The share of foreign companies in office leasing transactions fell below 10% after the start of the CBO

The departure of large Western corporations from Russia after the outbreak of hostilities in Ukraine seriously affected the Moscow office market. In this segment, by the end of 2023, foreign companies will account for no more than 10% of the volume of rental transactions, which is almost twice as low year-on-year and three times lower than in the pre-crisis period. Mostly Asian companies are showing interest in the capital’s business centers, but as a rule, we are talking about opening small representative offices.

By the end of 2023, foreign companies will account for about 10% of the total volume of office rental transactions in the Moscow market, which is 7 percentage points (pp) lower than a year ago, Nikoliers calculated. This is the lowest figure since at least 2009. In 2021, according to Nikoliers, companies from other countries accounted for 30% of transactions, in 2018-2020 – 20-21%. The figure reached its maximum value in 2009 – 53%.

NF Group confirms that this year the share of foreigners in the Moscow office market will be below 10%, while back in 2019 this figure was 26%.

CORE.XP calls the transactions currently being carried out by foreign companies minimal “due to small volumes.”

Demand for offices in Moscow, as noted by Nikoliers, remains predominantly from Asian companies. NF Group partner Maria Zimina calls the lease of more than 4.4 thousand square meters by the Chinese automaker Chery the largest office transaction involving a foreign company. m in Metropolis. “Among others are companies from Germany, Switzerland and South Korea,” the expert adds. According to her, the average transaction size with a foreign tenant this year was quite modest – 580 sq. m. m. Head of the office space department at IBC Real Estate, Ekaterina Belova, talks about foreign companies that have renewed lease agreements in three business centers.

Limited activity of foreigners is observed against the backdrop of active demand in general. Nikoliers expects the volume of transactions this year to reach 1.7 million sq. m. m, exceeding last year’s by 30%.

Net absorption (the difference between the volume of occupied and vacated space) will amount to 500–600 thousand square meters. m, while a year earlier the value was negative. Even in the first quarter of this year, the process of foreign tenants withdrawing from contracts continued and vacancy in the segment was growing, recalls Maria Zimina. But then the trend corrected. As a result, according to NF Group, the only segment where the share of empty space over the year increased by 2.2 percentage points, to 15.6%, according to Ms. Zimina, was expensive business centers. The head of the owner services department at CORE.XP, Kirill Babichenko, says that the overall vacancy rate in the Moscow office market has decreased over the year by 2.8 percentage points, to 7.5%.

Nikoliers explains current activity in the office market on the part of Russian companies by pent-up demand: in 2020, due to the pandemic, the business reduced its occupied space, in 2021 it began to slowly increase again, but in 2022 it took a pause until the general market situation stabilized. According to NF Group, this year the bulk of transactions fell on manufacturing companies (18%), telecommunications market players (16%), and financial structures (12%). Mr. Babichenko talks about the growing role of the public sector: over the year it increased from 8% to 15%.

In 2024, the volume of demand for space in Moscow business centers, according to Nikoliers forecasts, will be 1.5–1.6 million sq. m. m per year. Stone’s director of commercial management, Kristina Nedrya, expects activity to remain at the current level next year. The main volume of demand, according to her, is formed by state corporations and companies from the real sector. Nikoliers also counts on the growing interest of Asian companies in opening offices in Russia. But mainly we will talk about renting small areas for opening representative offices, says Kirill Babichenko. Maria Zimina predicts that in 2024, foreign companies will account for about 10% of office transactions in Moscow.

Alexandra Mertsalova