SURVEY COLLIERS INTERNATIONAL | MOSCOW 12/2018

123112 Moscow, 191186 St. Petersburg, 10, Presnenskaya emb. 3, Volynsky lane, BC Severnaya BC Naberezhnaya Tower, Block C, floor 52 Stolitsa (Northern Capital)

+7 495 258 51 51 +7 812 718 36 18 SURVEY New-generation COLLIERS INTERNATIONAL staff increasingly prefer MOSCOW / DECEMBER 2018 a flexible working schedule and multiple office options Throughout the last 10-15 years we have seen rapid expansion of agile workspaces, including coworking schemes that are widespread abroad as well as in this country – particularly in Moscow and St. Petersburg. As per the original concept, coworking offers desks and a good environment for building a community, ensuring interaction and communication between users who represent a particular professional environment for them to exchange knowledge, ideas and contacts.

At a time of explosive technological progress, businesses are on the lookout for new points of expansion and optimisation, which results in a drive for the transformation of existing goods and services as well as creating new ones. The emergence of agile spaces and coworking options on a global scale is caused by ongoing social changes generated by value-driven dynamics: those who belong to the latest generation increasingly choose creative professions to express themselves, giving preference to a flexible working schedule and they are looking for independence from a single office as a place of work.

Based on global practice, two types of coworking users can be distinguished. The first group is represented by entrepreneurs, the self-employed and small businesses.

The second group includes large international corporations using coworking options for temporary accommodation of their staff, and based on the size of office space and the term of its lease, they want to minimise their risks and the costs of a long-term commitment.

2 SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 3 International companies that see a ready solution for their business in coworking spaces in terms of economic gain and + convenience for their employees include high-profile firms such as IBM, Microsoft, HSBS, KPMG, Dell, Google, Toshiba and General Electric.

The evolution of the agile office space market and the advent of large prominent consumers has resulted in coworking becoming a significant part of the office market in cities, such as London, New York, Hong Kong, Beijing and Sydney. In London, coworking space totals 722,000 sq m, accounting for 2% of the office space supply in that city (36 million sq m).

HOW MUCH TIME RESIDENTS SPEND IN COWORKING SPACE?

Walled office Non-fixed workspace Fixed (fixed)workplace

82% 54% 62% 18% 32% 34% 14% 4%

 Less than 3 days  From 3 to 5 days  Over 5 days

The arrival of coworking operators was instrumental in boosting vibrant competition: as a rule, the coworking operator provides the client with a ready business solution so that the client has no need to contact the owner directly. In the future, provided a certain level of demand for agile spaces is reached, the availability of agile offices will be a must for any business centre, which in turn may motivate BC owners to create and manage coworking spaces on their own, thus avoiding engagement with Total agile office space the end-client via sublease, which is presently the case. in Moscow: 100 000 sq m

4 SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 5 74% Classical SUPPLY AND DEMAND 26% Specialized IN THE MOSCOW AGILE SPACE MARKET

Coworking appeared in Moscow a few years ago, but there are already about 110 locations TYPES available. Compared to 2016, the number of operational coworking spaces has increased by 31%, OF COWORKING which exceeds global growth rates (15-20%, on average).

Typically, at the early stage of the coworking market there was a high share of closed outlets: under stiff quality requirements and competition a large number of coworking outlets were forced to close.

Structure 8%

46% 24% of coworking 9% 18% outlets, by area, 7% 2% 9% 5% sq m 2016 2017 2018 year year year  <100  100-500 67% 36% 24%  500-1,000  1,000-3,000

 >3,000 45%

Specialised coworking space accounts for 26% of existing coworking outlets in Moscow, the rest being As of the end of H1 2018, the classical coworking space in Moscow already totaled 60,000 sq m, classical. Specialised coworking is the first step in developing the agile office space segment in Moscow. of which almost 70% was accommodated in Class A and B+/- premises. Thus, the share of coworking These premises have their target audience while their floor area normally does not exceed 50 sq m. premises in the total office space supply in Moscow (around 18.2 million sq m) comes to 0.33%.

Among the most common types of specialised coworking areas are creative workshops and social Large coworking areas (from 1,000 to 3,000 sq m) can mainly (67%) be found in Class A and coworking venues provided by the state on a complimentary basis. The share of specialised coworking B+/- business centres, whereas most (70%) small coworking outlets (below 100 sq m) are found in venues is dwindling with each year due to the growth in classical coworking, which is evidence of the Class B- office centres, or those of lower classes as well as in other buildings, not office centres (residential development of the quality agile space market in Moscow. buildings, shopping centres and others).

6 SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 7 Average occupancy of coworking space ranges from 70% to 90%. Coworking premises in Moscow are mainly located in districts of high business activity: half of them (48%) are confined within central Moscow and the MIBC Moscow City business district, where coworking venues of operators such as Workki, CEO Rooms and Union Place successfully operate.

The expanding geography of coworking venues was an important trend of 2017: for the first time new outlets were opened in New Moscow (Troitsk, Moskovsky settlement). The coworking operator START launched an entire coworking chain in Moscow’s near suburbs, such as Krasnogorsk, Odintsovo, Korolev, Reutov and Dubna. Overall, 14 coworking venues were opened beyond the Moscow Ring Road (MKAD) in 2017.

The average space of newly opened coworking venues had grown from 300 sq m in 2016 to 1,300 sq m in 2017, which can be explained by the fact that chain operators Workki, GrowUp, SOK and Deworkacy opened several coworking outlets with areas varying between 1,000 and 2,500 sq m. An increase in the floor area of coworking venues is accompanied by a transformation in their functional zoning, with open space areas shrinking, whereas the number of private offices and event venues has increased.

Changes in the inner structure of coworking reflect the needs of users: COWORKING BREAKDOWN BY teams with an increased number of participants have started choosing a CLASSES OF BUSINESS CENTRES walled office that creates a comfortable working environment, ensuring an atmosphere of privacy. Other things aside, open space is the least profitable coworking zone, as compared to private offices and event venues (in the current market where demand is generated by sole entrepreneurs), which also stimulates coworking operators to make a choice not in favour of open space in coworking space zoning.

Class А Class B+ Class B- Class С Other (SCs, residential buildings) As of today, demand for coworking space from users is growing steadily. As estimated by coworking operators themselves, the average 16% 43% 12% 3% 26% occupancy level is in the range of 70-90%.

8 SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 9 HOW MUCH DOES COWORKING COST? 15,116 9,990 13,040 14,070 10,710 13,000 29,170 20,000 11,000 14,000 8,000 Based on the results of H1 2018, the av- resulting from increasing demand for such erage cost of a fixed workplace in a cowork- premises as well as the higher cost of work- ing amounts to 14,837 RUB/month – during places in coworking offices that opened in 2017 the first half-year this indicator demonstrated and were positioned as higher quality space. a 4% growth. Based on the results of 2017, the cost averaged 14,640 RUB/month, up 18% The upper limit of the cost range for a year-on-year. fixed workplace in a coworking office is shaped by premium coworking projects where the CAO Moscow region SVAO UAO SAO VAO Moscow- City ZAO UVAO UZAO SZAO The growth is caused by an escalation of monthly charge can be as high as 40,000 RUB. Number the cost per workplace in coworking venues, of co-working 42 15 13 9 8 5 5 2 2 2 1

Average price per fixed workplace (RUB/workplace/month)

MOST POPULAR RANGE OF RESIDENT EXPENSES RATES: ON COWORKING (RUB) >> leasing a non-fixed workplace Fixed workplace >> leasing a fixed workplace >> walled office lease

2% 18% 30% 35% 15%

ADDITIONAL OPTIONS Non-fixed workplace FOR RESIDENTS: >> leasing a meeting room >> leasing a conference hall 40% 6% 22% 13% 19%

< 5,000 > 20,000 10,000 - 15,000 15,000 - 20,000 5,000 - 10,000

10 SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 11 MOSCOW: DEVELOPING MARKET BIGGEST COWORKING TRANSACTIONS OF AGILE SPACES IN MOSCOW BUSINESS CENTRES

Increasing the number and floor area of coworking outlets, the growing cost of workplace leases, transformations in coworking space zoning — all of these factors indicate that the agile Co-working Area, sq m Office building Class Address space segment is undergoing rapid development in the Moscow office market. SOK Arena Park 6,000 VTB Arena Park А 36, Leningradsky Ave.

According to plans announced by coworking operators, about 10 new locations will hit the SREDA 6,000 Federation. East B+ 12, Presnenskaya emb. market; converted into square metres, this will come to at least 30,000 sq m of office space. Mainly large-size coworking projects with floor areas of 2,000, 4,500 and even 6,000 sq m are scheduled WeWork 5,900 BC White Square А 5, Lesnaya str. for opening. Workki 4,500 BC Progress B- 17, Zubovsky blvd.

Looking at the global experience, coworking projects in Moscow are at initial development WeWork 4,228 BC Savin B+ 11, Timura Frunze str. stages, the average coworking space in Moscow is way below the size in world capitals: e.g. in London the average coworking space is 1,800 sq m, whereas in Moscow it is 500 sq m. SOK Peking Gardens 3,200 BC Peking Gardens B+ 5 bld. 1, Bol. Sadovaya str.

3% 5%5% RESIDENT

9% 32% ACTIVITY TYPES

12%  Marketing / PR / Design  IT / Telecommunications / Media OF POLLED 27% Service and Management  Production 15% Сost and quality of food / drinks  Retail USERS HAVE  Development / Design / Construction RECOMMENDATIONS 14% Clean rooms 15%  Services for business: legal advice, recruitment, consulting ON IMPROVING 13% Building engineering systems 24%  Other: education, medicare, logistics COWORKING 13% Quality finish / furniture 11% IT problems The number of large coworking projects capable of hosting a major client is limited, which is OPERATIONS* a clear indication that the quality supply of premises in this format has not been formed yet. 7% Price formation

As of today there are no cases of large companies leasing coworking premises for their employees in Moscow; nevertheless, major international companies are definitely interested in this option, which makes analysts optimistic about the prospects of agile office space market USERS’ Round-the-clock operation development in Moscow. Increasing the number of meeting rooms WISHES Soundproofing of premises The upcoming opening of the biggest international coworking chain will be an important Creation of recreational areas *As per the survey of Colliers International. Workspace zoning with an eye milestone in the development of the quality Moscow coworking market: WeWork has leased Participating in the survey were 5 coworking 5,900 sq m in BC White Square, 4,228 sq m in BC Savin (Red Rose business district) as well as chains in Moscow. As part of the survey, 180 on differences between user activity patterns users were polled. 3,200 sq m in Yakimanka, 26 Gallery. More sofas and armchairs

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MAP OF CO-WORKING 18 Number of workplaces in coworking CENTRES IN MOSCOW* <50 50-100 100-300 1. RULEX 30. Workki Neo Geo >300 2. #tceh on Myasnitskaya 31. Workki Komsomolskaya 3. Arma Coworking 32. Yellow Door 4. Cabinet Lounge 33. “Time” business club 33 5. CEO ROOMS "Imperia" 34. Delovar 6. CEO ROOMS West Park 35. Delovoy Alekseev Tower 7. Deworkacy CorporateInovations Hub 36. Delovoy Arma 8. Deworkacy "Izvestiya" 37. Delovoy Gostiny Dvor 51 9. Deworkacy "Red October" 38. Delovoy Omega Plaza 10. DI Telegraph 39. Derevo 11. Flexy Office 40. DomJour 12. GrowUp 41. Caliber 13. GVA HUB 42. Klyuch Arma 12 35 14. Hydrocowork 43. Klyuch Danilovskaya 24 15. IQ COWORKING 44. Klyuch Moscow Silk 23 14 41 16. Lerner 45. Klyuch Patriarshiye 53 17. MatrixOffice 46. Klyuch Trekhgorka 49 18. PO2RT 47. Atmosfera 55 48 19. SM Moscow-Cty 48. Coworking in BC Preo8 20 20. SOK Arena Park 49. Coworking on Rizhskaya 21. SOK Zemlyanoi Val 50. Mir SREDA OAK 22. 51. 50 23. Start Hub Flacon 52. Workstation ArtPlay 31 45 32 24. The Moon 53. Workstation Plaza 21 25. Union Place Place of Work 54. Gorky Park Workstation 13 42 26. Union Place “In the Office on Smolenskaya" 55. STROGINO technopark 46 40 37 22 52 27. Union Place “Moscow City" 56. Fiztechpark 29 27 26 28. Union Place "Taganskaya" WeWork 19 28 29. Workki City 9 *chain projects - 44 34 25 17 PREFERABLE 39 11 54 16 LOCATION 38 15 13% Irrelevant 43 IN CHOOSING Garden 35% Ring NEW 6 COWORKING

SPACE Moscow- 10% City 47 Next 9% to MCC 30

12% Other South- 21% west

14 SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 15 OFFICE AGENCY AND CORPORATE CLIENT DEPARTMENTS Vera Zimenkova Regional Director [email protected]

TENANT REPRESENTATION DEPARTMENT Francois Nonnenmacher Director [email protected]

RESEARCH DEPARTMENT Veronika Lezhneva Director for Russia [email protected]

MARKETING AND PR DEPARTMENT Olga Bakulina Regional Director [email protected]

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