Demand for the purchase of office real estate is growing only in Moscow

The completion of the cycle of selling assets of departed foreign companies, rising average prices and the high cost of borrowed funds are holding back demand for the purchase of offices in Russia. In the country as a whole, interest in purchasing such real estate decreased by 5% year on year. Buyer activity is noticeable only in Moscow. In other regions, demand is growing not for purchasing, but for renting premises.

Demand for the purchase of offices in Russia at the end of February decreased by 5% year-on-year, according to Avito Real Estate. The volume of supply, according to analysts, increased by 7% year on year. RAD Executive Director Konstantin Raev attributes the general decline in office sales, among other things, to the completion of the cycle of selling assets of departed foreign companies. RRG managing partner Denis Kolokolnikov points to “a certain stabilization of the market.”

A pronounced decrease in demand for the purchase of offices in Avito Real Estate was recorded in the regions. In Perm, demand decreased year-on-year by 42%, in Volgograd – by 33%, in Voronezh – by 29%, in Yekaterinburg – by 23%, in Rostov-on-Don – by 19%. In St. Petersburg, interest in purchasing offices decreased by 6%, and in Moscow it increased by 28%. Alexander Pyatin, head of investment brokerage CORE.XP, points out that 400–500 thousand sq. m. may be sold and commissioned in Moscow in the first quarter. m of offices, which is 10–20% more than a year earlier. The share of purchase and sale transactions, according to him, could grow from 21% to 28% over the year.

Pronounced fluctuations in regions are often due to the small size of the market. “If we compare the volume of high-quality office supply in Moscow and St. Petersburg, we will see a difference of five times: 20 million sq. m and 4 million sq. m, respectively,” says Denis Bobkov, Head of Marketing and Analytics at Asterus.

Konstantin Raev says that in general there is a decrease in vacancy in the office market. In the rental segment, demand, according to Avito Real Estate, increased by 4% year-on-year in Russia, the number of offers decreased by 18%. A pronounced increase in demand, according to analysts, is noted in Novosibirsk – by 26% year-on-year, Krasnoyarsk – by 25% and Tomsk – by 23%. In St. Petersburg, demand for office rental increased by 21%, in Moscow by 17%.

In 2023, according to Bright Rich | CORFAC International, 55% of the offices were purchased by end users, and 45% by investors. Denis Bobkov says that for Russian businesses buying their own office is more common than for foreign companies. But many entrepreneurs closed their needs for office real estate last year, points out Victoria Safronova, head of the commercial real estate sales department at Avito.

Bright Rich Partner | CORFAC International Victor Zaglumin believes that there are currently few liquid lots on the market, and the cost is growing at an accelerated pace. According to Avito Real Estate, offices in Russia over the year on average increased in price by 43%, to 138 thousand rubles. for 1 sq. m, in Moscow – by 8%, to 324 thousand rubles. for 1 sq. m. The second problem Mr. Zaglumin calls the high key rate of the Central Bank, which does not encourage investing borrowed funds in real estate.

Alexander Pyatin says that continued high inflation expectations may also contribute to additional demand for offices. According to him, the public sector, construction and manufacturing companies remain highly interested in the selection of space. A reduction in the Central Bank’s key rate in the second half of the year may also stimulate investment demand, Mr. Pyatin points out. Denis Kolokolnikov says that developers are trying to more actively offer offices to private investors at retail. In Moscow, many housing developers have entered this market because of the opportunity to receive benefits when creating places of employment, and an increase in supply may spur demand, he points out. The appearance of small lots on the market creates high variability for different purchasing budgets, adds Mr. Bobkov.

Alexandra Mertsalova