Warehouse owners are doubling rental rates for previously concluded contracts

The shortage of warehouse space observed in recent years has played into the hands of the owners of such real estate. They began to reconsider the terms of contracts previously concluded with tenants, doubling rental rates. Moreover, owners do not always do this using conscientious methods, forcing their counterparties to agree to increased costs, consultants say. They add that logo park operators are renegotiating contracts not only because of the desire to increase profits, but also because of the increased costs of servicing loans.

Almost all major owners of warehouse complexes began to reconsider the terms of contracts concluded with tenants until 2021–2022, several market participants told Kommersant. According to them, owners began to indicate rental rates in new contracts that are noticeably higher than previous ones.

Parus Asset Management leasing director Alexander Larin confirmed to Kommersant that the company is initiating negotiations to revise rates, especially for contracts that were concluded until 2022. According to him, they came to an agreement with tenants to increase rents to a level consistent with current market conditions: the average rental rate has almost doubled. This allows us to ensure the sustainable functioning of the business and maintain the quality of services, explains Mr. Larin. Other large owners of logo parks – Instone Development, Modern Real Estate Funds, Orientir, Raven Russia – did not respond to Kommersant’s request.

Just two years ago, the rent for a warehouse complex in the Moscow region was 5 thousand rubles. for 1 sq. m annually, and now it has almost reached 10 thousand rubles, states Oleg Grigoriev, General Director of Union Brokers. The owners believe that under the current contracts “they are missing out on the opportunity to earn more,” the expert adds. Evgeniy Bumagin, head of warehouse and industrial premises at IBC Real Estate, believes that property owners are forced to increase rental rates, since after a sharp increase in the key rate the Central Bank is forced to pay more interest on bank loans.

There are several options to force the tenant to pay more. In the case of contracts that provide for a unilateral exit, the owners can easily terminate the contract with a tenant who does not agree to pay a higher rate, explains Mr. Grigoriev. According to IBC Real Estate, by March 2024, shadow vacancies (properties where a change of tenant is possible) in logoparks in Moscow and the Moscow region amounted to 237 thousand square meters. m, which is four times more year on year.

If the terms of the contract do not allow it to be terminated unilaterally, then the owners of the premises threaten not to renew it after the expiration of the term with tenants who now do not agree to the new rental price, continues Oleg Grigoriev. Managing partner of IBC Global Stanislav Akhmedzyanov gives an example of a case where a property owner deliberately escalates the situation with a tenant for various reasons in order to be able to withdraw from the current contract and enter into a contract with a new partner.

Most often, the tenant has to agree to the landlord’s terms, since it is difficult to find another warehouse, adds Mr. Grigoriev. Now, according to NF Group, in Moscow and the Moscow region, no more than 0.1% of the space in the logo park is vacant. This practice is not always conscientious, and it can directly affect the company’s reputation and its future relations with the tenant, warns Stanislav Akhmedzyanov, adding that in 70% of cases the owners manage to achieve a rent increase or termination of the contract.

In conditions of an acute shortage of warehouse space, such cases will occur on the market, NF Group partner Konstantin Fomichenko is sure. However, the market is unlikely to cope with the shortage of space in the near future. According to NF Group estimates, of the total volume of projects announced for completion by 2024, more than 70% of the area of ​​2.1 million square meters. m by the end of 2023 were already contracted. According to CMWP partner Egor Dorofeev, in order to increase competition among warehouse property owners for tenants and strengthen the bargaining power of the latter, it is necessary that the level of vacancy increases to 10%.

Daria Andrianova