Warehouse Real Estate Moscow Knight Frank
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overview 2010 warehouse real estate Moscow Knight Frank Main points • 405,000 sq m of quality warehouse space was commissioned in 2010, which is nearly 50% less than in 2009. • A total of 800,000 sq m of warehouse premises were bought or leased in 2010, which is nearly double the amount in 2009. • At present rates of construction and take-up, the vacancy rate for warehouse space will sink to 3% by the end of 2011. 2010 warehouse real estate Moscow warehouse real estate. Moscow. Vyacheslav Kholopov, Main indicators Director of Industrial, Warehouse and Land, Total supply (classes А, В, С), million sq m 10.54 Knight Frank Class А Class В 2010 was not an easy year for warehouse Supply of quality space in classes A and B, million sq m 4.23 1.88 market participants, but signs of recovery were evident. Surplus space, which Total supply of quality space, million sq m 6.11 accumulated in 2008–2009, was taken up thanks to increase of tenant activity. The Growth of supply in 2010, thousands of sq m 340 65 second half of the year saw strong growth of rents, and warehouse developments Projects due to be commissioned in 2011, thousands of sq m 350 30 now look much more profitable than a year ago, so we expect to hear of new Lease and sale transactions in 2010, thousands of sq m 800 warehouse projects in 2011–2012. A key post-crisis trend among developers is Average vacancy rate, % 5.0 11.5 to move beyond speculative warehouse construction: developers now aim to Declared rental rates, $ per sq m per annum* 115–130 90–110 address specific needs of their customers and to create new models of cooperation. Operating expenses, $ per sq m per annum 30–45 25–40 Turnkey projects are particularly popular. * Excluding VAT, operating expenses and utility payments Source: Knight Frank Research, 2011 Main events represents a strong recovery after 11.6% industrial park operators and market decline in 2009. (Figures from Rosstat)). experts. The purpose of the Association is to stimulate development of parks and • There were several notable purchase find investors for projects, including transactions on the warehouse market • Growth of retail turnover was also government investors. Association in 2010. At the end of the year an impressive. Turnover in Russian retail founders include the non-profit affiliate of BIN Group bought the during 2010 was 16,436 billion rubles, organisation, Delovaya Rossiya (Business Northern Domodedovo complex from which is 4.4% more than in 2009. That Russia), the Kaluga Development Eurasia Logistic for an estimated sum compares with a 4.9% decline of turnover Corporation, and others. of $450–500 million, representing the in 2009. (Rosstat figures). biggest-ever transaction on the Russian warehouse market. The Austrian fund • Replacement of the Moscow city • The self-storage format arrived in Immofinanz sold its share (53,000 sq m) government in 2010 has spurred a number Russia in 2010. Plans for self-storage in the Tomilino logistics complex to of initiatives to improve the situation on development in Moscow and other Sberbank for $39 million. Raven Russia the capital’s roads. These include tighter regions were announced by the sold its 28,000 sq m Baltia logistics limits on access to the city and use of companies Red Box and KR Properties complex, located 7 km from MKAD on MKAD (the Moscow ring road) by heavy- (“City Box” brand) and also by the Novorizhskoye highway, to the Cyprus goods vehicles, as well as development businessman Andrei Korkunov (Mobius company Casebre Holdings Limited for of a logistics system for construction of project). Self-storage capacities $42 million. cargo terminals at access points to MKAD remain very limited at present, with and the Lesser Moscow Ring (the outer just 40,000 sq m in Moscow (less than 0.004 sq m per capita). By comparison • There was a marked upturn in Russian Moscow ring road). These measures and a the US market has about 0.65 sq m of freight transport during 2010. Freight number of others are to be implemented in self storage capacity per capita, and carrying by all forms of transport rose 2011–2012. US capacity is growing by about 10% by 7.6% in January–November compared per annum (data from the Self Storage with the same period in 2009. This • A Russian Association of Industrial Parks has been set up, bringing together Association). 2 www.knightfrank.ru Large warehouse projects commissioned in 2010 Name Location Space (sq m) Developer PNK Chekhov, buildings 3–5 Simferopolskoye highway, 49 km from MKAD 161,800 PNK Group Krekshino, building 2В Kievskoye highway, 24 km from MKAD 45,800 RosEuroDevelopment Moscapstroy 1 Dorozhnaya street, Moscow 25,300 Moscapstroy Istra logopark, stage 5 Novorizhskoye highway, 42 km from MKAD 18,800 Raven Russia Source: Knight Frank Research, 2011 Supply projects begun in the pre-crisis period gave Construction of about 600,000 sq m of new 770,000 sq m of new quality warehouse class A space has been announced for 2011 space. (included projects for specific customers). There was a major slowdown in construction of new warehouse complexes in Moscow We expect that some of these projects will and its region during the crisis, as lowering Total warehouse supply in classes A and B not be completed until 2012 and that actual of rental rates due to decline of demand in Moscow and the surrounding region rose commissioning of new warehouse space in 2011 for warehouse space caused increase of above 6 million sq m in 2010, of which 4.23 will be about 380,000 sq m. Large projects, due project payback periods from 7–9 to 10–12 million sq m (nearly 70% of total supply) is for completion in 2011, include: years. Lower yields and uncertainty about class A and 1.88 million sq m is class B. future demand levels made warehouse • PNK-Chekhov, buildings 6–8 (49 km from developments unattractive for investors and In H2 2010 developers responded to MKAD on Simferopolskoye highway, class А, lenders. growing demand by announcement of new 86,700 sq m); warehouse plans, but these are mainly small- The market felt the consequences of lower scale projects or extensions to existing • VVV Company in Leninsky District of construction rates in 2010: supply growth complexes. Moscow Region (Kashirskoye highway, 3 km was only 400,000 sq m which is the lowest from MKAD, class А, 85,000 sq m). level since 2003. In 2009 completion of Growth of warehouse supply in Moscow and Q4 2010 set a record for lease and purchase transactions the surrounding region has seen a major in th8000000e warehouse segment slowdown in 2010–2011 thousand sq m 7000000 thousand sq m 3560000000 7 5000000 300 6 4000000 5 2530000000 4 2020000000 3 1000000 150 0 2 100 1 0 50 2006 2007 2008 2009 2010 2011 0 Total supply at the start of the year, classes A and B I II III IVI II III IVI II III IV Growth of supply 2008 2009 2010 Source: Knight Frank Research, 2011 Source: Knight Frank Research, 2011 300 3 250 200 150 100 50 0 2010 warehouse real estate Moscow In 2010, for the first time since 2005, lease and purchase transactions exceeded growth of supply by nearly 100% % Thousand sq m 120 1400 100 1200 1000 80 800 60 600 40 400 20 200 One of only a few class-A projects within the city’s 0 0 boarders — Moscapstroy, Dorojnaya street, 1 -20 -200 2005 2006 2007 2008 2009 2010 2011 Transaction volume Demand New supply Ratio of transactions to new supply, % A number of positive factors for quality Source: Knight Frank Research, 2011 warehouse demand have now come into play, as 100 follows: Rapid take-up of space caused rapid decline highway. Another 20% of warehouse lease and of the vacancy rate at warehouse complexes. purchase was on the south-east side of the80 city, • Pent-up demand (companies which The share of vacant space at class А premises led by Tomilino logistics park and Trilogy Park had postponed their plans in the crisis declined from 12–13% at the end of 2009 to 5% Tomilino, both on Novoryazanskoye highway.60 environment are again considering by the end1500 of 2010. The northern side of the city accounted for relocation or expansion of their warehouse 16% of take-up, led by Sherland, Brack Capital40 capacities); As much as 40% of take-up on the warehouse Lobnya, and Leningradksy Terminal. market in1200 2010 was on the south side of 20 • Revival of development plans by retailers, Moscow, where best results were shown by the It is important to note that distribution of including regional expansion; PNK-Chekhov900 complex on Simferopolskoye take-up by zones around Moscow in 2010 was0 • M&A market activity, by which retailers and The vacancy rate for quality warehouse space will fall as low as 3% by the end of 2011 -2 0 producers are acquiring logistics capacity 600 and creating new distribution centres; % 17.5 300 • Expansion of warehouse space by logistics operators, which have won tenders and 15 need more capacity. 0 12.5 Lease and purchase of warehouse space in Moscow and the surrounding region in 2010 was 10 at its highest level since the crisis, reaching 800,000 sq m. The busiest period was Q4 2010 7.5 when take-up was nearly 300,000 sq m (about 37% of the total for the year). 5 Transaction volumes in 2010 were nearly double 2.5 the amount of new supply delivered to the market during the year (405,000 sq m).