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 % 100 12 100 2 10 100 1200 8 58% 1000 1 6 00 00 4 00 2 200 S R 0 0 2011 2012 201 201 201 201 2017 201F Tra Vacan te 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 Built-to-suit 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 Dmitrov Klin 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 Korolev Technopark Uspensk, phase 2 M-9 42,000 sq m M-7 Atlant Park, bld. G Zvenigorod 21,000 sq m Odintsovo Lyubertsy Vnukovo 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 NORTHEAST 17 55 NORTH EST EAST 52 A 84 EST Moscow 52 SOUTHEAST SOUTHEST 153 78 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.