Housing developers began to actively build offices in Moscow
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Expecting to save money on changing the type of permitted use of land, housing developers have begun to actively build offices in Moscow. They already account for more than half of all projects announced for the coming years. However, 20% of such real estate may be unclaimed due to poor location, market participants warn.
Of all the projects for the construction of office space, announced for commissioning by 2026, 52%, or 542 thousand square meters. m, are implemented by housing developers, according to a study by Asterus. According to analysts, earlier the objects of such developers accounted for less than 12%.
Kirill Babichenko, director of the CORE.XP office real estate department, notes that this year housing developers plan to commission 101,000 sq. m. m of offices, almost twice as many as in 2022. Timur Ryvkin, director of the land development department at Nikoliers, predicts that by the end of this year, 67% of commissioned business centers will be built by companies that previously built exclusively housing.
Housing developers began to actively bring office projects to the market after the adoption in 2020 by the Moscow City Hall of increased coefficients for changing the type of permitted use of sites, says Denis Bobkov, head of marketing and analytics at Asterus. “For projects where, in addition to housing, it is planned to create new jobs through the construction of offices, the fee is reduced,” he explains.
As conceived by the authorities, the measure should solve the problem with the shortage of places for employment beyond the Third Transport Ring. “To do this, developers choose offices, since they can be built compactly,” explains Ruslan Syrtsov, Managing Director of Metrium. But developers are now active not only in the office, but also in the warehouse segment, building objects in the light industrial format, notes Timur Ryvkin.
Denis Bobkov does not rule out that the high activity of residential developers in the construction of business centers may have a negative effect on the commercial real estate market: 20% of the projects they have implemented may not be in demand due to poor location. In the medium term, this may lead to an increase in vacant space in the office segment by 3-5 percentage points, the expert notes. According to NF Group, in the first quarter of 2023, the share of vacant space in class A business centers in Moscow was already 13.3%, class B — 8.1%. Christina Nedrya, director of commercial management at Stone Hedge, says that housing developers rent out the constructed business centers, while specialized developers prefer to sell the space as soon as possible.
As a rule, offices built by housing developers are located in not very prestigious areas, says Elizaveta Ilyukhina, head of the commercial department at West Wind Group. For this reason, according to her, such objects are almost impossible to sell, and sometimes it is difficult to find tenants. Vasily Kvlividze, commercial director of Coldy, explains that such projects are mainly focused on local demand: often the space in them is occupied by companies that rented premises in neighboring buildings. He cites as an example projects of integrated development of territories that are being implemented on the site of industrial zones, where companies have already occupied part of the premises.
Maxim Leshchev, Managing Partner of the Meta Group, also draws attention to the fact that the low demand for office and industrial space as part of residential projects at the moment is not a problem for the city authorities. “Residential areas are being built for a long time, and in the future the demand for commercial space in these locations may increase,” the expert believes. At the same time, he draws attention to the fact that the profitability of building commercial and industrial real estate in remote areas is lower and such measures for the city hall are one of the few ways to stimulate its development.
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