Companies are getting denser – Newspaper Kommersant No. 242 (7443) dated 12/28/2022

Despite the general decrease in demand for office real estate by one and a half times this year, the volume of transactions in this segment increased noticeably in December. As a result, the last month of the year can provide almost a third of the total absorption volume. Tenants from among large Russian companies and international structures that have decided to maintain at least a minimal presence on the Russian market remain active. They seek to take advantage of the market conditions and rent space in premium business centers at discount rates.

In December, deals were concluded on the Moscow office market with a total volume of at least 300,000 sq. m. m, according to the Remain study. Analysts point out that, contrary to tradition, the end of the year has become more lively, as the completion of part of the transactions planned in October was postponed to December. Elena Medushushskaya, deputy director of the office real estate department at Nikoliers, also draws attention to the revival that took place in December.

This situation is observed against the backdrop of a general crisis recession. According to CORE.XP forecasts, about 1 million sq. m of office real estate is one and a half times lower than last year and the lowest since 2015. Absorption at the level of 1 million sq. m is also predicted in IBC Real Estate. Based on these figures and Remain’s forecasts, we can assume that December this year will account for almost a third of the total volume of transactions. While a year earlier, according to JLL, the entire fourth quarter formed 28.9% of the annual absorption volume.

Ms. Medushevsky connects the December jump with the formed pent-up demand and the increase in the activity of state-owned companies that have become prominent players in the office real estate segment. Remain CEO Dmitry Klapsha also points out that many companies that had been postponing the move for a year decided to close this issue in December. The expert does not rule out that this is due to the management buyout processes that began against the backdrop of foreign players leaving the market, in which control over their local divisions was transferred to Russian managers. In some cases, according to him, the current management seeks to quickly sign a lease in anticipation of a change in the ownership structure.

More often, players, against the backdrop of leaving international structures, reduce their staff, moving to smaller offices, but with a more prestigious location, Mr. Klapsha notes. International players that maintain a presence in the country, according to the expert, are moving to compact offices designed for five or fewer employees, which allows them to reduce rental costs by 70-90%. “We have examples where a flexible office was rented for one person,” he adds.

Kirill Babichenko, head of the CORE.XP owner services department, also notes that the main activity in the office market is now formed by business relocations. At the same time, he adds, 80% of the demand for the year as a whole fell on ready-made offices.

Ekaterina Belova, head of the office space department at IBC Real Estate, believes that foreign companies and Russian players that have remained in the country now form the main demand in the office market, considering small premises in the range of 2-3 thousand sq. m. m. “Often the current office, rented by the company before the crisis, in the new realities has become too large and, accordingly, financially costly,” she argues. At the same time, according to the observations of Dmitry Klapsha, large Russian businesses now often try to move to premium offices with decoration and furniture, renting them at a significant discount.

The departure of large international companies this year has indeed contributed to the release of predominantly premium premises. Thus, according to CORE.XP estimates, the total share of vacant space in the whole office market in Moscow this year increased from 7.6% to 11%, but in the segment of high-budget facilities – from 3.9% to 23.9%. At the same time, for class B offices, the dynamics over the year turned out to be minimal: the vacancy rate increased only by 1.7 percentage points, to 8.7%.

Alexandra Mertsalova