Skip to main content Skip to footer

Moscow Q3 Office Market Update: New Build Increases but Tenants Remain Conservative in Light of Tepid Economic Growth

In its quarterly market update, Colliers International, the leading global real estate consultancy, reports that the Moscow office market has added over half a million square meters of new quality office space since the beginning of the year, which is nearly one third more than for the same period in 2012. At the same time, companies are taking a conservative approach when leasing new offices and rarely make allowances for substantial increases in office space.
In the third quarter of 2013 eight new business centres were completed in Moscow, having a total area of 157,013 m2. 78% of this space came in six Grade B buildings, while another 22% were in two new Grade A offices buildings. This brings the total new build for the year to 503,753 m2, which is nearly 28% more than for the same period of the previous year. The total stock in Moscow’s  office segment is now estimated to be about 14 million m2.*

Preliminary estimates for the third quarter indicate that the market take-up of office space was approximately 300,000 – 350,000 m2, giving a total take-up of 1.15 – 1.20 million m2 since the beginning of the year. This volume is comparable to that seen over the first three quarters of 2012.

Grade B+ centers accounted for more than half of the take-up during the quarter while the share of Grade A and Grade B- was approximately the same – at about 20-24%. Tenants moving from one office centre to another have been rather conservative and are practically not increasing the office floor space they occupy as a result of such moves.

Vacancy rates remain highest in Grade A centres, holding steady at 15-15.5% in the third quarter. For Grade B+ buildings the vacancy rate saw a modest decline of 1% to 7.5-8% while in Grade B- facilities the vacancy rate has stabilized at 4-4.5%.

In the third quarter the average lease rates offered for Grade A space dipped slightly to $800/m2/year, as two new office buildings outside the established business districts came on the market. For Grade B+ the rates climbed to $550/m2/year thanks to high demand for such premises. The rates offered for Grade B- buildings have remained stable, averaging $360/m2/year during the third quarter.

Although not all of the 30 projects announced for 2013 will be completed on schedule, Colliers International anticipates that as much as 300,000 – 350,000 m2 of new quality office space could enter the market in the remaining months of this year. This would bring the total for 2013 to 800,000 – 850,000 m2, which is 50% more than in 2012.

Vera Zimenkova, Director of Corporate Solutions, Colliers International Russia, commented: “The office market is in a fragile equilibrium. As long as the economy is in such a state – relatively stable – there probably will not be any substantial changes on the office market. However, even a slight economic upturn or downturn could lead to a sharp change in the dynamics of the Moscow market.”

* In July the Moscow Research Forum (MRF), of which Colliers International is a participant, announced the adoption of updated classification criteria for office real estate in Moscow. The criteria for quality office premises (Grade A, Grade B+, Grade B-) became more stringent. At present all major office buildings in Moscow are being reclassified, with a number buildings now being classified as Grade C. Thus the total stock of quality office space is decreasing.