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JLL Presents the Q2 2016 Moscow Warehouse Market Results

July 26, 2016, 13:43 (PX Newswire)

According to JLL estimates, the vacancy rate in existing warehouse premises increased to 12.5% compared from 10.2% at the end of March and 10.5% at the end of 2015. In absolute terms, the volume of the vacant warehouse space reached a record 1.5m sq m against the total stock of 12.4m sq m.

“Such an increase in vacancy was caused by sizable volume of speculative completions and by growing availability on the secondary market. In addition to this, there is ‘hidden vacancy' exists on the market - officially occupied space, but not used by the tenants. Tenants would like to return the surplus space to project owners; however, the latter are reluctant to do so,” - Petr Zaritskiy, Regional Director, Head of Warehouse and Industrial Department, JLL, Russia & CIS, commented.

The total of 357,000 sq m of high quality warehouse premises was delivered in the first half of 2016, twice lower than in H1 2015. Most of new deliveries happened in Q2 – 265,000 sq m, a comparable level to Q2 2015. Among the largest completions were Vnukovo Logistic II (phase I; 50,000 sq m), Mikhailovskaya Sloboda (phases II, III; 47,000 sq m).

The total amount of expected completions of warehouse space for the rest of the year is estimated at 0.64m sq m. For the full year, the total volume of new supply of warehouse space in Moscow is expected to be close to 1m sq m which will be 18% higher the volumes of the last year.

Over the course of Q2, total warehouse transactions in Moscow Region reached 110,000 sq m. The total H1 2016 take-up volume far exceeded the volume in the same period last year - 390,000 sq m compared to 305,000 sq m. The average size of a warehouse deal decreased significantly, to 7,900 sq m from 11,500 sq m in H1 2015.

Retailers and logistic companies remain the main sources of demand for new warehouse space in H1, accounting for 46% and 24% of all transactions respectively.

“The trend of tenants moving out of expensive stock to more affordable new warehouse premises persists. This leads to a significant increase in vacant space on the secondary market, although does not affect net absorption,” - Petr Zaritskiy said. – “Taking into account the transactions under negotiation, according to JLL forecast, the amount of take-up this year is unlikely to fall below 800,000 sq m. We forecast a gradual decline in the vacancy rate - to 11-11.5% by the end of 2016.”

The average level of asking rents for new deals in Class A remained unchanged in H1 2016 – at RUB3,700 sq m per year, the level of prime rents - at RUB4,200 sq m per year (all triple net). The actual level of rents varies quite significantly depending on particular object and its location, with relatively expensive supply located on the most demanded locations (e.g. close to Moscow Small Ring highway).

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