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Moscow International Business Centre lease rates could rise 10%-15% in next 1.5 years

In the next one to one-and-a-half years, this shortage will spread to all categories, even small blocks, because of which offices will be sold without significant discounts and there will be potential increases of 10%-15% in the price per m2. In this case, secondary supply will not contribute significantly to the current amount of available space.

According to Q3 2017 results, the total area of MIBC office transactions was 86,225 m2, which is 38% more year over year. At the same time, vacancy in this period fell from 19% to 12.2%, whereas in early 2016, it was 33.6%. Given the record low commissioning of new offices, as well as the high level of absorption of large areas by ministries and banking structures, a supply shortage is expected in the nearest one to one-and-a-half years at MIBC, as well as a 10%-15% increase in prices and lease rates.

The MIBC is currently almost the only submarket in the office property segment with available large office blocks. Consequently, the MIBC is in demand among large companies for the lease of large areas. For example, Russia's Agency for Housing Mortgage Lending has announced its intention to buy 74,600 m2 in the IQ-Quarter skyscraper.

Currently, the MIBC's main tenants are companies in the banking and financial sector – they occupy 33% of total space. In H1 2016, the share of these companies was 19%, while the largest share belonged to the companies engaged in extraction and distribution of natural resources. Such companies occupied 17% of all office space in H1 2017 (22% in 2016), with companies providing professional services and manufacturing companies at 14% and 9% respectively. Government and non-profit organizations, construction companies, pharmaceutical companies and other types of companies occupied the rest of the remaining offices. Owing to the increased activity of financial companies, the share of foreign tenants at the MIBC also changed, decreasing from 34% to 29%.


Kermen Mastiev, director of office property sales, Colliers International Russia: “There currently few offers of comparable quality to the MIBC. Commercial companies that purchase space at the MIBC pay more, but the size of each transaction is an order of magnitude lower – an average of 800-2,000 m2. In the face of a rapidly growing shortage of high-quality Grade A and B+ office property and absorption by the ministries of large amounts of office space at the MIBC, the shortage will increase and in the next one to one-and-a-half years, and it may lead to higher prices for office space amid reduced commissioning of new offices.”