A study by Knight Frank found that demand for class-А office premises in central Moscow is three times higher than supply, and the statistic is confirmed by lettings of office space at the MFK SUMMIT business centre. Knight Frank, acting a exclusive letting agent for MFK SUMMIT, has already found tenants for 80% of all space assigned for office purposes at this multi-use complex on Tverskaya Street.
Analysis of office construction volumes in 2010 and the amount of class-A business centres being built in 2011-2014 points to an inevitable reduction of available office space in all districts of Moscow by three times in the period up to 2015. New space commissioned in 2010 was 30% less than in 2009, and the forecast for new space in coming years is roughly at the level of 2010 (about 300 000 sq m per annum). Meanwhile, take-up will be about 700,000 sq m per annum.
Several projects in the Garden Ring district are expected to come onto the market in 2011-2012, and will represent 37% (in 2011) and 41% (in 2012) of total new supply in Moscow, but recently introduced construction limitations will lead to an absolute lack of new premium-class office complexes located in the central part of the capital by 2013. The largest part of supply in 2013 will be concentrated around the Third Transport Ring, and in 2014 between the third ring and the Moscow Ring Road.
These trends in commissioning and take-up of office space in the centre and other districts of Moscow will lead to a deficit of space with central location and shift of demand to districts that are increasingly far from the centre, and also to faster growth of rental rates. “Our forecast is that average rents for premium office property inside the Garden Ring will increase by 20% in 2011-2012,” said Evgenia Luchitskaya., Deputy Head of the Office Property Department at Knight Frank.
At the end of the first quarter of 2011 Moscow had Europe’s third highest rental rates in the prime segment, after London and Paris. The highest rates in London are in the West End ($1560 per sq m), which is more than twice higher than levels in Docklands and 60% above levels in the City of London. In Paris the highest rates ($1045 per sq m) are observed in central districts and also in developed business districts, particularly in the south-west of the city. So, despite a developed and decentralized market, office rents in central areas of London and Paris remain at much higher levels than in areas that are further away from the centre. Analysis of trends and tendencies on office markets in London, Paris and Moscow suggests that office markets in these cities will develop in analogous ways.
There is strong demand for offices with central location in Moscow from companies, whose business requires them to be located fairly nearly the city centre: companies in the financial and banking sectors account for as much as 77% of all office rental transactions handled by the five leading real estate consultants in the city’s central area, while B2B companies account for 12%, and 5% of transactions are for IT and telecom operators. This patterns is confirmed by transactions to date at the SUMMIT business centre, which meets the current criteria for class-A office space on all counts – central location, vehicle access, adjacent infrastructure, large number of parking spaces and freedom of tenants to apply their own architectural and planning solutions.
At present about 80% at space at MFK-SUMMIT has been let. Main tenants include both Russian and international companies (Sanofi-Aventis and Samsung Electronics are among the latter). “The high level of interest in our business centre reflects demand for modern office premises in the centre of the capital, which meet all the technical and infrastructure needs of tenants, as well as specific features of the development, including synergy effect from uniting office space with other functions in a multi-use centre,” said Angela Kuzmina, sales director of the company Unicor, which is the developer of MFK-SUMMIT.
Unicor management company coordinates the business of other companies, which are legally and organisationally separate from one another, with respect to strategic planning, development and implementation of projects that require use of shareholder funds or external financing. Segments, in which these companies are active, include development, financial business, management of collective investments, agriculture and pharmaceutical retail. They have operations in the Central, Southern, North-Western, Urals and Siberian federal districts, and employ more than 15,500 people.
Unicor is responsible for strategic planning and development of large investment projects, including construction of the SUMMIT multi-use complex and the LUX hotel complex in central Moscow, as well as the premium-class Garden Quarters (Sadoviye Kvartali) residential development in Moscow’s historical district of Khamovniki and the Dom.PIONEER residential complex in Sochi.