Tenants leave the offices – Newspaper Kommersant No. 182 (7383) dated 03.10.2022

According to the results of the third quarter, the capital’s office real estate market, especially its premium segment, showed a decline: almost 15% of such areas were empty in expensive business centers. Many international companies have left the Russian Federation, and Russian ones are not yet ready to occupy the vacated premises due to the unclear prospects. However, the figures for February, when almost 30% of class A offices in Moscow were empty, are still far away. Requests for new premises are still coming from government agencies, telecom companies and banks.

According to Knight Frank data, in the third quarter of 2022, the level of vacant space in Moscow offices reached 8.6%. This is almost 2 percentage points (p.p.) more than at the beginning of this year, and 0.8 p.p. more than in the second quarter. The most difficult situation is in the segment of premium business centers, where the volume of vacant space reached 14.9%, an increase of 5.6 percentage points since the beginning of this year. “In this segment, the vacancy has really grown since the beginning of the year,” confirms Irina Khoroshilova, Senior Director of CORE.XP. Class B business centers, according to Knight Frank, are now vacant at 6.9% of the space, which is 1.3 percentage points more than at the beginning of this year.

Maria Zimina, director of office real estate department at Knight Frank, calls the departure of foreign tenants the main factor in the growth of vacancy: at the beginning of 2022, they occupied 500-700 thousand square meters. m of space, mainly in premium properties. The general uncertainty in the country, according to the expert, also affects Russian companies, many of which are busy optimizing leased space. Irina Khoroshilova adds that over the past two weeks, some transactions have stalled. “The market rolled back to March 2022, when demand and activity in the office market were minimal,” agrees Karina Anaevskaya, director of the office real estate department at Nikoliers.

Those companies that are still active focused on class B business centers, which accounted for 60% of the total volume of transactions in April-September, says Ekaterina Belova, head of the office space department at IBC Real Estate.

The premium segment expects small single transactions, Ms. Belova believes. Requests for the selection of new offices are now coming from state-owned companies or near-state structures, as well as from companies that have changed foreign jurisdiction to Russian, the expert explains. Most often, they consider small premises, up to 1 thousand square meters. m, for a period not exceeding three years. Christina Nedrya, Head of the Stone Hedge Valuation and Analytics Department, adds that there is still demand from telecommunications companies, banks and financial institutions, and the activity of small and medium-sized businesses has increased.

The average cost of renting premium offices, according to Knight Frank, in Moscow is now 44.9 thousand rubles. for 1 sq. m per year, for the quarter the figure decreased by 2.3%. The average rental rate for space in class A business centers decreased by 3.8% to RUB 27,000. for 1 sq. m per year, in class B – by 0.6%, up to 17.42 thousand rubles. for 1 sq. m. Despite the difficult market conditions, the owners of business centers are not yet ready for a noticeable reduction in rates, although tenants are counting on a significant discount, says Ekaterina Belova. She predicts rate cuts of 5-15% overall in 2022.

The total volume of transactions in the market as a whole by the end of this year will be only 700-800 thousand square meters. m, are expected in IBC Real Estate. Irina Khoroshilova predicts that the share of vacant office space of all categories will also continue to grow, reaching 9.5% by the end of the year, and taking into account hidden vacancies – 12%. Maria Zimina hopes that she will be able to avoid the situation of 2014, when 29.6% of class A offices in Moscow were empty, “there is a limit to the release of space by foreign tenants, and there is no large volume of speculative supply on the market.”

Alexandra Mertsalova