2013 office real estate market - knight frank · 2013 office real estate market saint petersburg 4...
TRANSCRIPT
researcH
2013Office real estatemarketSaint Petersburg
HiGHliGHts• Thetotalleasableareaofhigh-qualityofficespaceexceededthemarkof2millionsqm.
• 247thousandsqmofhigh-qualityofficespacehavebeenaddedtothemarketstockin2013,thusdemonstratingagrowthofnewsupplyby15%.
• Aslowdownintake-upcouldbeobserved:duringthe2013,itamountedto109thousandsqm,whichis62%lessthanforthepreviousyear.
• AtrendofgrowingvacancyratesinClassAbusinesscentersisobserved:theirfiguregrewby15.6percentagepointsreaching22.4%bytheendoftheyear.
• AslightgrowthofvacancyratesoccurredinClassBbusinesscenters:bytheendof2013,thefigurehasreached7.5%.
• Forthepastyear,therubleleaserateforClassAofficefacilitiesgrewduetothefluctuationsincurrencyexchangerate.
• Duetothetake-upofliquidsupplystockindowntownareas,averageleaseratesforClassBofficebuildingshavedropped.
2013Office real estate market Saint Petersburg
2
Key events
• Anumberofthecity’slandmarkprojectsgotdeliveredlastyear:twobuildingsofthebusiness-administrativedistrictNevskayaRatusha, the Leader Tower skyscraper,twoprojectsofadevelopmentcompanyRenaissanceDevelopment:RenaissancePravdaandRenaissancePremium,the2ndstageof Technopolis Pulkovobusinesscenter,thenewbusinesscenterofSenator
network (37Prof. PopovStr.), ZolotayaDolinaofficecenter.
• Severalmajortransactionsoccurredontheleasemarket.CompaniesengagedinITandtelecommunications,development,and oil and gas sector have beenparticularly active. For example, theLuxoftcompanyleased5thousandsqmintheZimabusinesscenter,whileLOESKcompanyleasedawholeofficebuildingof3.9thousandsqm(businesscenteron42PesochnyEmb.).
• Major investment transactions onthe officemarket became known: theFORTGROUPcompanyacquiredfiveofficecenters from the LSR. Nedvizhimost-North-Westcompany.FinancialHoldingcompany Empire has acquired thebuilding of Frunzenskiy departmentstore,whichwillbereconstructedintoaClassAbusinesscenter.
Office real estate market
Marina Puzanova, Headofofficedepartment, KnightFrank St.Petersburg
ʺAddition of new decisively high-quality supply to the stock of office market, which has provided the tenants with a large range of options was one of the main trends of the past year.
Among the entrenched trends of 2013, one could name a growing importance of resettlement expenses invested into refurbishing of new properties for the companies considering moving to another office. Hence, in our opinion, in the current year, in the face of growing competition, the projects that will provide customers with finished facilities, whilst taking into account individual characteristics of each company, will be the most successful in terms of occupancy.
In ruble terms, the lease rates last year have shown gradual growth. Most likely, this trend will continue in the future, though one should without a doubt consider the weakening of the ruble and high costs of financing commercial real estate projects when making forecasts. In the coming year, we expect a number of major companies to relocate: taking advantage of the favorable situation for tenants, they will be able to move offices to more comfortable buildings of higher qualityʺ.
Key indicators. Dynamics
Indicator Class A Class B
Totalhigh-qualitystock,thousandsqm 2,019.8
including,thousandsqm 699.9 1,319.9
Changessince2012,% +34 +5
Deliveredin2013,thousandsqm 247
including,thousandsqm 178.9 68.1
EndofQ42013vacancyrate,% 22.4 7.5
Changessince2012p.p. +15.65 +1.75
Askingleaseratesinoperationalbusinesscenters*, $/sqm/year 277–870 185–780
Leaserateschangesinthefunctioningbusinesscenterssince2012,% +15 -86
Askingleaseratesinbusinesscentersunderconstruction*,$/sqm/year 480–660 185–416
*excludingVAT(18%),includingoperationalcosts,1USD=33RUB.Source:KnightFrankSt.PetersburgResearch,2014
www.knightfrank.ru
3
Supply
By theendofQ42013, the total leasableareaofhigh-qualityofficespaceexceeded2millionsqm.
Oneof themaineventsontheofficerealestatemarket of St. Petersburg last yearwasthedeliveryofalargequantityofhigh-qualityofficespace–247thousandsqm.Thenewsupplygrowthfortheyearwas15%.Geographically,thehighestgrowthofnewsupplyhasoccurredinthebusinessdistrictMoskovskyAveaccountingfor40%ofnewsupply.
TheupwardtrendingrowthofClassAofficecentersisalsoworthanotice:inthepastyear,72%ofnewsupplybelongedtothiscategory.
By the end of Q4 2013, Moskovsky Avebusinessdistrictbecametheleaderintermsofhigh-qualityofficespaceinSt.Petersburg.Thisresultsmainlyfromthefactthatmostofthenewsupplyof2013wasdeliveredhere.ItisfollowedbyCentral-2businessdistrict,inwhichthevolumeofhigh-qualityofficespaceisonly1%smaller.
Business centers delivered in 2013
Name Address ClassLeasable
office space, thousand sq m
NevskayaRatusha(Buildings2,3) 11ABDegtyarniyLn. A 40.5
LeaderTower 153LeninskiyAve. A 38.0
RenaissancePravda 12–14KhersonskayaStr. A 21.8
Senator 37SH’ProfessorPopovStr. A 19.1
TechnopolisPulkovo 40/4PulkovskoyeHwy. A 18.8
RenaissancePremium 14AReshetnikovaStr. A 14.2
Faberzhe 26LiteyniyAve. A 11.5
Zima 44SverdlovskayaEmb. A 8.4
Osen 44SverdlovskayaEmb. A 5.8
VelikanPark Alexandrovskypark,4 A 1.0
ZolotayaDolina 8FaberzeSq. B 16.7
MegaPark 22AZastavskayaStr. B 11.8
Bazel 23NovgorodskayaStr. B 9.8
Alfa/Universal 19EPulkovskoeHwy. B 5.6
Mariinskaya 158BMoskovskyAve. B 5.0
Fabrika 140MoskovskyAve.Bld.2 B 5.0
Magnitogorskaya,51MagnitogorskayaStr.,property1,southwesternintersectionpastEnergetikovAve.
B 5.0
Administrativebuilding(partofRC) 5KovenskyLn. B 4.9
Al'piyskiy 29AlpiyskyLn. B 2.4
HaninPlaza 6-8ADrovyanayaStr. B 1.9
TOTAL 247
Source:KnightFrankSt.PetersburgResearch,2014
thousand sq m
Class BClass A
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
High-quality office space dynamics, 2002–2013
Source:KnightFrankSt.PetersburgResearch,2014
2013Office real estatemarket Saint Petersburg
4
Demand
Throughout the year, one could observea trend of growing vacancy rates in thesegment of Class A business centers.ComparedwithQ42012,thisfigurehasgrownby 15.6 percentage points reaching 22%growthbytheendof2013.Suchdynamicsisassociatedwiththemarketentryofnewfacilitieswithlowoccupancy.
As to theClass Boffice centers segment,thistrendisnotsoobviouslypronounced,thevacancyratesgrowthsincetheendofQ42012amountedtoonly1.7percentagepoints.TheendofQ42013figurewas7.5%.
A slowdown in take-up rate on the high-qualityofficerealestatemarket isworthanotice.During2013,themarkettake-uphasreachedafigureof109thousandsqm. Incomparisonwith2012,thefiguredroppedto62%.ThemostpopularbusinessdistrictofthepastyearwasMoskovskyAve:about50%ofallthedeliveredhigh-qualityofficespacewasconsumedthere.
0%
2%
4%
6%
8%
10%
12%
14%
16%
Moskovsk
y Ave
Centra
l-2
Emba
nkmen
ts with
view
s
Petro
gradsk
y
North W
ester
n
Vasile
ostrovsk
y-1
Centra
l-1
Obvodny
Sourt
h Eas
tern
Easte
rn
Vasile
ostrovsk
y-2
Admiralte
ysky
North Ea
stern
Sourt
h Wes
tern
Outside
Vacancy rate, Class AVacancy rate, Class B
Vacancy rate volume, Class AVacancy rate volume, Class B
2009
thousand sq m %
2010 2011 2012 2013III IV I II I IIIII IV I II III IV I II III III IVIV
0
50
100
150
200
250
0
5
10
15
20
25
30
35
Distribution of high-quality offi ce space according to business districts of St. Petersburg, Q4 2013
Vacancy rates and vacancy shares dynamics in Class A and B business centers
Source:KnightFrankSt.PetersburgResearch,2014
Source:KnightFrankSt.PetersburgResearch,2014
www.knightfrank.ru
5
Companies operating in the oil and gassectorwerethemostactivetenantsin2013:theyaccountedfor18%ofalltransactions.Followingarethecompaniesengagedinthefieldof ITandtelecommunications, leavingthethirdplacetodevelopers.
Despitetheslowdownintake-upontheleasemarket,majortransactionstookplace.Firstly,thisgoesfortheleaseofawholebuildingwithanareaof3.9 thousandsqmbytheLOESKenergysectorcompany.ClassAofficebuildingis locatedat42PesochnayaEmb.Furthermore,LuxoftITcompanyleasedfivethousandsqminthebusinesscenterOsenand the logisticscompanyModule leased5thousandsqminthebusinesscenterSt.Petersburg Plaza. In addition, the oil andgas sector companies concluded severaltransactionsofmorethan3thousandsqminhigh-qualitymodernbusinesscentersofthecity.
Commercial terms
Theaverageweightedaskingleaserate inoperatingClassAbusiness centers at theendofQ42013amountedto499$/sqm/year(includingoperatingexpensesexcludingVAT),whileforClassBitwas347$/sqm/year(including operating expenses, VAT notincluded).
Duringtheyear,onecouldobserveatrendofgrowthinaverageaskingleaseratesforClassAofficecenters inrubleterms.AscomparedwithQ4 2012, the average lease rate hasgrownby7%inrubleterms,whileindollartermsithasgrownonlyby1%.Theaveragerates fluctuation is causedmainly by thechangesofcurrencyvalue,asasignificantpart of Class A office properties bids isdenominatedindollars.
Areversetrendwasobservedinthesegmentof Class B office centers: there occurredagradualdropinaverageaskingleaseratesinbothrubleanddollarterms.AscomparedwiththeendofQ42012,thedropwas3%and8%respectively.
Gas, oil, raw materials
IT / Telecommunication
Construction / Development / Engineering
Distributors
Logistics
Banks & financial companies
Government / Consulates
Health & Beauty / Tourism
Industrial Companies
Consulting, audit, law companies
Advertising, media
HoReCa
Education
18%
18%
16%12%
6%
5%
5%
5%4%
4%3%
2% 2%
Transactions structure according to the tenants profi les, 2013
Source:KnightFrankSt.PetersburgResearch,2014
AdmiralteyskyNorth Western
Embankments with viewsOutside
ObvodnyNorth Eastern
Vasileostrovsky-2Central-2
Sourth WesternVasileostrovsky-1
PetrogradskyEastern
Central-1Sourth Eastern
Moskovsky Ave
-10% 0% 10% 20% 30% 40% 50% 60%
Distribution according to business districts of St. Petersburg, 2013
Source:KnightFrankSt.PetersburgResearch,2014
2013Office real estatemarket Saint Petersburg
6
This trend is associated with thepredominanceofleasableofficespacesupplyinbusinesscenterslocatedattheperipheryofSt.Petersburg,wheretheratesarebelowthemarketaverageby5%.Furthermore,itisworthnotingisthat liquidspaceinClassBbusinesscenterslocateddowntownisscarceandisquicktoleavethemarket.
Itshouldbenotedthatasking leaseratesinthenewbusinesscentersofClassAaresignificantlyhigherthanthosestatedforthealready functioning objects. The averageaskingleaserate inbusinesscentersunderconstructionwheretheleasecampaignhasalreadystartedis578$/sqm/year(includingoperatingexpensesexcludingVAT).Needlesstosay,suchhighratesofnewfacilitieshaveanegativeimpactonoccupancy,astheydonotreflecttheexpectationsofpotentialtenants.
Forecast
Morethan290thousandsqmofhigh-qualityofficespaceareexpectedtobedeliveredin2014.ActivedevelopmentoftheMoskovskyAvebusinessdistrictcontinues:morethanathirdofthedeclaredspacewillbelocatedinthisbusinessdistrictofSt.Petersburg.
Highrateofnewfacilitiesconstructionmayentailcontinuingthetrendthathasalreadyemergedlastyear:agrowingvacancyrate.Bytheendof2014,thisfigureisexpectedtogrowby2–3percentagepointsupto15%.
However, considering the conditions ofgrowingcompetition,askingleaserates inthenewbusinesscenterswitha lowshareofoccupancymaydrop.Thisfactmayhavea positive effect on the take-up rate andoccupancyofnewprojectsonthemarket. Source:KnightFrankSt.PetersburgResearch,2014
Business districts of St. Petersburg
Class BClass A
$/sq m/year
2009 2010 2011 2012 2013III IV I II I IIIII IV I II III IV I II III III IVIV
0
100
200
300
400
500
600
Lease rates dynamics for Class A and B offi ces for Q3 2009–Q4 2013$/sq m/year (excluding VAT, including operating expenses)
Source:KnightFrankSt.PetersburgResearch,2014
Europe Austria Belgium CrechRepublic France Germany Ireland Italy Monaco Poland Portugal Romania Russia Spain Switzerland TheNetherlands UK Ukraine Africa Botswana Kenya Malawi Nigeria Tanzania Uganda Zimbabwe Zambia SouthAfrica Middle East Bahrain UAE Asia Pacific Australia Cambodia China India Indonesia Malaysia NewZealand Singapore SouthKorea Thailand Vietnam
Americas & Canada Bermuda Caribbean Canada USA
EstablishedinLondonmorethanacenturyago,KnightFrankistherenownedleaderoftheinternationalrealestatemarket.TogetherwithNewmarkCompany,KnightFrank’sstrategicpartner,thecompanyencompasses370officesin48countriesacrosssixcontinents.KnightFrankhasbeenasymbolofprofessionalismfortensofthousandsofclientsallovertheworldfor117years.After17years,KnightFrankhasbecometheleadingcompanyinthecommercial,warehouse,retailandresidentialrealestatesegmentsoftheRussianrealestatemarket.Morethan500largeRussianandinternationalcompaniesinRussiahavealreadymadeuseofthecompany’sservices.ThisandotherKnightFrankoverviewscanbefoundonthecompanywebsitewww.knightfrank.ru
RetailSergey GipshPartner,Director,Russia&[email protected]
ResidentialEkaterina [email protected]
Strategic ConsultingIgor [email protected]
ValuationOlga KochetovaDirector,Russia&[email protected]
Marketing, PRGalina CherkashinaMarketingDirectorgalina.cherkashina@ru.knightfrank.com
Market ResearchTamara [email protected]
Investment and SalesNikolai [email protected]
International InvestmentsHeiko [email protected]
Property ManagementDmitry AtopshevPartner,[email protected]
Project Management Andrew [email protected]
OfficesMarina Puzanova [email protected]
Industrial & WarehousesMikhail Tyunin [email protected]
ST.PETERSBURG
191025,3BMayakovskogoStAliaTemporaBCPhone:+7(812)3632222Fax:+7(812)3632223
MOSCOW
115054,26ValovayaStLighthouseBCPhone:+7(495)9810000Fax:+7(495)9810011
research
© Knight Frank 2014
Thisoverviewispublishedforgeneralinformationonly.Althoughhighstandardshavebeenusedinthepreparationoftheinformation,analysis,viewandprojectionspresentedinthisreport,nolegalresponsibilitycanbeacceptedbyKnightFrankResearchorKnightFrankforanylossordamageresultantfromthecontentsofthisdocument.Asageneralreport,thismaterialdoesnotnecessarilyrepresenttheviewofKnightFrankinrelationtoparticularpropertiesorprojects. ReproductionofthisreportinwholeorinpartisallowedwithproperreferencetoKnightFrank.