Skip to main content Skip to footer

EMEA Office Market Snapshot: Class A Offices in Moscow among Most Expensive Despite High Vacancy Rates

The general trend for the office market in EMEA points toward a slight uptick in rental rates across the region during the first half of the year, according to report by the leading international real estate consultancy Colliers International. Of the 54 office markets monitored, the majority (29) exhibited no change in Class A rents, while 17 reported increases and 8 saw reductions. The report analysed data from the central business districts of major cities in the EMEA region. The Moscow and St. Petersburg markets were among those demonstrating no substantial changes in rental rates for centrally located Class A premises. In contrast, last year more cities in the EMEA region saw reductions than increases (13 to 9).
London’s West End again topped the rating of the most expensive Class A offices, with the average rent exceeding €136/sqm/month. The second market was the City of London at €68/sqm/month, followed by Paris (€63), Geneva (€57) and Moscow (€56). St. Petersburg was the 10th most expensive market in EMEA, with an average rent of €40/sqm/month.

Even as rents for offices in Moscow’s city centre remain high, there is trend toward lower rates for the market in general. In the first half of the year Moscow saw a total of 532,000 sqm of new prime office space enter the market, which is the largest H1 new build volume since 2010, with more than half of these premises coming in Class A space. This high volume of new space has kept vacancy rates at a record high level of 25% for Class A space in the Russian capital, putting downward pressure on rents outside the Central Business District. 

The EMEA report by Colliers International highlighted several important market trends. (1) Prime rents are finally moving ahead in a number of Southern European markets like Madrid and Lisbon, ending a correction which had dragged on for five years. (2) Amsterdam’s prime office district has clearly recovered as rents have risen steadily over the last 18 months. (3) The German office market has continued to show strength, particularly in Stuttgart, which registered the largest jump (+25%) in prime CBD rents. (4) Dwindling supply and growing occupier confidence is set to feed into appears ready to drive up rental levels in London in the coming months, with secondary UK office markets also poised to benefit. (5) Dubai, a weathervane of the world’s office market, is now seeing rents up 20% since the market bottomed out several years ago, although rents remain 40% lower than the pre-crisis peak.
Office markets across Europe have seen yield compression: from Dublin (-75 bps) and Madrid (-50 bps) to Bucharest (-50 bps) and Budapest (-25 bps). In Europe’s core, the City of London was one the few markets to see some degree of yield compression (-25 bps to 4.5%), thanks to new sources of Asian capital targeting the London market.

According to Stanislav Bibik, executive director of capital markets at Colliers International Russia, yields in the Moscow market may be headed in the opposite direction. However, due to the sharp drop in investment deals in the first half of the year, there has not been enough information to indicate whether prime office yields had changed from the previous level – 8.5%.

Vera Zimenkova, director of corporate services department at Colliers International Russia: “Right now there are a number of factors putting downward pressure on rents in Moscow’s business centres – the uncertain economic outlook, high vacancy rates and large volume of new build coming on the market. At the same time, Class A premises in the Central Business District have always been less prone to such pressures. Moreover, the recent change in property tax calculation has created an additional burden on landlords, who in these circumstances really do not want to see lower rent revenues.”