RESEARCH
2017 WAREHOUSE MARKET REPORT Moscow
HIGHLIGHTS
The 5-year low volume of The vacancy rate fell to 7.8% The online trading segment The asking rental rate for quality industrial space was delivered to by the end of 2017, which was formed the bulk of the demand Class A warehouse properties the warehouse market 1.5 p. p. lower against 2016 structure at year-end 2017. was equal to 3,700 rub./sq m/year of the Moscow region in 2017. figure. (triple net) by the end of 2017. WAREHOUSE MARKET REPORT. MOSCOW
Warehouse Market Report Moscow
Key indicators Vladislav Ryabov Regional director, Industrial, Warehouses 2017 2016 and Land, Knight Frank, Russia and CIS Total quality supply volume, thousand sq m 13,359 12,789 ”The past year happened to be eventful in terms of transactions, a New delivery in 2017, thousand sq m 570 709 bit ahead of the year 2016, but all the other indicators of the market turned Transaction volume in 2017, thousand sq m 1,196 1,099 5 out to be less positive, demonstrating a continued decline in rental rates Vacancy rate, % 7.8 9.3 and a record low delivery volume. We expect that vacant premises will Asking Class A rental rates, rub./sq m/year* 3,700 4,000 be occupied further and the rental rates will stabilize and possibly grow Asking selling price, rub./sq m** 30,000–35,000 32,000–37,000 in H2 2018. We do not expect new developers to approach the market, * Triple net – hereinafter, asking rental rates exclude VAT, Operational Expenses and utility bills. retailers and distributors will continue ** Hereinafter, the selling price for the standard Class A dry warehouse of more than 10,000 sq m, to prevail in the demand structure”. excl. VAT. Source: Knight Frank Research, 2018
Borisovskiy terminal, Moscow, Simferopolskoe hw., 10 km from MKAD
2 2017 RESEARCH
Supply
570,000 sq m were delivered to the warehouse real estate market of Moscow region in 2017 - 20% lower than the same indicator in 2016 and the lowest delivery volume for the last 5 years. The total Elena Bushmina, supply volume reached 13.4 million sq m. managing director of Ghelamco Russia The largest volume of warehouse space KF: Is there a demand for completed the vacancy in the north of Moscow was completed in the northern part of the speculatively warehouses in current region has decreased significantly, so Moscow region – 212,400 sq m or 37.3% market conditions? our premises are in demand, and today of the total delivery volume, followed by we have an opportunity to focus not only the southern direction with 178,400 sq m E. B.: Development is a cyclic process. or 31.3% of the total delivery volume. It takes an average of up to 1.5 years on the volume of leased space, but also from the project creation of a warehouse on the quality of potential tenants. Over 328,000 sq m or 57.6% of the total building to the receipt of commissioning volume of warehouses completed in KF: Which companies are applying permit. In this regard, if the demand in 2017 were built speculatively; 26.6% or for lease in building C of Dmitrov the market increases, a large volume of 151,800 sq m were built for end users; new space appears immediately, as a rule. Logistics Park? and the remaining 90,000 sq m or 15.8% were constructed in a built-to-suit for Thus, the warehouse market of Moscow E. B.: Many companies with expiry of their lease and for sale format. Some of the region started 2017 with rather large leases in 2018 are seriously considering largest speculative projects put into volume of vacant space in terms of the the option of moving to a better and more operation in 2017 were units 2.4 and balance of supply and demand. modern warehouse. 4.4 with a total area of about 69,000 There were lots of large warehouse units As to the current profile of potential sq m in Orientir Sever-2 logopark; move-in ready in the north of Moscow tenants of the Dmitrov Logistics Park, units 1, 2, 3, 4 in Vnukovo 2 logopark region during the construction of building with a total area of about 50,000 sq m; the main demand is registered from C in the Dmitrov Logistics Park. units C1, C2, C3 in Dmitrov Logistics Park manufacturing companies (both Russian with a total area of about 45,000 sq m; Now, by the time of obtaining a certificate and foreign), which plan to locate their phase 1 of Borisovskiy terminal with an of ownership for the completed building, distribution centres in our project. area of about 33,000 sq m.
Distribution of total quality supply Dynamics of growth of quality warehouse space, the volume of lease and purchase volume in Russia, 2017 transactions and the vacancy rate in the Moscow region
1 00 12
1 00 2 10 1 00
1 200
1 000 1 00
00
00 2 200 S R 0 0 2011 2012 201 201 201 201 2017 201
Source: Knight Frank Research, 2018 Source: Knight Frank Research, 2018
3 WAREHOUSE MARKET REPORT. MOSCOW
About 17% of the total delivery volume of warehouse space of 2017 was located at a distance of up to 15 km from the Moscow Ring Road, about 71% or 405,000 sq m of warehouse space – at a distance of 15 to 45 km from the Moscow Ring Road, the remaining 12% were located at a distance Kalin Anton, of more than 45 km from the Moscow director of industrial property department of PNK Group Ring Road. We pointed out that some facilities sold KF: What is the key difference of modern K. A.: We see that built-to-suit format is speculatively in 2017 were partially occu- Class A warehouses from analogs of a actively developing: large industrial and pied by tenants already at the construction decade ago? logistics companies, as well as retailers, stage. This indicated that the volume of increasingly prefer it. But now the large vacant units meets all potential ten- K. A.: The Russian market of industrial customer is not ready to wait for his built- ants technical requirements was shrinking. real estate is becoming more like the to-suit project more than one construction European one. This is evidenced not The largest BTS facility put into operation season, which is logical, because the only by improved quality of industrial in 2017 was BMW distribution centre with construction time is reduced, while the facilities, but also by the increasingly a total area of about 35,000 sq m, built on quality is constantly growing due to the strict observance of international fire the territory of PNK Park Bekasovo. introduction of new technologies. safety standards and property insurance The vacancy rate of 2017 dropped by standards, for example, such as FM Global. But we also understand that there will 1.5 p. p. reaching 7.8%, which was equiva- And if even 7-8 years ago in Russia there always be many companies demanding lent to 1 million sq m in absolute terms. was a demand from international brands the project to be built already and to be Such a decrease was caused by the large for compliance with such standards, but universal – with the possibility of using number of transactions concluded in developers did not have any supply. Today, both for storage and for production. And completed vacant facilities, thus inspiring the leading players of the Russian market knowing these market needs, PNK Group is the largest developers to announce the take into account the most stringent building exactly such industrial buildings. launch of new projects in Moscow region. requirements of international insurance Due to the high rate of construction of For example, Orientir company planned to systems. industrial facilities on a turn-key basis, begin construction of a warehouse com- PNK Group always has vacant space and KF: What type of transactions do plex on Novorizhskoe highway with a total high readiness condition of facilities. you think will be more in demand in area of about 400,000 sq m in 2018, and 2018: lease in completed speculatively in 2017 PNK Group introduced to the mar- buildings or construction of own ket of the Moscow region 5 new projects warehouse in BTS format? of universal buildings that can be used both for storage and for production.
Distribution of new delivery by type in the Moscow region, 2017
1
2 7
S
PNK Park Valishevo, Source: Knight Frank Research, 2018 Moscow region, Simferopolskoe hw., 32 km from MKAD
4 2017 RESEARCH
The largest warehouse complexes delivered in 2017
Klin Logistic warehouse complex, phase 1 56,000 sq m
Sergiev Posad
Orientir Sever-2 logopark Solnechnogorsk (bld. 2.4) 25,290 sq m Dmitrov LogisticsА-107 Park (bld. 4.4) 43,104 sq m А-108 (bld. С1) 19,835 sq m
M-10 А-108 (bld. С2) 14,455 sq m (bld. С3) 11,140 sq m
PNK Park Severnoe Sheremetyevo, bld. 5 M-8 18,310 sq m
Sheremetyevo
А-107 Istra Mytischi Technopark Uspensk, phase 2 M-9 42,000 sq m
M-7 Atlant Park, bld. G Zvenigorod 21,000 sq m
Odintsovo Lyubertsy
nukovo Moskovskiy M-5 hukovsky Ramenskoe M-1 M-3 Vnukovo 2 logopark, bld. 1, 2, 3, 4 49,000 sq m
Borisovsky terminal, phase 1 Podolsk 33,000 sq m Bronnitsy Domodedovo M-4 Naro-FomiskPNK Park Bekasovo, DC BMW А-107 34,345 sq m
M-2
Source: Knight Frank Research, 2018 Chekhov
Obninsk Distribution of total quality supplyА-108 by the directions in the Moscow region, 2017
NORTH NORTH EAST 1 7 5 5 NORTH EST EAST 5 2 A 8 4 EST 5 2 SOUTH EAST SOUTH EST 15 3 7 8 SOUTH 32
Vnukovo 2 logopark Source: Knight Frank Research, 2018 New Moscow, between Kievskoe and Borovskoe hw., 20 km from MKAD
5 WAREHOUSE MARKET REPORT. MOSCOW
Demand Distribution of transactions by tenant/ Distribution of transactions in the buyer in the Moscow region, 2017 Moscow region by directions, 2017 As a result of 2017, the total volume of lease and purchase transactions on quality ware- house space in the Moscow region got to 1 NORTH 1,196,000 sq m, which was slightly higher (by NORTH EAST 1 2 8%) over the same period in 2016. 2 2 24 3 3 4 NORTH Despite the increase in the share of BTS EST EAST transactions in 2017, the main volume of A 1 0 transactions (about 77.6% of the total vol- 11 3 EST ume) was concluded in comleted buildings. 1 6 The largest volume of lease and pur- SOUTH EAST 17 2 chase transactions in warehouses of the SOUTH EST 10 0 Moscow region (36.4% of the total) in 2017 SOUTH was concluded in the southern direction. 5 0 36 4 R
Source: Knight Frank Research, 2018 Source: Knight Frank Research, 2018 Gleb Belavin, deputy general director Distribution of transactions in the Moscow region by types on tenant relations in MLP Property 67.4% 10.2% 4.5% 17.9% Management 2017
KF: What are the current requirements 81.4% 1.5% 3.0% 14.1% of potential tenants for completed ware- 201 houses? Have the tenant preferences changed? 71.9% 9.8% 8.3% 10.0% G. B.: We did not see any fundamental 201 changes in the requirements of tenants to warehouses in 2017. As before, most companies were searching for a quality S S S warehouse in a small distance from the Source: Knight Frank Research, 2018 Moscow Ring Road and with a profes- sional management company. But a more thorough approach to choosing a partner was what we actually observed throughout the year.
KF: Has something changed in the behavior and preferences of developers in connection with the crisis? G. B.: If the quality of Class A warehouses Zakhar Valkov, remains quiet equal, the issue of pro- executive director of Radius Group fessionalism and promptness of decision KF: Which companies formed the demand the activation of e-commerce companies was making by the management company for quality warehouse space in 2017? pointed out, expressed in large lease and becomes important. We think this is due purchase transactions. to the different behavior of developers Z. V.: 2017, unlike in 2016, was more dynamic during previous crises. They witnessed in terms of the number of transactions – KF: How the year 2017 was for South Gate personally that cooperation with a large indicators of activity in the market. That industrial park? management company was an indisputable year, we saw an increase in demand from Z. V.: 2017 was successful for South Gate significant advantage, as it was ready and companies from different segments and industrial park, the team of Radius Group able to find adequate solutions quickly industries across the market of quality Class entered into long-term lease agreements for on any issue to maintain a long-term A warehouses. They were both major players more than 70,000 sq m with such companies partnership. Not every company can and medium-sized companies that took as Polaris, Leroy Merlin, Geyser, FM Logistic, afford it, and not every company keeps the advantage of market conditions to upgrade L'Argo, and others. promises given earlier. their warehouse infrastructure. In addition,
6 2017 RESEARCH
The largest transactions in 2017
15,492 м2
Sergiev Posad
M-10 10,726 м2 Andrey Postnikov, managing director Solnechnogorsk 12,468 м2 А-107 of Orientir group 45,056 м2 А-108
of companies А-108 15,000 м2
68,719 м2 2 KF: What requirements did X5 Retail 15,533 м M-8 Group specify for the future distribution 26,502 м2 Sheremetyevo centre? А-107 Istra Mytischi A. P.: The main feature of Severny distribution centre for Pyaterochka company was a period of 4.5 months from the date M-9 10,000 м2 of signing the contract to the start of M-7
operations. The technical task of the customer Zvenigorod included all the latest best practice of
X5 Retail Group on warehouse buildings: 2 Odintsovo 23,000 м2 20,614 м Lyubertsy from special requirements to formwork А-107
of high-precision heated floors to the nukovo 2 18,671 м2 Moskovskiy 20,550 м M-5 system of dispatching and monitoring of hukovsky Ramenskoe all systems of the building directingM-1 them M-3 to a single centre and with access to ЛН Дистрибьюция information for managing organizations 13,600 м2 and services of the building. Русинхим Podolsk 11,000 м2 Domodedovo KF: What is your estimate of the demand Bronnitsy Naro-Fomisk M-4 for quality warehouse real estate in the 146,000 м2 north of Moscow region in 2017? 12, 970 м2 14,000 м2 A. P.: 2017 was the year of setting records
M-2 for Orientir group of companies by 52,000 м2 the volume of concluded lease and pur- chase transactions in the Moscow region. Source: Knight Frank Research, 2018Chekhov The total transaction volume completed Obninsk by Orientir Group of companies in 2017 А-108 amounted to 150,000 sq m, which, according to our estimates, was more than About 282,000 sq m or 24.3% of the total ment for the construction of distribution 60% of the total volume of transactions in volume of transactions was completed in the centre in a built-to-suit format for Utkonos 2017 in the historically most demanded north of the Moscow region. Interestingly, company with an area of about 69,000 sq m northern direction of the Moscow region. in Orientir Sever-3 logopark. Such a high volume of transactions these directions historically formed the high- concluded in 2017 allowed Orientir to est demand. The second place in the demand structure take a leading position among the largest The leading position (about 26% of the of 2017 was the segment of distributors with warehouse developers of the Moscow total volume of transactions) in the struc- a share of about 20%. One of the largest region. ture of demand in 2017 was occupied by transactions in this segment was the lease of about 18,600 sq m in Bykovo warehouse Orientir group of companies also conclud- the segment of online-retail. The largest complex by Pharmcomplect pharmaceutical ed the largest investment transaction on transactions of this segment were: the sign- the warehouse real estate market in 2017 ing of an agreement between the online- distributor. by signing a sales and purchase agreement retailer Wildberries and A Plus Development The largest transaction of the retail seg- for 195,000 sq m of space already leased company for the construction of a distri- ment in 2017 was the signing by the grocery on a long-term basis to such companies as bution centre with a total area of about retailer X5 Retail Group of a lease agreement OBI, O'KEY, Miratorg, R-Pharm and others. 146,000 sq m; the signing of the sales agree- for 45,000 sq m in Orientir Sever-2 logopark.
7 WAREHOUSE MARKET REPORT. MOSCOW
Commercial terms Asking rental rates and demand volume by directions of Moscow region
As a result of 2017, the average rental rate for quality Class A warehouse space shrank 7.5% over 2016 and equalled to NORTH 3,700 rub./sq m/year. The asking rents var- NORTH EAST ied depending on the location of the facil- ity, the volume of leased space and other 00 NORTH 00 terms of the lease. The highest rates were EST recorded in the western, north-western EAST and southern directions, the lowest – in the 00 A eastern and south-eastern directions of the 200 Moscow region. In 2017, the selling price of a built-to-suit EST 00 project from 10,000 sq m was in the range of 30,000–35,000 rub./sq m, excluding 200 VAT. It should be noted that the construc- tion cost of a built-to-suit warehouse 700 complex for sale with an area of less than SOUTH EST 00 SOUTH EAST 10,000 sq m was 35,000–40,000 rub./sq m, excluding VAT. SOUTH Vacancy space 0 00 A 7 rub./sq m/year 7 10 10
Source: Knight Frank Research, 2018
Dynamics of average asking Class A rental rates for warehouses in the Moscow region, rub./sq m/year
700 00 00 00
000 00 700 0 00
2010 2011 2012 201 201 201 201 2017 201
Source: Knight Frank Research, 2018
Key indicators of the warehouse market of the Moscow region
Index 2013 2014 2015 2016 2017
Quality supply volume at the end of the period, thousand sq m 9,603 11,240 11,957 12,789 13,359
Delivery, thousand sq m 763 1,637 717 709 570
Transaction volume, thousand sq m 1,280 911 1,231 1,099 1,196
Vacancy rate, % 1.9% 9.2% 9.4% 9.3% 7.8%
Average asking rental rate for Class A warehouse complexes, rub./sq m/year 4,700* 4,500 4,300 4,000 3,700
Source: Knight Frank Research, 2018
8 2017 RESEARCH
Forecast
According to forecasts of Knight Frank analysts, the new construction volume of 2018 will exceed the indicator of 2017 rising to 800,000–900,000 sq m. Most of the facilities declared for commissioning Alexander Nikishov, in 2018 will be completed in built-to-suit commercial director of Stroitelny Al’yans holding format or with the involvement of the KF: In your opinion, will the format of very interesting to light industrial custom- general contractor on their own land plots. light industrial warehouses be much-in- ers, because they have historically formed Therefore, the share of speculative ware- demand at a distance of 20–40 km from infrastructure favourable for creation and houses will not exceed 50% of the total the Moscow Ring Road? development of business. volume of new space in 2018. In 2017, the light industrial format began A. N.: First of all, the format of light indus- KF: Do you plan to put into operation to actively spread at the warehouse real trial is not just the division into small warehouses of small format in 2018? units. These are professional production and estate market of the Moscow region. This A. N.: There have been multi-parks in Europe storage facilities, radically different from format implied the division into small units for a long time, where all formats of indus- Class A warehouses. and was mostly in demand within the limits trial real estate perfectly coexist with each of the city or in the immediate vicinity of The demand for this format in the immedi- other, but there is not a single real multi- the Moscow Ring Road. However, some ate vicinity of the Moscow Ring Road can be park in Russia. Stroitelny Al’yans holding developers started to implement small- argued. The European experience is, indeed, is developing it already, it will be ready in size warehouses far from the Moscow Ring the concentration of such facilities close to 2018 in the south of the Moscow region, Road. Delivery of some of these projects large megacities, but the Russian experience where there will be together light indus- scheduled for 2018. is different. In the Moscow region there are trial, industrial, logistics, and a pharma- Despite the fact that the bulk of the cities (for example, Podolsk, Domodedovo, ceutical cluster. This will be the first and demand structure was formed by the Chekhov, Elektrostal, etc.), which are located only multi-park in the Russian Federation at online-retail segment by the end of 2017, 30–50 km from Moscow, but they will be the moment. we believe that the retail segment will be in charge of the bulk of transactions in 2018, leasing space in completed ware- houses, and completing transaction on The largest properties planned for delivery in 2018 in the Moscow region construction of their own facilities. Property Developer Area, sq m Provided that the demand for completed units remains stable, the vacancy rate will Wildberries distribution centre A Plus Development 145,000 continue to decline gradually and will be Auchan distribution centre Radius Group 138,000 fixed at 6-6.5% by the end of 2018. Warehouse complex A Plus Development 90,000 In connection with the entry into the Utkonos distribution centre Orientir 71,000 market of a large number of facilities with Major warehouse terminal, phase 2 Standart Proekt LLC 57,300 asking rental rates below the market aver- Operator kommercheskoy nedvizhimosti age in the first half of 2018, we assume PNK Group 52,000 distribution centre that the asking rental rate will go down to 3,600 rub./sq m/year. Dmitrov Logistics Park, block D Ghelamco 50,000 Borisovsky terminal, phase 2 Promtechalians 35,000 Svitino warehouse complex VS Nedvizhimost 27,000 Source: Knight Frank Research, 2018
© Knight Frank LLP 2018 – This overview is published for general information only. Although high standards have been RESEARCH INDUSTRIAL used in the preparation of the information, analysis, view and Olga Shirokova Vladislav Ryabov projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any Director, Russia & CIS Director, Russia & CIS loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent [email protected] [email protected] the view of Knight Frank in relation to particular properties or projects. +7 (495) 981 0000 Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank.
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