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Moscow Q3 Industrial Market Update: Demand Remains Stable as Developers Bring New Industrial Premises to the Market

Colliers International, the leading global real estate consultancy, has released its quarterly analytical report on the industrial market in the Moscow Region. New build increased significantly during the period but not enough to substantially affect the near-zero vacancy rates for quality industrial premises.
The volume of new industrial premises coming on the market continued to rise in the third quarter, reaching 295,000 sq m (up 28% q-o-q) and bringing the year’s total to 685,000 sqm. Notably, 98% of the new buildings delivered to the market over the past three months have been Grade A premises. The total volume of Grade A and Grade B industrial space in the Moscow Region is now estimated at 9 million sq m. 

During the third quarter take-up of quality industrial space in the Moscow market totalled 350,000 sq m, staying at the same level as the previous quarter. Total take-up since the beginning of the year has reached nearly 1 million sq m, matching the pace observed in 2012. Vacancy rates continue to remain very low, although increasing slightly to 1.6% for the industrial segment (1.3% for Grade A and 2.5% for Grade B). 

Lease rates on average have not changed over the past three months, remaining steady at $137/sq m/year for Grade A and $120-125/sq m/year for Grade B accommodation. In terms of the sales market, the demand for Grade A industrial premises remains quite high and the average offering price for completed facilities is $1,300/sq m and in those under construction or in the planning stages – approximately $1,150/sq m. 

Experts at Colliers International expect the traditional lag in the actual volume built compared to the volume of industrial premises previously announced to remain. If another 500,000 sq m or more were announced for completion before the end of the year, it is anticipated that the actual volume will be closer to 350,000 – 400,000 sq m. 

Vladislav Ryabov, Partner, Regional Director of the Warehouse, Land and Industrial Property Department, Colliers International Russia: “The total volume for the year could reach as high as 1.1 million sq m, which is approaching the maximum seen before the crisis – 1.15 million sq m in 2007. At the same time, with a vacancy rate of under 2% there is a clear deficit of quality industrial space. Even factoring in the slower economy growth, we expect vacancy rates and lease rates to remain stable through to the end of the year.”