, we can still observe the US dollar extreme growth unlike rouble ficreasedgures, w byhi c1%h s t(73%).arted showing a downshifting trend. This might •b eThe exp gaplain ebetweend by the theUS Dupscale/RUB eandxch midscaleange rate segmentsdrop by 1 8was% in January-June 2017 compared to the corresponding period in USD2016 .90/RUB Moreov 5,237er, su ccomparedh differen toce USDin ind 73/RUBices m a4,956y hav ein a ltheso oTheccurr economyed becau ssegmente all ave rofag eMoscow rates a rehotels, now cawhichlcula tised mostlyusing a lasamerger s periodet of ho ofte 2016.ls than last year, and the average figures in 2017represented are calc ubyla Soviet-erated includi objectsng the ec showedonomy ADR segm ine thent. amount • The difference in RevPAR between upscale and business Tofhe RUB abso 2,189lute g aforp i nthe Re vsixPA monthsR betw eeofn 2017mark e(6%t seg decreasements de mason strhotelsated t hchangede follow itong USDresu lt67/RUBs: 3,906 vs 2016 results (USD compared The toga pthe be correspondingtween the upsca periodle and of m 2016).idscale Occupancy segments was59/RUB USD 9 04,018)./RUB 5,237 compared to USD 73/RUB 4,956 in demonstratedthe same 5% per igrowthod of 20 (58%)16. resulting in 3% increase in RevPAR – RUB 1,262. The difference in RevPAR between upscale and business hotels changed to USD 67/RUB 3,906 vs 2016 results (USD 59/RUB 4,018). 36 HOTELS OPENED IN JANUARY-JUNE 2017 IN MOSCOW Hotels opened in January-June 2017 in Moscow Number of Name Address Class rooms 31+13 Moss Club House 10/4 Krivokolenny Lane 5 stars apartments 12a Verkhnyaya Krasnoselskaya Street, Hilton Garden Inn Krasnoselskaya 292 3 stars Bldg 4 Park Inn Izmaylovo 109 10a Nikitinskaya Street 3 stars
Ibis Oktyabrskoe Pole 240 2/5 Marshal Rybalko Street 3 stars
Ibis Budget Panfilovskaya 114 2/5 Marshal Rybalko Street 2 stars
Vega Izmaylovo (renovation) 997 71 Izmaylovskoe Highway, Bldg 3B 3 stars
Total: 6 hotels 1,783 rooms, 13 apartments
Source: EY database, open sources, operators’ data Source: EY database, open sources, operators’ data Hotels opened in Q1 2017: 16 AEB Real Estate Monitor | 3/2017 A new Moss Club House with apartments and a boutique hotel opened in Moscow at 10/4 Krivokolenny Lane, in February 2017. The house offers 13 apartments and 31 hotel rooms. The developer of the project is Adwill
Moscow market overview | Hospitality market AEB Real Estate Monitor | 3/2017
Hotels opened in Q1 2017: Dedeman Hotel operated previously. The Dedeman chain • A new Moss Club House with apartments and a bou- left the Russian market in 2016. Park Inn Hotel offers 109 tique hotelMan aopenedgement, inth eMoscow amoun t ato f10/4 proj ecKrivokolennyt investment sLane, in ac quirooms,sition a nda café,recon sat rbar,uction a conferenceis RUB 1.5 hall,billio na (mini-market,USD 25.7 a in Februarymillio n2017.). The house offers 13 apartments and terrace and parking. 31 hotel rooms. The developer of the project is Adwill • Accor Hotels opened Ibis and Ibis Budget Hotels at 2/5 Hilton Worldwide announced the opening of the new Hilton Garden Inn Krasnoselskaya Hotel in Moscow in March Management,2017. T hthee ho amounttel is loca ofte dproject at 11a Vinvestmentserkhnyaya K inra sacno-selskayaMarshal Stree Rybalkot, Bldg 4 Street and o ffine rsMoscow 292 roo inm sJune, a re s2017.tauran Ibist, a Ok- quisitionshop and, a nreconstruction event hall, four ism eeRUBting 1.5 roo mbillions, a f it(USDness ce 25.7nter , a ltyabrskoeaundry and Poleparki ngoffers. 240 rooms, Ibis Budget Panfilovs- million).Hotels opened in Q2 2017: kaya – 114 rooms. The infrastructure of the complex in- • Hilton Worldwide announced the opening of the new cludes a restaurant and three conference halls. Carlson Rezidor Hotel Group announced the opening of Park Inn Izmaylovo Hotel in Moscow near Izmaylovo Park Hilton iGardenn April 2017Inn . KrasnoselskayaThe hotel opened Hotelin a bu inil dMoscowing wher e inD ede•m Aan large-scaleHotel opera trenovationed previous lofy. Tthehe DVegaedem Izmaylovoan chain le ftHotel March 2017.the Ru Thessian hotel mark iset locatedin 2016 .at P a11ark IVerkhnyayann Hotel off eKrasrs 109- rooroomms, a stock café , anda ba r conference, a conferen ce halls hall, was a m i finishedni-market, in a June noselskayaterrace Street, and p aBldgrking 4. and offers 292 rooms, a restau- 2017. The renovation was initiated before FIFA World Cup rant, a Ashop,ccor Hano teventels op ehall,ned Ifourbis ameetingnd Ibis B rooms,udget H ao tfitnessels at 2 /5 2018.Marsh Nowal Ryb thealko hotel Stree offerst in M 997osc orooms,w in Jun thee 2017 infrastructure. Ibis centre,O ak tlaundryyabrskoe and Po lparking.e offers 240 rooms, Ibis Budget Panfilovalsoskaya includes – 114 r4oo restaurants,ms. The inf r17ast rconferenceucture of th ehalls, com pal efitnessx includes a restaurant and three conference halls. Hotels opened in Q2 2017: center and a beauty salon. The hotel is located at 71 Iz- • Carlson A l aRezidorrge-scale Hotelrenov aGrouption of Vannouncedega Izmayl ovothe Hopeningotel room stmaylovskoeock and conf eHighway,rence hall Bldgs was 3B. finished in June 2017. The renovation was initiated before FIFA World Cup 2018. Now the hotel offers 997 rooms, the infrastructure also of Parki nInnclud eIzmaylovos four res taHotelurant sin, 17 Moscow confer encenear ha Izmaylovolls, a fitne ss Wecen texpecter and athe beau followingty salon . brand-nameThe hotel is hotelslocated toa t open71 in Park inI zAprilmay l2017.ovsko eThe High hotelway, Bopenedldg 3B . in a building where 2017: (37 ) We expect the following brand-name hotels to open in 2017: 37 FUTURE HOTELS ANNOUNCED FOR OPENING IN MOSCOW IN 2017 Future hotels announced for opening in Moscow in 2017
Number of Name Address Class rooms Moscow
Hyatt Regency Moscow Petrovsky Park* 298 36 Leningradsky Avenue 4 stars
DoubleTree by Hilton Vnukovo Airport* 432 Vnukovo Airport 4 stars
Ramada H&S Moscow Greenwood Park 376 69 km MKAD, Krasnogorsk District 4 stars
Four Points by Sheraton Moscow Vnukovo Airport 250 8 Vnukovskaya Bolshaya Street 3 stars
Holiday Inn Express Moscow - Dubininskaya 243 Dubininskaya Street 2 stars
Mercure Neglinnaya 100 n/a 4 stars
Ibis Moscow Alekseevskaya 180 n/a 3 stars
Radisson Olympiyskiy Hotel Moscow 340 1 Olimpiysky Passage 5 stars
Moscow region
Hilton Mozhaysk Borodino Hotel & SPA 160 Zarechye Village, Mozhaysky district 5 stars
Ibis Domodedovo 158 Shishkino Village 3 stars 2,537 Total: 10 hotels rooms Source: EY database, open sources, operators’ data *These hotels were to be opened in 2016, but remained at the stage of development as of 2017. *These hotels were to be opened in 2016, but remained at the stage of development as of 2017 Source: EY database, open sources, operators’ data
AEB Real Estate Monitor | 3/2017 17
AEB Real Estate Monitor | 3/2017 Moscow market overview | Hospitality market
5-star hotels: ADR (RUB) and occupancy dynamics, 2017 vs 2016 38 5-STAR5-star HOTELS: hotels: ADR ADR* (RUB (RUB)) and occupancyAND OCCUPANCY dynamics, 201DYNAMICS,7 vs 2016 2017 VS 2016 14,000 100% 14,000 100%90% 12,000 90%80% 12,000 10,000 80%70% 10,000 70% 8,000 60% 8,000 60%50% 6,000 50%40% 6,000 4,000 40%30% 4,000 30%20% 2,000 20%10% 2,000 0 10%0% 0 jan feb mar apr may jun jul aug sep oct nov dec 0% jan feb mar apr may jun jul aug sep oct nov dec ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017 ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017 Source: EY analysis
So* uaveragerce: EY dailyanal yratesis Source: EY analysis
39 4-STAR4-star HOTELS: hotels: ADR* ADR ( RUB(RUB)) and AND occupancy OCCUPANCY dynamics DYNAMICS,, 2017 vs 2016 2017 VS 2016 4-star hotels: ADR (RUB) and occupancy dynamics, 2017 vs 2016 14,000 100% 14,000 100%90% 12,000 90%80% 12,000 10,000 80%70% 10,000 70% 8,000 60% 8,000 60%50% 6,000 50%40% 6,000 4,000 40%30% 4,000 30%20% 2,000 20%10% 2,000 0 10%0% 0 jan feb mar apr may jun jul aug sep oct nov dec 0% jan feb mar apr may jun jul aug sep oct nov dec ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017
ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017 *average Source: EdailyY an ratealysis
SoSource:urce: E EYY aanalysisnalysis
40 3-STAR3-star hotels: HOTELS: ADR ADR*(RUB) and(RUB) occupancy AND OCCUPANCY dynamics, 201 7DYNAMICS, vs 2016 2017 VS 2016
14,000 100% 90% 12,000 80%
10,000 70% 8,000 60% 50% 6,000 40% 4,000 30% 20% 2,000 10% 0 0% jan feb mar apr may jun jul aug sep oct nov dec
ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017
Sou*averagerce: EY a ndailyalys irates Source: EY analysis
2-star hotels: ADR (RUB) and occupancy dynamics, 2017 vs 18 2016 AEB Real Estate Monitor | 3/2017 14,000 100% 90% 12,000 80% 10,000 70%
8,000 60% 50% 6,000 40% 4,000 30% 20% 2,000 10% 0 0% jan feb mar apr may jun jul aug sep oct nov dec
ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017
Source: EY analysis
3-star hotels: ADR (RUB) and occupancy dynamics, 2017 vs 2016
14,000 100% 90% 12,000 80% 10,000 70%
8,000 60% 50% 6,000 40% 4,000 30% 20% 2,000 10% 0 0% jan feb mar apr may jun jul aug sep oct nov dec
ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017 Moscow market overview | Hospitality market AEB Real Estate Monitor | 3/2017 Source: EY analysis
41 2-STAR2-star HOTELS: hotels: ADR ADR* (RUB (RUB)) and AND occupancy OCCUPANCY dynamics DYNAMICS,, 2017 vs 2017 VS 2016 2016 14,000 100% 90% 12,000 80% 10,000 70%
8,000 60% 50% 6,000 40% 4,000 30% 20% 2,000 10% 0 0% jan feb mar apr may jun jul aug sep oct nov dec
ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017
Source:*average EY ana ldailyysis rate Source: EY analysis
42 AVERAGEAverage MARKET market ADR ADR* (RUB (RUB)) and occupancyAND OCCUPANCY dynamics DYNAMICS,, 2017 vs 2016 2017 VS 2016
14,000 100% 90% 12,000 80% 10,000 70% 8,000 60% 50% 6,000 40% 4,000 30% 20% 2,000 10% 0 0% jan feb mar apr may jun jul aug sep oct nov dec
ADR RUB, 2016 ADR RUB, 2017 Occupancy, 2016 Occupancy, 2017
*average daily rate SouSource:rce: EY EY an aanalysislysis
AEB Real Estate Monitor | 3/2017 19
AEB Real Estate Monitor | 3/2017 Moscow market overview | Hospitality market
43 OPERATIONAL INDICES DYNAMICS Operational indices dynamics January-June 2017 January-June 2017 January-June 2016 / January-June 2016 (USD/RUB) (USD/RUB) 2016, % 5 stars Occupancy 64% 65% -1% 69%
Average daily rate USD 187/RUB USD 218/RUB 12,614 USD 183/RUB 12,514 20% / 1% (ADR) 12,325
Revenue per available room USD 139/RUB 8,049 USD 121/RUB 8,243 15% / -2% USD 129/RUB 8,486 (RevPAR) 4 stars Occupancy 71% 70% 1% 74% ADR USD 101/RUB 5,822 USD 88/RUB 6,058 14% / -4% USD 89/RUB 5,902 RevPAR USD 72/RUB 4,143 USD 62/RUB 4,225 16% / -2% USD 66/RUB 4,357 3 stars Occupancy 73% 74% -1% 78% ADR USD 66/RUB 3,841 USD 64/RUB 4,424 3% / -13% USD 64 /RUB 4,234 RevPAR USD 49/RUB 2,812 USD 48/RUB 3,287 1% / -14% USD 50/RUB 3,306 2 stars Occupancy 58% 53% 5% no data ADR USD 38/RUB 2,197 USD 34/RUB 2,335 12% / -6% no data RevPAR USD 22/RUB 1,269 USD 18/RUB 1,234 22% / 3% no data Average Occupancy 67% 70% -3% 74% ADR USD 106/RUB 6,119 USD 112/RUB 7,665 -5% / -20% USD 113/RUB 7,487 RevPAR USD 70/RUB 4,068 USD 77/RUB 5,252 -9% / -23% USD 82/RUB 5,383
Source:Source :Smith Smit hTravel Tra vResearch,el Resea rEYch analysis, EY an aandlys iforecasts and forecast
20 AEB Real Estate Monitor | 3/2017 ! ! Moscow Housing Market! Moscow market overview | Moscow housing market AEB Real Estate Monitor | 3/2017 At present, the choice of high-budget rental apartments is wide and varied, and the volume of supply is at its highest point for the past year. At the same time, amid landlords' increased activity, the number of requests from potential tenants is also growing. This positive trend is traditional for this period and connected with the fact that many tenants, especially families with children, are trying to solve the rental housing issue by August or early September, before the start of the business season and academic year. ! Moscow Housing Market Supply At present, the choice of high-budget rental apartments is SUPPLY wide and varied, and the volume of supply is at its highest Over the past three years, the volume of high-budget apart-
point for the past year. At the same time, amid landlords’ ments for rent in Moscow has increased by approximately a Oincreasedver the activity,past t hthere enumber year sof, requeststhe vol fromume potential of hig ten-h-budgquarteret ap a(26%).rtments for rent in Moscow has increased by apantspro isx ialsoma tgrowing.ely a q uThisart epositiver (26% trend). is traditional for this Operiodver t hande p connectedast year ,with the the la rfactges thatt in cmanyreas etenants, in su es-pply Overhas btheee pastn o byear,ser vtheed largestin th rincreaseee ma iinn supplydistri chasts: been Zpeciallyamosk familiesvorech withye ( children,+ 20%) are, L etryingning rtoa dsolvesky thePro rentalspek t (+observed 17%) ainn threed Fr umainnze ndistricts:skaya (Zamoskvorechie+ 10%). A no (+20%),ticeabl e dehousingcrease issue in a byva Augustilabili tory earlyof h iSeptember,gh-budg ebeforet apa rthetm startents frLeningradskyom June 20 Prospekt16 was (+17%) found andin K Frunzenskayautuzovsky (+10%).Prospe kt (- 20of% the) a businessnd Tsv seasonetnoy andBo uacademiclevard (year.-18%).! A noticeable decrease in availability of high-budget apart- ! ments from June 2016 was found in Kutuzovsky Prospekt ! (-20%) and Tsvetnoy Boulevard (-18%). (44 ) Chart 1.1 Supply volume growth by area, H1 2017! 44 SUPPLY VOLUME GROWTH BY AREA,! H1 2017
Zamoskvorechie 20% Leningradsky Prospekt 17% Frunzenskaya 10% Tverskaya - Kremlin 8% Taganskaya 5% Krasnopresnenskaya 1% Arbat - Kropotkinskaya 0.2% Patriarshy Ponds 0% -1% Lubyanka, Kitay-Gorod -4% Prospekt Mira -11% Kuntsevo -17% Leninsky Prospekt -18% Tsvetnoy Boulevard -20% Kutuzovsky Prospekt -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25%
Source: Intermark Relocation "#$%&('!)*+'%,-%.!/'0#&-+1#*!
The TOP 3 districts in terms of supply are Arbat-Kropotkinskaya area, with 20% of market share, Tvers- kaya - Kremlin and Zamoskvorechye areas, with 15% and 10% of all lots, respectively. !
AEB Real Estate Monitor | 3/2017 21
AEB Real Estate Monitor | 3/2017 Moscow market overview | Moscow housing market ! !
! ! Chart 1.2 Analysis of the most popular areas in terms of supply The TOP 3 districts in terms of supply are Arbat-Kropotkin- and Zamoskvorechie areas, with 15% and 10% of all lots,
skaya area, with 20% of market share, Tverskaya-Kremlin respectively. (45 ) Arbat - Kropotkinskaya 20% Tverskaya - Kremlin Chart 1.2 Analysis of the15% mos t popular areas in terms of supply 45 ANALYSIS OF THE MOST POPULAR AREAS IN TERMS OF SUPPLY Zamoskvorechie 10% ArbatLubyanka, - Kropotkinsk Kitay-Goraodya 8% 20% LeningTverskradskyaya -P rKospektremlin 8% 15% LeninskyZamosk Pvroospektrechie 7% 10% LuKbryasnopanka,r esnenskKitay-Goaryoda 7%8% LeningTsvetnradskyoy B ouleProspektvard 5% 8% LeninskyPatriarsh Pyr ospektPonds 4% 7% KrasnopFrunresnenskzenskaayyaa 4% 7% Tsvetnoy BKouleuntsevavrod 3% 5% KutuPzatriarsovsky Phryospekt Ponds 2% 4% PFrunrospektzensk Miaryaa 2% 4% TaganskKuntseayvao 2%3% Kutuzovsky ProspektOther 2%2% Prospekt Mira 2% ! Taganskaya 2% "#$%&('!)*+'%,-%.!/'0#&-+1#*! Other 2%
ThSource:us, in Intermark June - Relocationearly July 2017, we see the maximum volume of high-budge!t apartments for rent in Moscow for the past year. The last time a comparable volume of supply was registered in July of last year. "!#Thus,$%& in('! )June-early*+'%,-%. July!/'0 #2017,&-+ 1we#* see! the maximum volume year. The last time a comparable volume of supply was reg- of high-budget apartments for rent in Moscow for the past istered in July 2016. (46 ) Thus, inC Jhuanrte 1 -. 3e aDrlyyn Jaumlyic 2s 0o1f 7th, ew seu pspeley t hoef Mmoaxscimowu’ms pvroimluem ree notfa hl imghar-kbeutd (gJeatn auparayrt 2m0e1n6t s– f 1o0r 0re%n)t in M46os co DYNAMICSw for the p aOFst yTHEear. SUPPLYThe las tOF tim MOSCOWe a comp’aSr aPRIMEble vo RENTALlume of sMARKETupply w a(JANUARYs registere 2016d in J –ul 100%)y of las t year. ! 100% 95% 90%C hart 1.3 Dynamics of the supply of Moscow’s prime rental market (January 2016 – 100%) 85% 100%80% 75% 95% 70% 90% 65% 85% 60% 80% I II III IV V VI VII VIII IX X XI XII I II III IV V VI 75% 70% 2016 2017 65% ! Source:60% Intermark Relocation "#$%&('!)*+'%I ,-%.II!/ '0#III&-+ 1#IV*! V VI VII VIII IX X XI XII I II III IV V VI ! 2016 2017 ! At the present moment, the most expensive apartments for rent are offered in the following districts: "A#r$b%at&8K('!r)o*p+o'%tk,i-n%sk.!a/y'0a #(&$6-+,518#0* !per property per month), Krasnopresnenskaya and Patriarshiye Ponds – $6,400 and $5,890 per property per month, respectively. ! 22 AEB Real Estate Monitor | 3/2017 A! t the present moment, the most expensive apartments for rent are offered in the following districts: Arbat8Kropotkinskaya ($6,580 per property per month), Krasnopresnenskaya and Patriarshiye Ponds – $6,400 and $5,890 per property per month, respectively. !
! ! ! ! ! ChartC 1h.4a rSt u1p.4p lSyu apnpalyly asinsa olyfs eisxp oaf te hoxpuast ihongu isni nMg oinsc Mowo sicno twer mins t eorfm resn otfa lr ebuntdagl ebut dget ! ! Moscow market overview | Moscow housing market AEB Real Estate Monitor | 3/2017
< $2000 4% ! < $2000 6% 4% ! At the present6% moment, 17% the most expensive apartments$2000 Patriarshiye - $4000 Ponds – USD 6,400 and USD 5,890 per month, 6% 17% $2000 - $4000 forC renthar tare 16%. 4offered S upp liny athena lfollowingysis of edistricts:xpat ho uArbat-Kropot-sing in Moscorespectively.w in terms ( 47of re)ntal budget kinskaya (USD 6,580 per month), Krasnopresnenskaya and ! $4000$4000 - $6000 - $6000 11%11% 47 SUPPLY ANALYSIS OF EXPAT HOUSING IN$6000 MOSCOW$6000 - $8000 IN -TERMS $8000 OF RENTAL BUDGET $8000 - $10000 34% < $2000$8000 - $10000 4% 34% 22% 6% $10000 - $15000 22% 17% $2000$10000 - $4000 - $15000 6% $4000> $15000> - $15000$6000 11% $6000 - $8000 ! ! $8000 - $10000 "#$%&('!)*+'%,-%.!/'0#&-+1#*! 34% "#$%&('!)*+'%,-22%%.!/' 0#&-+1#*! $10000 - $15000
Two-T awnod- tahnrede -tbheredero-boemd roaopmar tmapeanrttsm aernet s thaere mthoes t mcomst> mc $15000oonm mopotni o nosp tioonn st hoen htihgeh -buhigdhg-ebut dregnetta lr emntaarlk emt airnk et in MoscMowo.s cTohwe. vTohluem veo loufm seu popf lsyu opfp lsyu cohf soubcjehc otsb jies cmts oirse mthoarne hthaalfn ohfa lafl lo ef xahlilb eitxehdi bloittesd (5lo7t%s ()5, 7d%ist)r,i bduistterdib iunt ed in almosatl meqousat le pqrSource:uoaplo pr Intermarkrtioopno r–t Relocationi3o3n% – a3n3d% 2 a4n%d, 2r4e%sp,e cretisvpeelcyt.i vAetl yth. eA st atmhee staime, ttihmee !s, htahree sohfa rsetu odfi osstu fdoiro sre fnotr i sre mnti nisi- m ini- mal, amt aoln, layt 5o%nl yo f5 %the o tfo tthael stuoptapll syu. pply. ! "#$%&('!)*+'%,-%.!/'0#&-+1#*! ! Two- and three-bedroom apartments are the most common ed lots (57%), distributed in almost equal proportions – 33% Two- and optionsthree- boned thero ohigh-budgetm apartm rentalents marketare th ein Moscow.most c oThemm vol-on oandptio 24%,ns o nrespectively. the high At-bu thedg sameet re time,ntal thema sharerket ofin studios Chart 1.5 Supply analysis of expat housing in Moscow in terms of number of rooms Moscow. TumehCe h vofaor lsupplytu 1m.5e oSoffu suchpsuppl pyobjectsl ya noafl ysisus moreicsh oof bthan ejexpc thalfsa ti s hoof m alluos rexhibit-ien gth iann Mhaforolfs crentoof wa isl li minimal,ne xtehrimbit sate do only fl ontu s5% m(5b 7ofe% rthe )o, f totald riostor supply.imbust ed ( 48in ) almost equal proportion – 33% and 24%, respectively. At the same time, the share of studios for rent is mini- mal, at only48 5 % SUPPLYof the to ANALYSIStal supply. OF EXPAT HOUSING IN MOSCOW IN TERMS OF NUMBER OF ROOMS !
Chart 1.5 S5%upp ly5% ana lysis of expat housing in Moscow in terms of number of rooms 18%18% StudioStudio 20%20% 1 Bed1r oomBedr oom
5% 2 Bed2r oomsBedrooms 24% 18% 24% Studio 20% 3 Bed3r oomsBedrooms 33%33% 1 Bedroom 4+ Bed4+r oomsBedrooms 2 Bedrooms 24% 3 Bedrooms Source: Intermark Relocation33% 4+ Bedrooms ! !
"#$%"&#('$!)%*+&'%('!),*-%+'.%!/,'-0%#.&!/-'+01##&*-!+1#*! ! DemDaenmda nd "#$%&('!)*+'% ,-%.!/'0#&-+1#*! ! !
In JuDnIne e J20mun1ae7 n,20 dAEB1e m7 Real,a dned Estatem faronm dMonitor fpromte |n 3/2017ptioatle ntetniaaln tes nwanatss 8w%a sh 8ig%h ehr igcohmerp caoremdp taor etdh et os athmee spaemrieo dp etrwiood ytewaors year23s earlie!er.a rlier.
The vIonl uJmunee o20f d1e7m, daenmda fnrdo mfr otemn apnottse nhtaiasl i ntecnraenatsse dw absy 81%5% h ifgrhoemr cthome epnarde do ft o20 t1he6 tsoam thee pperreiosedn ttw (oc oymeaprasr ing the eTahrlei evro. lume of demand from tenants has increased by 15% from the end of 2016 to the present (comparing the periodp efrioomd fNroomve Nmobveer mtob Derec toe mDbeceer m201be6r 2a01nd6 M anayd tMo aJyun toe 20Jun1e7 )20. 17). ! T! he volume of demand from tenants has increased by 15% from the end of 2016 to the present (comparing the period from November to December 2016 and May to June 2017). ! AEB Real Estate Monitor | 3/2017 Moscow market overview | Moscow housing market
! ! Chart 2.1 Dynamics of the demand of Moscow’s prime rental market (January 2016 – 100%) DEMAND The volume of demand from tenants has increased by 15% since In June 2017, demand from potential tenants was 8% high- the end of 2016 to the present day (comparing the period from er than in the same period two! years earlier. November to December 2016 and May to June 2017). (49 ) 120% ! 110% Chart 2.1 Dynamics of the demand of Moscow’s prime rental market (January 2016 – 100%) 100% 49 DYNAMICS OF THE DEMAND OF MOSCOW’S PRIME RENTAL MARKET (JANUARY 2016 – 100%) 90% 120% 80% 110% 70% 100% 60% 90% 50% 80% 40% I II III 70%IV V VI VII VIII IX X XI XII I II III IV V VI 60% 2016 2017 50% ! "#$%&('!)*+'%,-%.!/'0#&-+1#40%*! Source: Intermark IRelocation II III IV V VI VII VIII IX X XI XII I II III IV V VI Leningradsky Prospect is traditionally the most popular district i2016n the high-budget rental market in Moscow. 2017 Since the beginning of the year, apartments in this area have been of interest to almost 16% of all potential ! Source: Intermark Relocation tenants. The second most popular location for rent is Arbat8Kropotkinskaya, at 10% of all requests. "#$%&('!)*+'%,-%.!/'0#&-+1#*! Compared to the same perTheiod Leningradskylast year, t hProspekte aver aisg etraditionally tenant b uthedg mostet h apopulars increa swithed – 10% $4, of716 all requests.versus $ Compared3,650 in to the same period last 2016. More than a quarter (28%) of all tenants are interested in renting an apartment at around $2,000-$4 000! Lendistrictingra dins kythe Phigh-budgetrospect is rentaltraditi marketonally inth Moscow.e most popuSince laryear, dist rtheict averagein the tenanthigh- budgbudgete,t hasren increasedtal mark –e tUSD in M4,716osc ow. per month. Sincethe beginningthe begi nnof itheng year,of t hapartmentse year, a pina thisrtm areaents havein t hbeenis a reaversus have USDbee n3,650 of inint e2016.rest tMoreo alm thanost a16 quarter% of a(28%)ll po tofen tial tenofan interestts. The tosec almostond m16%ost ofpopu all potentiallar loca titenants.on for Theren tsec- is Arballa ttenants8Kropo aretki interestednskaya, a int 10renting% o fan a llapartment requests at. around ond most popular location for rent is Arbat-Kropotkinskaya, USD 2,000-4,000 per month. (50 ) CompCarheadr t t2o. 2th De esmamande paenraiodlys ilsa sint yteearmr,s tohfe raevnetarla gbudge teneta nt budget has increased – $4,716 versus $3,650 in 2016. More than a quarter (28% ) of all tenants are interested in renting an apartment at around $2,000-$4,000! 50 DEMAND ANALYSIS IN TERMS OF RENTAL BUDGET per month.
2% Chart 2.2 Demand ana<$2000lysis in terms of rental budget 11% 26% $2000-$4000 5% $4000-$6000 9% 2% $6000-$8000 <$2000 11% 26% $2000-$4000 5% $8000-$10000 19% $10000-$15000 $4000-$6000 28%9% >$15000 $6000-$8000 $8000-$10000 Source: Intermark Relocation 19% 28% ! $10000-$15000 "#$%&('!)*+'%,-%.!/'0#&-+1#*! >$15000
As of June 2017, apartmen24ts with one and two bedrooms have been the most popular among tenants sinceAEB tRealhe Estate Monitor | 3/2017 beginning of the year. ! ! "#$%&('!)*+'%,-%.!/'0#&-+1#*!
As of June 2017, apartments with one and two bedrooms have been the most popular among tenants since the beg inning of the year. ! !
! Moscow market overview | Moscow! housing market AEB Real Estate Monitor | 3/2017 ! Chart 2.3 Demand analysis in terms of number of rooms
As of June 2017, apartments with one and two bedrooms have been the most popular among tenants since the beginning ! Studio ! of the year. (51 ) 7% 8% Chart 2.3 Demand analysis in terms of number of rooms 19% 1 Bedroom
51 DEMAND ANALYSIS IN TERMS OF NUMBER OF ROOMS 33% 2 Bedrooms Studio 7% 8% 3 Bedrooms 33% 19% 1 Bedroom 4+ Bedrooms 33% 2 Bedrooms ! 3 Bedrooms 33% "#$%&('!)*+'%,-%.!/'0#&-+1#*! 4+ Bedrooms ! Source: Intermark Relocation ! "SUPPLY-DEMAND$990:!; !<',-*=! >CORRELATION#%%'0-+1#* ! "#$%&('!)*+'%,-%.!/'0#&-+1#*! 52C ha DYNAMICSrt 3.1 Dyna mOFic THEs of tSUPPLYhe supp lANDy an dDEMAND demand OFof MMOSCOW’Soscow’s p rPRIMEime re nRENTALtal mark MARKETet (Janua ry 2016 – 100%) ! !(JANUARY 2016 – 100%)
"$990:!; !<',-*=!>#%110%%'0 -+1#* ! 100% Chart 3.1 Dynamics of the90% supp ly and demand of Moscow’s prime rental market (January 2016 – 100%) ! 80% 70% 110% 60% 100% I II III IV V VI VII VIII IX X XI XII I II III IV V VI 90% 2016 supply demand 2017 80% ! 70% Source: Intermark Relocation 60% "#$%&('!)*+'%,-%.!/'0#&-+1#*! I II III IV V VI VII VIII IX X XI XII I II III IV V VI Chart 3.2 Supply and demand analysis of expat housing in Moscow in terms of rental budget 2016 supply demand 2017 supply demand !
"#$%&('!)*+'%,-%.!/'0#&-+1#*! 33% 33% 33%
Chart 3.2 Supply and demand analysis of expat housing in Moscow in terms of rental budget 24% 20% 19% 18% supply demand 8% 5% 7% 33% 33% 33% AEB Real Estate Monitor | 3/2017 25 24% Studio 1 Bedroom 2 Bedrooms 3 Bedrooms 4+ Bedrooms 20% 19% 18% ! 8% 5% 7%
Studio 1 Bedroom 2 Bedrooms 3 Bedrooms 4+ Bedrooms ! ! ! Chart 2.3 Demand analysis in terms of number of rooms
Studio 7% 8%
19% 1 Bedroom
33% 2 Bedrooms
3 Bedrooms 33%
4+ Bedrooms
!
"#$%&('!)*+'%,-%.!/'0#&-+1#*!
!
"$990:!; !<',-*=!>#%%'0-+1#* !
Chart 3.1 Dynamics of the supply and demand of Moscow’s prime rental market (January 2016 – 100%) !
110% 100% 90% 80% 70% 60% I II III IV V VI VII VIII IX X XI XII I II III IV V VI
AEB Real Estate Monitor | 3/2017 2016 supply demandMoscow market overview | Moscow2017 housing market !
"#$%&('!)*+'%,-%.!/'0#&-+1#*!
C53ha rt SUPPLY3.2 Sup pANDly an DEMANDd deman dANALYSIS analysis o OFf e xEXPATpat ho uHOUSINGsing in M INosc MOSCOWow in term INs oTERMSf renta lOF bu RENTALdget BUDGET
supply demand
33% 33% 33% 24% 20% 19% 18%
8% 5% 7%
! ! Studio 1 Bedroom 2 Bedrooms 3 Bedrooms 4+ Bedrooms "#$%&('!)*+'%,-%.!/'0#&-+1#*! ! Source: Intermark Relocation Rental Rates and Budgets! 54 AVERAGE BUDGET STRUCTURE OF SUPPLY BY! AREA (JUNE 2017)
Arbat - Kropotkinskaya area $6,581 Krasnopresnenskaya area $6,408 Patriarshy Ponds area $5,888 Zamoskvorechie area $5,837 Tverskaya - Kremlin area $5,629 Tsvetnoy Boulevard area $5,040 Leningradsky prospect $5,040 Lubyanka, Kitay-Gorod, Chistye Ponds area $4,884 Frunzenskaya area $4,641 Kuntsevo $3,464 Kutuzovsky Prospekt area $3,377 Leninsky Prospekt area $3,291 Prospekt Mira area $3,187 Taganskaya area $3,031 Other $2,684
Source: Intermark Relocation ! "#$%&('!)*+'%,-%.!/'0#&-+1#*!
Chart 4.1 Average budget structure of supply by area (June 2017)! ! $6,000
$5,500
$5,000 $5,272 $4,500 $4,300 $4,000 26 AEB Real Estate Monitor | 3/2017 $3,500
$3,000 I II III IV V VI VII VIII IX X XI XII I II III IV V VI 2016 2017 !
"#$%&('!)*+'%,-%.!/'0#&-+1#*!
! ! ! ! ! ! ! ! ! ! ! "#$%&('!)*+'%,-%.!/'0#&-+1#*!
Rental Rates and Budgets! !
Arbat - Kropotkinskaya area $6,581 Krasnopresnenskaya area $6,408 Patriarshy Ponds area $5,888 Zamoskvorechie area $5,837 Tverskaya - Kremlin area $5,629 Tsvetnoy Boulevard area $5,040 Leningradsky prospect $5,040 Lubyanka, Kitay-Gorod, Chistye Ponds area $4,884 Frunzenskaya area $4,641 Kuntsevo $3,464 Kutuzovsky Prospekt area $3,377 Leninsky Prospekt area $3,291 Prospekt Mira area $3,187 Taganskaya area $3,031 Other $2,684
Moscow market overview | Moscow housing market AEB Real Estate Monitor | 3/2017 !
"#$%&('!)*+'%,-%.!/'0#&-+1#*!
Chart 4.1 Average budget structure of supply by area (June 2017)! 55 DYNAMICS OF THE AVERAGE! RENTAL RATES IN MOSCOW’S PRIME RENTAL MARKET $6,000
$5,500
$5,000 $5,272 $4,500 $4,300 $4,000 ! ! $3,500 ! $3,000 ! ! I II III IV V VI VII VIII IX X XI XII I II III IV V VI ! 2016 2017
Source: Intermark! Relocation ! Chart 4.3 Dynamics of the average asking price for tenancy in Moscow’s prime rental market! "#56$% & DYNAMICS('!)*!+'%,-% .OF!/'0 THE#&- AVERAGE+1#*! ASKING PRICE FOR TENANCY IN MOSCOW’S PRIME RENTAL MARKET
$5,500 ! $5,000 ! $4,716 $4,500 ! ! $4,000 ! $3,500 $3,500 ! $2,800 $3,000 ! ! $2,500 ! $2,000 I II III IV V VI VII VIII IX X XI XII I II III IV V VI 2016 2017 Source: Intermark Relocation ! "#57$% & ANALYSIS('!)*+'%,-%. !OF/'0 THE#&- +AVERAGE1#*! ASKING PRICE/NUMBER OF BEDROOMS/CLASS
Arbat-Kropotkinskaya, Patriarshy Chart 4.4 Analysis of the average asking price/number oClosef bed rtooo internationalms/class schools Area Ponds, Tverskaya, Lubyanka-Kitay- (Leningradsky Prospekt, Kuntsevo) ! Gorod, Zamoskvorechie
Elite class and Elite class !"#Description$ % !"&$'()"*+Business*',-./,$ class0$1%2$'"-$"/30% >Business?*/#%'* %class@.'#".$'-*.$?%/=3*%*?/ Premium class and Premium class 2*.4/1%56#"/,$0$1%78&0$.,$()-'$90 A7#.-.B"$4/,0%+"*/+#='1%)8.'/#6*%C 1 bedroom :*"*$1,40041%;$ -< $2,500*/,6*"#=3 0#$2,000% - $3,000 $1,200 - $3,000 $1,400 - $3,500 D#/="-2+ 'bedrooms-*. % ! $1,800 - $2,700A01+!&' 0-@!$3,200-@*= ! - $6,500 $1,100! - $3,000 A01+!&' $2,5000-@!-@* =- !$5,500B%',1$, ! B%',1$, !&0-@! @ &0-@! @ 3 bedrooms ?$@1*'@!&@$2,7000-@!@ - $3,500 $4,200 - $8,500 ?$@1$2,000*'@!&@0 -- @$3,500!@ $4,200 - $7,500 ! ! ! 4 bedrooms $3,700 - $6,000 $6,500 - $9,000 $3,500 - $5,000 $6,000 - $8,300 1 bedroom C7DE66; C3D466! C3D666; CFD666! C7D366; CFD666! C7DE66; CFD466! ! ! ! 5+ bedrooms $7,000 - $10,000 $9,000 - $11,000 $5,500! - $9,000 $9,000 - $10,000 ! !
Source: Intermark Relocation 2 bedroom $3,200–$6,500 $1,100–$3,000 $2,500–$5,500! $1,800–$2,700 ! AEB Real Estate Monitor | 3/2017 27 ! ! ! 3 bedroom $2,700–$3,500! $4,200–$8,500! $2,000–$3,500 $4,200–$7,500 ! ! ! 4 bedroom $3,700–$6,000 $6,500–$9,000 $3,500–$5,000 $6,000–$8,300 ! ! ! ! ! 5+ bedroom $7,000–$10,000 $9,000–$11,000 $5,500–$9,000 $9,000–$10,000 ! ! ! ! ! ! AEB Real Estate Monitor | 3/2017 St. Petersburg market overview | Office market
St. Petersburg Market Overview
St.Offi cPetersburge market market overview
In QOffice2 2017, on lmarkety one office centre (Nevka, Class A, 3,100 sq m GLA) was delivered. This is the lowest quarterly completion level on record. A number of projects were postponed to H2 2017. Completions in In Q2 2017, only one office centre (Nevka, Class A, 3,100 sq In Q2 2017, the average vacancy rate dropped by 0.8 ppt to 2017 are expected to be 29% lower YoY at about 153,000 sq m. m GLA) was delivered. This is the lowest quarterly comple- 7.8%. In Class A, it reached 5.0% in Q2 2017 (down by 0.9 Due tionto tlevelhe l oonw record.new s upA numberply, ne tof a projectsbsorpti oweren ha postponeds also de clinepptd .QoQ), In Q in2 201Class7 ,B it9.0% tota l(-0.7led 3 ppt7,02 QoQ).0 sq Wem, expect45% the to H2 2017. Completions in 2017 are expected to be 29% vacancy rate to fluctuate around 7.5-8% in H2 2017 due to lower YoY. In H1 2017, the net absorption was down 48% YoY. lower YoY at about 153,000 sq m. new completions. In Q2 2017, the average vacancy rate dropped by 0.8 ppt to 7.8%. In Class A, it reached 5.0% in Q2 Due to the low new supply, net absorption has also declined. In Q2 2017, rental rents increased by 0.6% in Class A, to 2017 (down by 0.9 ppt QoQ), in Class B 9.0% (-0.7 ppt QoQ). We expect the vacancy rate to fluctuate In Q2 2017, it totalled 37,020 sq m, 45% lower YoY. In H1 RUB 1,647/sq m/month, and by 0.9% in Class B, to RUB aroun2017,d 7. 5the-8 %net i nabsorption H2 2017 was du edown to n e48%w c oYoY.mpletions. 1,177/sq m/month (including VAT and operating expenses). The growth was driven by declining availability. (58 ) In Q2 2017, rental rents increased by 0.6% in Class A, to RUB 1,647/sq m/month, and by 0.9% in Class B, to RUB1,177/sq m/month (including VAT and operating expenses). The growth was driven by declining availability. 58 MARKET BALANCE Graph 1. Office market balance
`000 sq m 450 30% 400 350 300 20% 250 200 150 10% 100 50 0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F
Completions Net absorption Vacancy rate (R axis)
Source: JLL Source: JLL
Retail market
The St. Petersburg quality shopping centre stock comprises 58 centres with the total leasable area of 2.25 million sq m. There are no shopping centres announced for delivery until 2018.
The overall vacancy rate increased slightly in Q2 2017 by 0.1 ppt, to 5.7%. The most visible decline was in the East, by 0.8 ppt QoQ. The highest increase was in the North, by 0.7 ppt QoQ.
The 28total volume of opened clothing stores exceeded the area of closed ones inAEB Q2 Real 201 Estate7 by Monitor18%. T |h 3/2017e share of clothing & accessories stores among the opened tenants has reached a maximum level in the last two years – 49%. St. Petersburg market overview | Retail market AEB Real Estate Monitor | 3/2017
Retail market
The St. Petersburg quality shopping centre stock comprises The total volume of opened clothing stores exceeded the area 58 centres with the total leasable area of 2.25 million sq m. of closed ones in Q2 2017 by 18%. The share of clothing & There are no shopping centres announced for delivery until accessories stores among the opened tenants has reached a 2018. maximum level in the last two years – 49%.
Prime base rPernimThetse i overallnb aquse avacancy lirteyn sts hoprate in increasedpquinagl icty eslightly nsthopres in p hQ2ina gv2017 ec en bynott r0.1 echanges hPrimeaved basen anot rents dc hangea min qualityoundt eshoppingand dto a Rm centresUouBn6 havet5e,d0 0nott0o- changed7R0U,00B6 05/,s0q0.0 -70,000/sq. ppt, to 5.7%. The most visible decline was in the East, by 0.8 and amounted to RUB 65,000-70,000/sq m/year (excluding m/year (exclumd/iyenga Vr A(exT canlud inopg eVraAtTin ang edx pensoperaetsin).g expenses). ppt QoQ. The highest increase was in the North, by 0.7 ppt VAT and operating expenses). (59 ) QoQ. Graph 2. TenGarnapt hch 2a. ngTeensa nint SchCa ingn Qes2 i20n S17C in Q2 2017
Opened storeOspene in Qd2 s201tore7s, sinq Qm2 2017, sq m Closed storeCs lions Qed2 s201tore7s, sinq Qm2 2017, sq m 59 TENANT CHANGES IN SC IN Q2 2017
OPENED STORES IN Q2 2017, SQ M CLOSED STORES IN Q2 2017, SQ M
Other Other Other Other 17% 17% 20% 20% Sportswear & SpoSrtps ortswear &C Slopthoirtnsg & Clothing & Sportswear & SportSpors tswear & Sports goods gooAdsc cessories Accessories goods goods Clothing & Clothing & 5% 5% 34% 34% 5% 5% Accessories Accessories Shoes & Shoes & Shoes & Leather gooShodses & Leather goo49%ds 49% Leather goods Leather goods 5% 5% 6% 6% Health & Beauty Health & Beauty Household & Household & 7% 7% Furnishings Furnishings 13% 13% Leisure Leisure 14% 14% Leisure Leisure 25% 25%
Source: JLL
Source: JLL Source: JLL
Street-retaiSl tmreaertk-reet tail market
In Q2 2017, Itnh eQ a2v 201erag7e, tvhaec anvecyrag leev evla ocna nthcye lmevaeinl ocno rtrhideo mrsa iinnc rceoarrsieddo rsb yi n0c.r1e apspet dt ob y6 .40%.1 . pTpht eto l a6r.g4e%st. The largest increase wasin ocbresaesrvee wd aosn oRbusbeirnveshdt eoin RSt.,ub binys h4t.e4i np pSt t.,to b5y. 94%.4, panptd t oS r5ed.9n%iy, anAvde .,S rbedy 2n.i7y Appvte t.,o b5y. 32%.7. ppt to 5.3%.
AEB Real Estate Monitor | 3/2017 29 The total numThbe rt ootfa openel numbde sr tofr eopenes in Qd2 s201tore7s wina Qs 2a lm201os7t equwasa la tlmo othset equnumabl etor othf ec lnousmedb,e er xocfeede closde dt,h e xceeded the latter by juslta t2te%r . bTyh eju slta r2g%es.t Tinhcer elasrgee swt aisn corebaseserve wda sin otbhsee rHveeda ltihn &th eB eaHeuatylt hs e&g mBeeantu tduy es etgom tehnet due to the developmentd oefv pheloaprmeanctie osf. pharmacies.
The share ofT chaef éssh aanred orfe csatafuérsa anntsd orne stthaeu rmanatins ostnr etheet rmetaiinl csotrreideot rse traeacheil corrdid othrse rheacheighestd quthaer theighrly essht aqurea rterly share among openeamd onstogr eopenes in thde slatosrte tsw ion yethea rlsa,s 4t 0tw%o. yeAlsaors, ,t h4e0 %sh.a Arels o,f tfhaesh siohna rree toafi lfearssh hioans rreetacilheersd hitass pe reaakc hed its peak of 18%. of 18%.
In Q2 2017, Inp riQm2e 201ren7ts, tpyrpimicea l rfeonrt sth tey pmicaailn fosre cthtieo nm oafi nN esevscktiioyn A ovfe N. e(bvsefkoiyre A Vvoes. s(tbaenfioyrae SVqo.s) srteamniayiane Sdq .) remained stable at RUBst1a3b,l00e a0t/ sRqU. Bm1/m3,o00nt0h/ s(qin. cmlu/dminogn tVhA (iTn)c. luding VAT). Graph 3. VacGraanpchy 3 r.a Vteac daynncaym riactse odny nthaem micasj orn stthree emt-arejotar ils tcroeerrti-dreotra il corridor AEB Real Estate Monitor | 3/2017 St. Petersburg market overview | Street retail market
Street retail market
In Q2 2017, the average vacancy level on the main corridors The share of cafés and restaurants on the main street re- increased by 0.1 ppt to 6.4%. The largest increase was ob- tail corridors reached the highest quarterly share among served on Rubinshtein St., by 4.4 ppt to 5.9%, and Sredniy opened stores in the last two years, 40%. Also, the share of Ave., by 2.7 ppt to 5.3%. fashion retailers has reached its peak of 18%.
The total number of opened stores in Q2 2017 was almost In Q2 2017, prime rents typical for the main section of Nevs- equal to the number of closed, exceeded the latter by just kiy Ave. (before Vosstaniya Sq.) remained stable at RUB 2%. The largest increase was observed in the Health & 13,000/sq m/month (including VAT). (60 ) Beauty segment due to the development of pharmacies.
60 VACANCY RATE DYNAMICS ON THE MAJOR STREET RETAIL CORRIDOR
8% 7.1% 6.7% 6.5% 6.3% 6.4% 6%
4.2% 3.8% 4% 3.5% 3.5%
1.8% 2%
0% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Nevsky Ave., main part Average for St. Petersburg
Source: JLL Source: JLL
Warehouse market
In Q2 2017, two quality warehouse complexes were delivered to the market with a total area of 25,000 sq m. Overall in 2017, about 59,000 sq m will be built, the lowest level since 2012.
The lack of new supply affects the vacancy rate dynamics. In Q2 2017, the vacancy rate declined by 0.4 ppt, to 6.1%. By the end of 2017, we expect a decline to 5.9%.
In 2016, the asking rental rates for quality warehouse complexes declined to RUB 400-450 per sq m/month (including OpEx and VAT). We do not expect significant further rental changes in 2017.
The total take-up reached maximum values of 95,300 sq m in Q2 2017 and 150,100 sq m in H1. Current warehouse market conditions encourage tenant relocation to other quality complexes in order to improve the commercial terms.
In 2017, the high volume of warehouse deals coincides with low net absorption, which is typical for a recessionary period. The net absorption reached 33,500 sq m in Q2 2017 and 16,900 sq m in H1. AEB Real Estate Monitor | 3/2017 Gr30aph 4. Warehouse demand breakdown by company type St. Petersburg market overview | Warehouse market AEB Real Estate Monitor | 3/2017
Warehouse market
In Q2 2017, two quality warehouse complexes were deliv- The total take-up reached maximum values of 95,300 sq ered to the market with a total area of 25,000 sq m. Overall m in Q2 2017 and 150,100 sq m in H1. Current warehouse in 2017, about 59,000 sq m will be built, the lowest level market conditions encourage tenant relocation to other since 2012. quality complexes in order to improve the commercial terms.
The lack of new supply affects the vacancy rate dynamics. In 2017, the high volume of warehouse deals coincides with In Q2 2017, the vacancy rate declined by 0.4 ppt, to 6.1%. low net absorption, which is typical for a recessionary pe- By the end of 2017, we expect a decline to 5.9%. riod. The net absorption reached 33,500 sq m in Q2 2017 and 16,900 sq m in H1. (61 ) In 2016, the asking rental rates for quality warehouse com- plexes declined to RUB 400-450 per sq m/month (including OPEX and VAT). We do not expect significant further rental changes in 2017.
61 WAREHOUSE DEMAND BREAKDOWN BY COMPANY TYPE
H1 2017
2016
2015
2014
2013
2012
2011
2010
2009
0% 20% 40% 60% 80% 100% Manufacturing Retail Logistic Distribution Other
Source: JLL Source: JLL
AEB Real Estate Monitor | 3/2017 31 AEB Real Estate Monitor | 3/2017 Hot Topic
Hot Topic:
Cloud services: new business models for VAC system manufacturers
Alexander Nevrovskiy Head of Marketing in Building Technologies, Siemens LLC
In this article, we will talk about cloud services – special ers is remote commissioning. In other words, a techni- remote data banks that make such data available wher- cian does not have to actually visit the site. All work ever you are and whichever type of device you are using required – downloading of software, selection of appli- to refer to them – as long as you have a web application cation, customisation, etc. – can be performed by the installed (any browser). specialist from the shop floor. Therefore, you will be able to significantly cut costs, which can either be used to WHAT ARE THE BENEFITS OF CLOUD SER- increase revenue or market price competition. VICES FOR VENTILATION AND AIR CON- DITIONING (VAC) SYSTEM MANUFACTUR- The third unique feature changing your usual thinking ERS? is warranty service-based operation of systems sold. Cloud services offer a number of advantages for VAC As with the commissioning process, warranty service of system manufacturers. First and foremost, they ensure a geographically remote sites is no longer expensive. You more transparent market: all systems sold and installed do not have to send an employee to the site and incur on site will be displayed on a map linked to exact coor- expenses in order to receive all data on the unit’s cur- dinates. The Russian and global reality shows that part rent status, its operation modes that caused a warranty of the equipment is dispatched to installation specialists, (non-warranty) case, and review error messages. The and the end customer is not always known. The share of manufacturer’s technician can get all the data for failure such ‘invisible’ customers may vary from manufacturer diagnosing and establishing its root cause directly from to manufacturer: companies with a ‘project’ approach the shop floor, in the same familiar interface. know their customer more often than those working through installation, distribution companies and other Moreover, post-warranty period can work just the same. agents. Each installation with its recorded (log files stored in a cloud) history can be easily forecasted by the manufacturer with In any case, a VAC system synchronised with the cloud regard to operability and hub replacement. This gives you service will be identified by the manufacturer via the an opportunity to provide fee-based post-warranty service monitoring system interface. The obvious advantage of – both low-cost software updates and replacement of spe- this functionality for marketing and business develop- cific machines and hubs. Thus the latter, the manufacturing ment is search for new geographical sale segments. company’s service specialist already knows which hub Another significant benefit for VAC system manufactur- broke down, and which needs replacement as their life
32 AEB Real Estate Monitor | 3/2017 Hot Topic AEB Real Estate Monitor | 3/2017
span is close to critical even before he/she arrives to the Interface displaying system operation features (temper- customer site. This allows you to immediately create an atures for various sections, fan rotation speed, humidity, order for spare parts and carry out the service itself as pressure, etc.) can be easily adjusted to the company’s soon as possible. needs.
Convenience of remote support by local specialists work- The planner will help you ensure more power-efficient ing on site for the operator should be mentioned spe- operation of the unit: neatly adjusted modes will reduce cifically. Instead of directly managing the entire system, power consumption to 30% during the day. The planner the manufacturer’s technician can also help (and train) a can also be accessed from the cloud interface. local specialist in terms of various peculiarities. The ben- efit of such training is that, for example, in Climatix IC The emergency and abnormality alert system allows not cloud service, the manufacturer’s representative can see only a prompt reaction to events, but also prompt in- on his/her display (in browser window) a full copy of the volvement of all stakeholders. For this purpose, auto- actual controller display demonstrating the local special- matic e-mails are distributed under a specific algorithm ist’s operations. And the specialist can also work with to pre-defined persons. Among other things, you can different displays – standard controller displays, remote select a service company. However, as already noted, it panels, in-house modules. In any case their dialogue will will keep up-to-date through its own monitoring. be more efficient as both will be using the same inter- face: the first one – the actual interface, the other – the WHAT ABOUT SAFETY? virtual one. Safety is one of the most frequently questions asked by the customers. In particular, building owners and main- Furthermore, cloud technologies provide other new op- tenance organisations are most interested in the follow- portunities to VAC system manufacturers. API (special ing: could an external user access our systems and start programming interface) facilitates transmission of any controlling indoor climate? data from the cloud to any business accounting system, e.g. to 1С widely used in Russia. Thus, you can ensure As a rule, all state-of-the-art cloud solutions are tamper- full-scale digitalization of your business and make it pre- proof. As for web dispatching Synco IC and Climatix IC, dictable. data between on-site VAC system and the cloud, where all data are stored, are transferred via a securely en- Moreover, API allows to transfer data to specifically de- crypted protocol. The cloud itself is secured in accord- veloped applications (e.g. for phones) which will help ance with the global safety standards, regardless of the you customise a standard cloud solution for your own cloud service provider. needs. THERE IS MORE TO COME OPPORTUNITIES FOR ON-SITE Finally, it should be said that innovative digital add-ons OPERATION SERVICE for VAC systems not only change business models of What does a VAC system operation service get from it market players, but also can attract new ones previous- besides prompt response of the manufacturer’s service? ly not engaged in engineering. All information collected Here there’s also a number of quite critical financial busi- in engineering systems every second means data, and ness model points. considering the complexity of the systems and their constant operation this already means big data. So- First of all, as mentioned above, the VAC manufacturer called big data that can be analysed, enriched with has access to the entire ventilation unit history, includ- third-party information (outside temperature, daylight ing its previous operation modes. Together with the op- hours, falls, number of visitors in the building, etc.) erator it can optimise inefficient modes that will auto- and further used for forecasting. But that is a topic for matically affect heat costs. another article.
AEB Real Estate Monitor | 3/2017 33 AEB Real Estate Monitor | 3/2017 Hot Topic
Hot Topic:
Unjustified tax benefit in real estate – what is on the tax authorities’ agenda?
Anna Yana Klimova Anastasia Strelnichenko Senior Bolotina Partner, Head consultant, Consultant, of Real Estate Real Estate Real Estate Tax Services Tax Services, Tax Services, in CIS, EY EY EY
As of August 2017, the ‘unjustified tax benefit’ concept, have managed to identify tax schemes and requalify transac- which was first formulated by the Plenum of the Supreme tions based on their actual economic substance, resulting in Arbitration Court at the end of 2006 in Ruling No. 53, will the recalculation of tax obligations. There are a number of assume a codified form with the introduction of Article 54.1 court cases where the tax authorities appeal to the receipt of of the Tax Code. unjustified tax benefit by real estate owners and developers.
The above-mentioned Ruling was adopted as the judiciary’s Russian tax authorities tend to challenge companies of the response to the absence in the tax law of clear provisions for real estate market based on, among other things, the fol- addressing situations in which taxpayers understated their tax lowing grounds: base as a result of unlawful actions and the abuse of rights. • Intra-group loans were requalified as capital contributions. • Interest deduction was challenged under the loan received Tax authorities have frequently referred to Ruling No. 53 in by a company for acquisition of shares in another company demonstrating both lack of due circumspection in choosing with further merger of the two companies (debt push-down contractors and the lack of business purpose in particular strategy). transactions. • The contribution of immovable property to a company’s capital and the subsequent sale of shares in that company These amendments are quite general and are mainly aimed (share deal) were treated as the sale of immovable property at setting in law the ‘unjustified tax benefit’ concept that (asset deal). has been extensively used. Given the main purpose and the wording of the amendments, it is reasonable to predict that REQUALIFICATION OF LOAN the new Tax Code provisions, taken in combination with ex- ARRANGEMENTS INTO CAPITAL isting practice, may come to form one of the key reference CONTRIBUTIONS points for the tax authorities in challenging taxpayers over Prior to 2017, a number of court cases were known in which tax obligations arising from transactions. the tax authorities challenged deduction of interest and for- eign exchange losses on intra-group loans on the grounds A considerable number of court cases relating to the receipt that contributions to capital had been made under the guise of unjustified tax benefit are cases in which the tax authorities of loan agreements1.
1 Determination No. VAS-5243/2014 of the Supreme Arbitration Court of 8 May 2014 on Case No. A40-18786/2013, Determination No. 305-KG14-5812 of the Supreme Court of 11 December 2014 on Case No. A40-141855/2013, Ruling No. F05-6830/2015 of the Arbitration Court of the Moscow District of 15 June 2015 on Case No. A40-115140/2014.
34 AEB Real Estate Monitor | 3/2017 Hot Topic AEB Real Estate Monitor | 3/2017
We know of at least two adverse rulings dated this year, participants of the company, and not the company itself. which confirm the tax authorities’ interest in reclassifying in- The court concluded that the transfer of the debt obligations tra-group loans. For instance, in Ruling No. F10-960/2017 of to the company had given rise to an unjustified tax benefit. the Arbitration Court of the Central District of 20 April 2017 on Case No. A09-2657/2016, a tax authority succeeded in In Decision No. A11-6203/2016 of the Arbitration Court of proving that the provision of funds in the form of loans by the Vladimir Province of 13 February 2017, a tax authority a shareholder had an investment nature. The arguments challenged deduction of interest incurred on credit notes presented by the tax authority were that the loan maturity, issued by way of payment for equity interests in another the interest rate and the loan amount had been regularly in- company that was later acquired by the taxpayer, contend- creased and funds received had been used for construction ing that the acquisition of the equity interests had no busi- purposes, but the borrower had losses, meaning that it had ness purpose. Taking the tax authority’s side, the court no sources to repay the loan. asserted that the chosen approach to the merger of the companies had been contrived to enable the receipt of an Determination No. 303-KG17-1509 of the Supreme Court unjustified tax benefit in the form of the reduction of tax- of 28 March 2017 on Case No. A16-343/2016 concerned a able profit. situation in which a number of interest-free foreign currency loans had been issued to the taxpayer by a parent com- REQUALIFICATION OF SHARE DEAL INTO pany. The funds had been used for construction purposes, ASSET DEAL the loan maturity had been extended on multiple occasions, Quite a few rulings concern cases in which the utilisation of the taxpayer had not paid off loans and the lender had not tax benefits stipulated by the tax law was interpreted as the issued repayment demands. Arguing that the arrangement abuse of rights by the tax authorities. For instance, the Tax effectively constituted investment in the taxpayer’s capi- Code exempts the sale of equity interests from VAT. At the tal, the tax authority challenged the deduction of foreign same time, a contribution to capital is not subject to VAT3, exchange losses on the loans in question and reduced the while the sale of immovable property is subject to VAT. If company’s accumulated losses. a tax authority succeeds in proving that an unjustified tax benefit was obtained through a chain of transactions involv- CHALLENGES OF INTEREST RESULTING ing the contribution of immovable property to a company’s FROM DEBT-PUSH-DOWN TRANSACTIONS capital and the subsequent sale of equity interests in that The tax authorities show considerable interest in cases company to third parties, thus requalifying the transactions where funds are provided for a planned restructuring. In as the sale of immovable property, the taxpayer will be Ruling No. F09-2776/17 of the Arbitration Court of the Urals obliged to calculate VAT on the market value of the property District of 16 June 2017 on Case No. A50-17405/20162, for sold4. example, it was found that loan repayment obligations had effectively been transferred to the very company for the ac- WHAT TO DO quisition of shares in which the loan had been obtained in It may be recommended for real estate market players that the first place by means of merger of the acquiring company they should precisely review their ownership and financial into the acquired one. Taking the tax authority’s side in this structures to identify areas that could be challenged by the case, the court asserted that the conditions laid down in tax authorities. Upon such review, we recommend investi- Article 252 of the Tax Code for the tax-deductibility of inter- gating economic grounds for those transactions which are est had not been met, observing that the cost of purchasing considered to be vulnerable to the tax authorities’ challeng- shares in the company should have been incurred by the es and prepare a defence file.
2 It should be pointed out that the trial court sided with the taxpayer in this case. 3 Subsection 1 of clause 1 of Article 146 of the Tax Code. 4 For example, Ruling No. F01-1067/2017 of the Arbitration Court of the Volga-Vyatka District of 16 May 2017 on Case No. A39-1826/2016, Determina- tion No. 309-KG17-53 of the Supreme Court of 10 April 2017 on Case No. A50-2818/2016, Determination No. 305-KG15-13840 of the Supreme Court of 3 November 2015 on Case No. A40-209850/14.
AEB Real Estate Monitor | 3/2017 35 AEB Real Estate Monitor | 3/2017 Hot Topic
Hot Topic:
Lease termination: is the courts’ approach likely to change?
Ivan Veselov Angelika Doguzova Partner, Dispute Junior Associate, Dispute Resolution, Resolution, Goltsblat BLP Goltsblat BLP
Russia’s sharp economic downturn has made changing Since art. 451 of the Russian Civil Code had already been or cancelling long-term leases, especially those setting rejected by the Russian Supreme Commercial Court1 the rent in foreign currency, an urgent issue for many as grounds for amending or cancelling an agreement, companies. Vimpel-communications PJSC vs Tizpribor PJSC was a landmark case: the first instance court acknowledged This issue becomes particularly acute when talks with that the sharp devaluation of the rouble was sufficient landlords come to nothing because they are reluctant to grounds for amending agreements setting prices in for- revise foreign currency rents, claiming to have other for- eign currency2. eign currency liabilities (such as bank loans for building the leased property) or are just disinclined to compro- This case might have set a precedent for future lease mise. cases, but the decision of the Moscow Commercial Court was later reversed by a higher court and the parties sub- Such reluctance on the part of the landlord usually means sequently reached an amicable settlement. the tenant has to go to court to get the lease amended or cancelled. The prevailing current trend is still not to accept economic crises as a material change in circumstances3. Since the beginning of the currency crisis in 2014, several different judicial approaches have emerged when tenants Nor have courts ever included exchange rate changes in try to get their leases changed or cancelled. The courts force majeure, and justifiably so, since the latter usually had already developed some of these during the many relates to emergencies and Acts of God (such as govern- previous such crises. ment actions and natural disasters).
For instance, claimants have sometimes referred to force Since whether a given circumstance is unforeseeable or majeure (Russian Civil Code art. 401) or a material change extraordinary is a matter of fact, it is pointless to expand in circumstances (Russian Civil Code art. 451). the force majeure clauses of a lease. Even if a court were
1 Resolution of the Praesidium of the SCC RF of 13.04.2010 on case No. А40-90259/08-28-767. 2 Decision of the Moscow Commercial Court of 01.02.2016 on case No. А40-83845/2015. 3 Ruling of the RF Supreme Court of 07.03.2017 No. 305-ЭС17-713; Ruling of the RF Supreme Court of 15.08.2016 No. 305-ЭС16-10566.
36 AEB Real Estate Monitor | 3/2017 Hot Topic AEB Real Estate Monitor | 3/2017
to recognise an exchange rate change as force majeure, Why? Because the last criterion, imbalance of the parties’ this would merely put off performance of the obligation to interests, is the most difficult to prove under the condi- pay the rent, without allowing for change or cancellation tions prevalent in the Russian economy today, when a of the lease itself. currency clause is a way to insure (hedge) against the risk of inflation. This risk is particularly great if the lease is Another, relatively new, argument for amending or cancel- concluded for a long period. If the currency strengthens, ling a lease is that the landlord is the stronger party to the the debtor naturally gains from a monetary liability under agreement. There are different variations on this theme: to a currency clause, which then appears unfair from the have the payment in foreign currency recognised as an unfair creditor’s (landlord’s) point of view. This is how the courts contractual condition (Russian Civil Code art. 428) or abuse traditionally argue when dismissing a tenant’s claim for of rights (Russian Civil Code art. 10), or have the lease invali- termination or amendment of a lease6. dated on special grounds (such as it being oppressive, etc.). So where do we stand now? No: currently the courts do To rely on art. 428 of the Russian Civil Code for having not provide a universal way to escape long-term obliga- an agreement amended or cancelled, the tenant needs to tions. This can be regarded as a sort of judicial contribu- prove that the relevant condition meets the following cri- tion to economic stability. teria: the wording was proposed by the landlord, the ten- ant was not in a position to argue, the condition is clearly Another way of insuring exchange risks is to conclude unreasonable and materially unbalances the parties’ inter- a lease setting exchange rate corridors (exchange rate ests4. It is usually not too difficult to prove the first three changes are introduced within certain bounds as a condi- criteria, since the landlord is most often a professional on tion for calculating a payment) or entitling the parties to the property lease market (such as a retail and entertain- withdraw unilaterally from the agreement if the exchange ment centre owner that uses basically the same lease rate changes sharply. If a lease lacks such conditions, an template with tenants of separate premises). To classify attempt could be made to cancel it on other grounds. For proposed adhesion contract terms as coercive, the court example, by having an expert review conducted of the assesses both the parties’ negotiating strengths and other condition of the leased premises in order to refer sub- factors, such as competition on the market, whether the sequently to violation by the landlord of its obligations. adhering party can in reality negotiate or conclude a similar Such an expert review often throws up a multitude of contract with another party under different conditions, etc. defects. It is riskier just to vacate the leased premises and sign a unilateral statement of delivery and acceptance, Yet this practice is not widespread and there are but a providing the landlord with a list of candidates interested few court judgements amending or cancelling a lease5. in concluding a lease.
4 Resolution of the RF Supreme Court Plenum No. 16 of 14 March 2014 “On Freedom of a Contract and Its Limits”. 5 Resolution of the Commercial Court for the Volga Circuit of 27.10.2014 on case No. А12-1193/2014. 6 Resolution of the Commercial Court for the Moscow Circuit of 13.05.2016 on case No. А41-71971/2015.
AEB Real Estate Monitor | 3/2017 37 AEB Real Estate Monitor | 3/2017 Hot Topic
Hot Topic:
Current trends on the housing market
Lilia Ganagina Marketing & Communications Director, YIT
It has recently become apparent how customers’ re- student, but for a whole family with small kids. So, the quests and the product have changed due to the eco- apartment that was good for a rental, becomes unsuit- nomic situation. The rouble weakness led to boom in able for a final customer. Developers reacted fast and demand for real estate – everybody was trying to make the total areas have started to grow. But the problem a good investment and secure their savings. with financing is still up-to-date, the average customer is not ready to pay for extra space. Where is the answer However, growth in demand was accompanied by a to that? weak rouble combined with decrease in purchasing pow- er. As a result, apartments with extremely small total We suppose that first of all it is essential to work with area appeared on the market. At first, the apartments’ the functionality of the apartment, to find the balance size decreased as an answer to the demand from private between the clients’ needs and their budgets. It means investors, who leased them out or resold. Of course, the enlarging the total square footage just a little so all the most liquid commodity is the cheapest one. According to main ‘working’ zones stay in place: kitchen, living room analysts, in the last 7 years the total square footage of and bedroom. The ‘studio’ layout could be a solution, an average apartment in new buildings has decreased this popular European option is even called a Euro lay- by 23% – from about 80 sq m to 60 sq m. But these are out in Russia. By combining rooms, we could economise average numbers, meanwhile apartments with 16-20 sq the total square footage and add such a bonus as a m in total area are becoming common on the market. dressing room. Some of our complexes became a test- But some developers have exceeded even these num- ing area for a new layout developed by Finnish archi- bers: according to RBC, in Novosibirsk it was possible to tects, where the bedroom, dressing room (and zone for find an apartment with the size of 8 sq m! washer and dryer if there is a lot of space) and bath- room compose a line. At the same time, the hallway, Now, when private investors have disappeared from kitchen and living room are a common area from which the market as a class and there is no improvement in you can also enter the bathroom. This layout lets us purchasing power, such small apartments become just create a master part of the apartment that is a private the most affordable product on the market for the ma- and common area. At the same time, the total square jority of customers. Of course, it is difficult to qualify footage of such an apartment is still small, about 40 such housing accommodations as comfortable. It may sq m on average. As for Finland, YIT professionals de- seem to be cozy in one room, but in reality, it turns out veloped a new concept of apartments. This product is to be a ‘pencil box’ that is difficult to outfit, and worst intended first of all as a solution that allows following of all, it is usually supposed to be a home not for a of its master’s needs, reshaping and changing accord-
38 AEB Real Estate Monitor | 3/2017 Hot Topic AEB Real Estate Monitor | 3/2017
ing to different life situations, such as changes in family It is interesting that not only the Russian market is subject size or growing of its members. There are no dividing to changes as time goes by or under economic conditions walls in this type of apartments, so space is divided by pressure – other countries are no exception. For example, partition walls or even furniture, and thus the residents Finns are giving up such a traditional part of the apart- have more storage space. They can add or remove any ment as a sauna. More and more customers are voting for items if necessary. Walls are covered with decorative common saunas placed inside the residential complex to panels to help create the unique style and to renovate save space inside their own apartment. Balconies are one the apartment without major repairs. The customers more trend. Lately, these spaces have been used more and can choose between some alternative interior styles to more widely: people are cooking there or growing flowers make the apartment personalised. or vegetables and of course, just spending spare time.
In Russia, we are also creating new architectural con- It is the market trends that developers must follow. We cepts and try to localise the best European experience. think that it is a real talent to catch it and be in time with Our current target is to provide as many types of layouts the appropriate product, this is 90% of success. That is as possible and to enrich each project by some unusual why we always stress that the client is our starting point, solutions, for example, terraces or ‘places of interest’ that the times when the product was in first place and inside of the complex. the customers’ interests followed are long gone.
AEB Real Estate Monitor | 3/2017 39 AEB Real Estate Monitor | 3/2017 AEB Real Estate Committee
AEB REAL ESTATE COMMITTEE The AEB Real Estate Committee was founded in 2003 and brings together real estate professionals from a variety of areas including developers, investors, financiers, consultants, project and facilities managers, and other ser- vice providers.
The Real Estate Committee has three primary objectives around which its activities are structured: to facilitate the exchange of information regarding real estate and development issues in Russia; to influence existing pro- cedures in order to increase the attractiveness of foreign and domestic investment; and to establish a ‘bridge’ between the AEB, the Moscow Government, the State Duma and other relevant governmental bodies.
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Saida Makhmudova, Committee Coordinator, at [email protected]
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