COMMERCIAL REAL ESTATE MARKET - Knight Frank

2009
Commercial
real estate market
Moscow
The Novorizhskoe and Leningradskoe
directions lead in terms of maximum
asking prices for land plots
$ mln per ha
3.0
2.5
2.0
1.5
1.0
0.5
0
Novorizhskoe
Leningradskoe
Kievskoe
Yaroslavskoe
Simferopolskoe
Source: Knight Frank Research, 2010
Dmitrovskoe
Kashirskoe
logistics began to grow and the price of operator's
services grew due to postponed demand and
seasonal factors.
Novoryazanskoe
By Q4 2009, the average request size for 3PL services
grew two–fold (to 2,565 sq m) in comparison with
Q4 2008. This is connected both with a growth
in popularity of logistics outsourcing and with a
temporary rejection of several companies from
procured warehouses in favor of safe storage during
the period of economic instability.
Land market
The abundance of supply and contraction of
demand lead to a drastic lowering of prices in
the land market. Due to the varying quality of
land plots, price differentiation increased. Thus,
prices for non–liquid land plots lowered between
5– and 10–fold.
Farmland, acquired earlier for the purpose of
being converted for residential construction or
industrial purposes, ceased to be sought after.
Along with this, the maximum discount size
for liquid land plots is not more than 20%.
More commonly, owners are holding a dilatory
position, taking their properties off the market.
That said, the level of prices for similar land plots
is fluctuating in the Moscow market from several
million US dollars for 1 ha near the Moscow Ring
Road to $300–400 thousand for 1 ha near Little
Concrete Ring (route A–107).
Forecasts
Careful policies from developers regarding the
construction of warehouses will continue, since
neither an increase in the availability of debt
financing nor a return to pre–crisis demand levels
are expected. Thus, some projects announced
earlier will be built only for specific clients.
Nevertheless, between 550,000 and 600,000 sq m
of new warehouse space will be built and placed
on the direct rental market in 2010. This volume
along with a sustaining of demand at 2009 levels
is allowing the market to stabilize and maintain
stated rent rates at current levels: $100–110
(triple net). Their slight growth is possible at
the end of 2010 or the beginning of 2011, when
a "collapse" in the construction of high–quality
warehouse space will start to be felt, which was
caused by the absence of project financing in
2009–2010, and the amount of vacant premises
will begin to decrease.
3PL Operators
Considering the structure of demand and current
trends, one can conclude that the demand for
safe–storage services will continue to grow in
2010 as more companies begin to realize the
advantage of logistics outsourcing. In sum,
this may lead to a stabilization of prices for
main types of services from 3PL operators and
to their further positive correction. That said,
the appearance of new players on the logistics
market will be made difficult by the high cost
of entrance (rent, costs for equipment, brand
development, etc.). Moreover, it is possible that
several smaller operators will exit the market,
having lost key clients in 2009.
In 2010, logistics operators will display caution
while renting warehouse space, having met an
excess of warehouses rented for a "long term" in
2008 and 2009. 3PL operators will expand space
during a factual (for specific clients) increase in
storage volumes.
Land market
The situation in the land market in many ways
depends directly on the general economic
situation in Russia. During a stabilization and
increase of macroeconomic indicators in the
country already by the end of 2010 and the
beginning of 2011, it is possible that demand
will actively return to the market, which might
lead to a stabilization and further positive
correction of prices for land. Along with this, an
advantageous situation is forming for companies
ready to by premises for developing proprietary
projects, since the value of land plots has
reached a minimal level and highly liquid plots
have appeared in the market.
14