COMMERCIAL REAL ESTATE MARKET OVERVIEW COMMERCIAL REAL ESTATE MARKET OVERVIEW

COMMERCIAL REAL ESTATE MARKET OVERVIEW Q1 2008 COMMERCIAL REAL ESTATE MARKET OVERVIEW Content Summary 1. 2. 3. Office spaces……………………………………………………………………………………………...…….……… 4 Retail spaces……….……………….……………………………………………………………………..…..………. 8 Hotels……..……………………………………………………………………………………………………………... 12 RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 COMMERCIAL REAL ESTATE MARKET OVERVIEW Summary Project bundling, decentralization and deindustrialization are the trends that still dominate the office realty market. Construction objects are still commissioned with serious delays. In the environment characterized by growing demand and high rates of consumption of high-quality office space one cannot speak of the market getting close saturation: the share of vacant space remains small and rental rates keep on growing: in Q1 they grew up by 6-8%. In Q1 2008 Moscow’s trade realty market was not developing rapidly. Only two major high-quality shopping centers were commissioned in that period. The market was thereby supplemented by a little more than 100 thous. sq. m. Its total volume reached 3,75 mln. sq. m. No significant changes took place in the supply pattern at the shopping space market as well. Supply was still in excess over demand. The most vivid sign of this fact was the low level of vacant areas in high-quality centers. According to the bottom line for Q1, rental rates in highquality shopping centers grew up by approximately 3%. As opposed to the previous period, this growth was largely influenced by the dollar’s fall. Q1’s most important event in the hotel realty market was the opening of Hilton-managed 4* Lenigradskaya Hotel after reconstruction. Thus, the hotel room stock of the upper price category was supplemented by 273 rooms and reached the overall figure of 20 493. Hotel accommodation prices are still among the highest in Europe and they keep on growing. Demand pattern for hotel premises did not change. 3* hotels are in the highest demand. Developers’ activity level in hotel segment remains high. 14 projects were announced in Q1 2008, multifunctional complexes are among them. RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 3 COMMERCIAL REAL ESTATE MARKET OVERVIEW OFFICE REAL ESTATE Supply Almost 260 thous. sq. m of high-quality office space were commissioned in Q1 2008. The share of А class in the total volume of commissioned areas was close to 40%, В+ class 60%. Therefore, the aggregate volume of supply of high-quality offices in newly-built and reconstructed A and B class objects is assessed at the level of 6,9 mln. sq. m. Commissioning of more than 500 thous. sq. m of high-quality office space is planned for Q2. High demand in this segment contributes to a persistently high rate of consumption of office buildings that come to the market. Meanwhile, most of the transactions are still made under preliminary lease contracts. Moscow’s office realty market keeps on developing steadily, but the shortage of high quality office space can still be perceived. The level of vacant areas in the end of 2007 had a slight rise due to the market entry of substantial number of highquality objects. In Q1 2008 some of the areas were consumed by the market thus leading to a decrease in the level of vacancies down to almost 5-6% in А class and 5% in В class. Project expansion, decentralization and deindustrialization trends still dominate the market. The latter trend is quite natural in the city that has almost no free land for development. On Largest objects to be commissioned in Q2 2008 Total area, sq. m Class Name Address Q1 2008 Supply volume dynamics, mln. sq. m 7,0 6,5 6,0 5,5 5,0 4,5 4,0 3,5 3,0 QI 2006 QII 2006 QIII 2006 QIV 2006 QI 2007 QII 2007 QIII 2007 QIV 2007 QI 2008 Current supply Source: Blackwood research New construction the other hand, it fits well in the general tendency towards the improvement of the city’s image by way of relocation of industrial objects. Delays in commissioning make up another persistent trend: the volume of commissioned space is still smaller than the volume announced, commissioning of several objects was delayed to later dates. Some objects commissioned in Q1 2008 Class Name Address Total area, sq. m А Federation tower (West) 180 000 Krasnopresnenskaya nab., (office 80 site 13 800) А Multifunctional complex Leningradskoe sh., 325 000 Metropolis, I and II stages 16 (office 80 000) 288 680 (office 28 987 ) 23 920 23 500 22 000 22 000 216 000 105 000 50 702 45 000 40 000 А Business park RigaLand, 1 stage of construction Vestside Novorizhskoe sh., 7 km from MKAD Mozhaiskoe sh., 8 km from MKAD А 46 340 А 12 700 75 000 (office 10 000) 15 000 (office 2 500) А А А В+ В+ В+ В+ Multifunctional complex Capital City, I stage Barkli Plaza Business park Khimki, 2nd building Voentorg Business center Smolnyi Nagatino i-Land I stage Myakininskaya poima Business center Business center Chaika Plaza 10 Danilovskii fort Krasnopresnenskaya nab., site 9 Prechistenskaya nab., vl. 17-19 Leningradskoe sh. Vozdvizhenka ul., 10/2 Smolnaya ul., 14 - 1 Nagatinskaya poima 66 km of MKAD Begovaya metro station Varshavskoe sh., 25 Novodanilovskaya nab., vl. 8 А А Neglinnaya Plaza Trubnaya plostchad, 2 А Business center with apartments Nikoloyamskaya ul., 11 5,6 В+ В+ В+ South port, 1 stage of construction Varshavskaya Plaza Diagonal House 2 Yuzhnoportovya pr., vl. 12 Varshavskoe sh., 26 Butyrskaya ul., 77 25 000 23 200 16 600 В+ Source: Blackwood research Source: Blackwood research RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 4 COMMERCIAL REAL ESTATE MARKET OVERVIEW OFFICE REAL ESTATE Demand Stable growth in demand and increasingly tough office quality requirements on the part of potential tenants are still among the most important trends in the office realty market. In spite of a substantial volume of new supply introduced in the market, it cannot satisfy the constantly growing demand. According to the results of Q1 2008 demand pattern by transaction types remained largely the same as the one recorded in 2007: almost 25% of requests received by Blackwood were the requests for the purchase of office premises and 75% of the requests were the ones for lease. Among the requests for the lease of office premises received by Blackwood in Q1 47% were for А class offices, 31% for В+ class, 21% - for В- class. As compared to the similar period of last year, the share of requests for А class offices increased by 6% thus attesting to the continuing trend towards tougher requirements for the quality of office space on the part of potential tenants, even in spite of the stable growth in rental rates. Major changes took place since the similar period of 2007: a 26% fall in the share of requests for blocks of more than 200 sq. m and a 17% growth in the share of requests for blocks of 500-1 500 sq. m. In Q1 blocks of 200-1500 sq. m were the most popular. This is yet another sign of the trend towards the expansion of rentable areas that took shape in 2007. The pattern of demand for office purchases changed versus Q1 2007: the share of requests for office purchases in А class came down by 7% to 39%, but the share of requests for В class premises increased due to an active growth in sales prices that had been persisting throughout 2007. Demand pattern in terms of metric area also changed considerably versus the similar period of 200: the share of requests for the purchases of blocks of more than 1 500 sq. m increased by 11%, but the share of requests for the purchase of office blocks of less than 200 sq. m and of 201-500 sq. m decreased by 5% and 7% respectively. As demonstrated by the results of Q1 2008, office blocks of 500 to 1 500 sq. m and more than 1 500 sq. m were the most popular among Blackwood’s customers. Requests for the purchases of such blocks made up 79% of the total of requests. Q1 2008 Office premises demand pattern with breakdown by building class 21% 1% 47% class A class B+ class Bclass C 31% Office premises demand pattern with breakdown by metric space 19% 16% <200 201-500 33% 33% 501-1500 >1500 Pattern of office premises purchase demand with breakdown by building class 21% 39% class A class B+ class B- 39% Pattern of office premises purchase demand with breakdown by metric space 6% 43% 15% <200 201-500 501-1500 >1500 36% Source: requests to Blackwood in Q1 2008 RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 5 COMMERCIAL REAL ESTATE MARKET OVERVIEW OFFICE REAL ESTATE Rental rates and sale prices In Q1 2008 rental rates for the offices of A and В class segments grew up by 6-8%. It should be noted that the highest rates were recorded outside the Garden Ring. Average base rates (minus VAT and operating expenses) for А class office premises were within the range of $750-$1 400 per sq. m per year. Rental rate for some А class objects in Central Administrative District (CAD) was as high as $2 500 per sq. m. In В class segment the rate spread was very wide: in В+ class the rates varied from $630 to $1 200 per sq. m per year, in В- class - from $400 to $900 per sq. m per year. There was only a minor increase in the operating expenses in the period under review: in A class they rose up to $100– $130 per sq. m, in B+ class – up to $80-$110, in B- class – up to $75-$90. In Q1 2008 a growth in sales prices was seen in both classes, but the biggest growth took place in B class. According to the results of Q1 2008, sales price of A class office premises amounts to the average of $6 500-$14 000 per sq. m, В+ class - $3 700-$10 000 per sq. m, В- - $2 700-$6 500 per sq. m. Q1 2008 Office space weighted average rental rates dynamics, $/ sq. m pa 1 100 1 000 900 800 700 600 500 400 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 A В+ А В В- Source: Blackwood research Significant events and deals in Q1 2008 Moscow’s office realty market keeps on developing steadily. A number of major industrial zone redevelopment projects was announced in Q1. Among these zones are: : AZLK «Moskvich» automobile plant, «Moskvichka» garments factory, «Marma» furniture factory, «Izolyator» insulator plant and «Filit» pipe manufacturing plant. Expansion of projects became one of the dominating trends of Q1 2008: areas of more than 42% of the total number of the announced projects exceed 100 thous. sq. m. Noteworthy are the following major projects: • • Inteco Company announced its plan to erect a multifunctional complex in the western part of the capital on a land plot of 23,65 hectares. The complex will have the total area of 730 thous. sq. m. It will incorporate shopping and office premises, a 4* hotel with 250 rooms, apartments and an entertainment zone. MORE Co. and MR Group announced their intent to construct two business parks: one of 300 thous. sq. m on Leningrasky prosp. and the other of 600 thous. sq. m near the Big City. The latter one will replace the existing industrial enterprises. Major deals of Q1 2008 Buyer/Tenant «KanAm Grund» MTS «TNK-ВР» «Yandex» TechnoServ A/S Eurasia Logistics Source: Blackwood research Name Business Complex Otkrytie Building of Bastion Business park Western Gates Legion 2 Business center Smolnyi Nordstar Tower Area, sq. m 100 515 n/d 37 000 29 100 22 000 13 200 Address Kozhevnicheskaya ul., 8/4 Bolshaya Kommunisticheskaya., 24/28, bldg. 4 Belovezhskaya ul., 21 Bolshaya tatarskaya., 13 Smolnaya ul., 14 - 1 Khoroshevskoe sh., vl. 2-20 В Deal Purchase Purchase Rent Rent Rent Rent RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 6 COMMERCIAL REAL ESTATE MARKET OVERVIEW OFFICE REAL ESTATE Q1 2008 • Alcon Development will build an A class business center to replace the «Izolyator» plant on Leningradkly prosp. 72. It will have the total area of 146 000 sq. m. First stage of this business center (100 000 sq. m) will be commissioned in 2010, second – in 2011. Investments are estimated at $285 mln. Otkrytye Co. and Deutsche Bank AG Commercial Real Estate Group signed an agreement with KanAm Grund Kapitalanlagegesellschaft for the sale of «Otrkrytye» (Discovery) business complex of 101 thous. sq. m. Another important event that took place in the office realty market in Q1 2008 was the commissioning of «Zapad» (West) Tower (total area - 180 thous. sq. m, office area - 80,8 thous. sq. m) in «Federatsyia» (Federation) Multi-Functional Complex in «Moscow-City» Moscow International Business Center (MIBC). Another deal immensity record was achieved in Q1 2008: ТNК-ВР oil company signed a preliminary contract for the lease of office space (37 000 sq. m) in «Zapadnye vorota» (West Gate), an A class business park. One of the biggest office sale and purchase deals was also made in Q1: a consortium of international investors headed by Major projects, announced in Q1 2008 Developer Inteco M.O.R.E and MR Group Globex bank MR Group M.O.R.E and MR Group Х5 Development Evocom Name MFC Fili business park Multifunctional center Multifunctional center Business park Office and retail center Business park OrekhovoDomodedovo Business center Office complex Office center Address Conjunction of Starovolynskaya ul. and Minskaya ul. Near Begovoi pr. Slava factory territory Between Butyrskaya and Dvintsev ul. Leningradskii prosp Kievskoe sh., 3 km from MKAD 1st stage of construction - Kashirskoe sh., vl. 63; 2nd stage of construction - Generala Belova ul., vl. 28 On the territory of «Izolyator» factory on Leningradskii prosp., 72 G-9 microdistrict of Marina Roscha On the territory of «Marma» factory on Narvskaya ul. Area, sq. m 730 000 600 000 480 000 < 300 000 300 000 250 000 More than 200 000. A class office center Orekhovo-park - 41 100 146 000 117 000 100 000 Alcon Development n/d n/d Source: Blackwood research Forecast Commissioning of more than 500 thous. sq. m of А and В class office space in Q2 2008 was announced. However, the volume of actually commissioned office space turns out to be much smaller than the announced one since the announced deadlines are usually not met. The share of vacant areas is likely to remain at a low level against the background of delayed commissioning of office objects and more intensive business activity. A moderate growth in the average rental rates and office realty sales prices is expected in Q2 2008. Due to the fact that prices have reached a rather high level in the central part of Moscow, growth in sales prices and rental rates outside the city center is expected. Trends towards decentralization and formation of new submarkets, such as MIBC «Moscow-City», «Nagatino», as well as former industrial zones near MKAD, keep on developing. RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 7 COMMERCIAL REAL ESTATE MARKET OVERVIEW RETAIL REAL ESTATE Supply The pace of trade realty market development in Q1 2008 was not fast. Only two high-quality major shopping centers were commissioned in Moscow in that period: • Q1 2008 It can thus be stated that the trend that had manifested itself in 2007, i.e. development of premium class shopping centers in Moscow, continued in Q1 2008. Therefore, 100 thous. sq. m were added to Moscow’s market of high-quality shopping centers. As of Q1, the total volume of supply in high-quality shopping space was estimated at the level of 3,75 mln. sq. m. The tendency to delay the commissioning of shopping centers persists. Openings of several major shopping centers were delayed in 2007: «Novoyasenevsky», «Rio-Grand», «Megapolis», «Marcos», «TC on Bagrationovsky pr.», «Semenovsky»(2nd stage). Not even one of them was commissioned in Q1 2008. The trend towards the development of the trade realty market of the Moscow Region continued. • «Oblaka» (Clouds) Shopping and Entertainment Center totaling 96 thous. sq. m. This new complex comprises three shopping floors and three car park levels with 1 500 parking stalls. The shopping mall will have three anchor tenants: «NASH hypermarket» (Our Hypermarket), «Eldorado», «BananaMama», «SportGrad» (Sports City), as well as more than 120 shops. The third floor of the complex will house a seven-hall «Kronwerk Cinema», children’s playroom and some restaurants of well-known chains. Shopping Center in «Neglinnaya Plaza» located at Trubnaya pl. 2. The complex has the total area of 75 thous. sq. m, of which 14 thous. sq. m are occupied by the shopping center. Operators like «М.Video», «Azbuka Vkusa» (Taste Alphabet) and «Evrodom» (European Home) are the anchor tenants in this center. The shopping mall houses boutiques of the following brands: «Less is More», «Café Coton», «Canali», «Lardini», «Georges Rech», «Estelle Adoni», «Dikaya Orkhideya» (Wild Orchid), «Pretium» and «Arcada» jewelry stores. «Goodman», «IL Patio» and «Sushi Planet» restaurants are located on the ground floor, SPA Beauty parlor is on the first floor. • In March the branch of TSUM (Central Department Store) opened in Barvikha Luxury Village on RublevoUspenskoye shosse. This three-floor shopping center sells premium class men’s’ wear and ladies’ wear, shoes, underwear and accessories. A beauty area will be opened in the basement of this center. Largest shopping centers to be commissioned by the end of 2008 Name Rio-Grand Metropolis Troyka Mall Gallery (Mitino) Megapolis Novoyasenevsky Gudzon Retail Center Marcos Semenovsky, II stage of construction Aerobus Prazdnik Almiral, III stage of construction Retail Center Source: Blackwood research Address Dmitrovskoe sh., 163 A Leningradskoe sh., 16 Vercnyaya Krasnoselskaya ul., vl. 3A, 3B Pyatnitskoe sh. Andropova prosp., 4-10 conjunction of Profsojuznaya ul. and Novoyasenevskii prosp. Kashirsoe sh., 12 Bagrationovsky pr., 5 Altuf'evskoe sh. Semenovskaya pl., 1 Varshavskoe sh., 95 Tushinskaya ul. Vernadskogo prosp., 86 (near Yugo-Zapadnaya metro station) Severnoe Butovo, community zone "Sadki", pr. 680 Area, sq. m 220 000 205 300 118 000 80 000 72 000 72 000 60 000 55 000 41 800 40 000 35 362 34 000 32 000 30 000 RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 8 COMMERCIAL REAL ESTATE MARKET OVERVIEW RETAIL REAL ESTATE Demand There were no significant changes in the demand pattern since the start of this year. Demand was still in excess over supply, and this excess manifested itself in the shortage of vacant areas in high-quality objects. High demand for trade space was determined by a number of factors. Among them is a growth in personal incomes accompanied by stable growth in consumer spending (including expenditures on high-quality goods). In general, public catering enterprises still take the lead in the pattern of demand for trade areas. However, a significant growth in demand for trade space on the part of retail operators in foodstuffs should be noted. Commitment to multi-format schemes is one of the trends that are common to the operators in this segment. For instance, many companies develop several trade formats from mini-markets («Mosmartik» which is a part of «Mosmart» project) to hypermarkets (project of «Mercado supercenter» announced by X5 Retail Group). This leads to higher demand for the areas of different sizes. The multi-format trend is accompanied by a trend towards convergence in the non-food sector, i.e. mixing of enterprises from various spheres of activity within the framework of one project. For example, «Tochka» (Point) service network started developing intensively in Q1 2008. Its concept is an alliance of such operators as bank, coffee bar, mobile communications enterprises, travel agency and multimedia within one area. It is expected that Starbucks coffee chain would become a partner of «TS-retail», the company that is currently implementing the project. It should also be noted that Costa Coffee, another international coffee chain, came to the market in Q1 2008. Vacant space in Central Administrative District is around 13%. In other districts this figure varies within the range of 47%. High demand for trade space is still evident among investors – international investment funds and sales networks. Four major deals were recorded in Q1: • • Q1 2008 Demand for shopping premises in Q1 2007 with breakdown by tenant activity types Profile Public catering Clothing and footwear Foodstuff Health and beauty Furniture and household goods Domestic appliances Entertainment Jewellery Services Cars Other Source: Blackwood research Share in total numAverage reber of requests, in quested area in % sq. m 23% 19% 11% 10% 9% 6% 7% 6% 4% 2% 3% 50 - 300 250 50 - 1 000 150 950 320 80 - 900 50-150 30 350 - 15 000 skoye. The projects have rentable areas of 9 000 sq. m and 6 500 sq. m respectively. Both shopping centers have already been leased out to operators. The cost of this deal is $110 million. • In January 2008 Apsys Co. from France and «SistemaHALS», a Russian company, announced the establishment of a joint venture with a view to implement major projects in trade realty. Terms of the deal stipulate equal subscription for the capital of the enterprise and financing of joint projects on parity basis. Within the framework of «Mosmartik» mini-market development project «Mosmart» purchased four «Alfavit» (Alphabet) stores of “next-door” format. Three of these four stores that have the average area of around 150 sq. m the other three are already working and the fourth one is now represented in the form of empty shopping premises. According to different estimates, this deal costs around $2 mln. OJSC«RTM» has acquired total control over «ReMa Immobilien”, owner of 18 trade realty objects totaling more than 53,3 thous. sq. m in Moscow. 77% of these objects have been leased out to Billa supermarket chain on the basis of 25-year lease contracts. Formerly OJSC «RТМ» had 75% control over LLC «ReMa Immobilien» via a joint venture with Eurobilla. Sponda PLC, a Swedish company, purchased two shopping centers from London & Regional Properties: Solnechny Rai (Sunny Paradise) I (Borovskoye shosse 6) in Moscow and Solnechny Rai II (Vokzalnaya pl. 4) in the town of Ramen- RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 9 COMMERCIAL REAL ESTATE MARKET OVERVIEW RETAIL REAL ESTATE Rental rates and sales prices Results of Q1 show a 3% growth of rental rates in highquality trade objects. Among the drivers of such growth were inflation, persistent shortage of high-quality trade space and growth in demand on the part of foreign retailers. Moreover, the dollar downing had a greater impact on this process in Q1 than in the previous periods (3,8% versus 1,3% in Q4 2007). The rate growth was also affected by the delays in the launch of announced objects and a continuing growth in the personal incomes of the population. Sales prices did not change much: price of one square meter in high-quality objects rose by 3-4%. Q1 2008 Rental rates and sales prices for the premises situated in the main retail corridors of Moscow (01.04.08) Retail corridor Tverskaya Kuznetsky most Arbat Pyatnitskaya Kutuzovsky prosp. Leninsky prosp. Prospect Mira Leningradsky prosp. Source: Blackwood research Average rental rates, USD/sq. m* 4 000 - 6 000 2 500 - 5 000 1 600 - 5 300 1 500 - 3 000 2 000 - 3 000 1 000 - 2 500 750 - 2 000 900 - 2 000 Average sale price 23 000 20 000 15 000 10 000 12 000 10 000 7 000 6 500 Minimal and maximum rental rates in different Moscow Administrative districts in Q1 2007*, USD/sq. m pa 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 No rth No rth -W es t No rth -E as t W es t Ea st es t st h l Ce nt ra So ut hEa hW Minimal and maximum sales prices** in different Moscow Administrative districts in Q1 2007, USD/sq. m 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 No rth No rth -W es t No rth -E as t W es t Ea st es t hW Ce nt ra So ut hEa st l h So ut So ut Source: Blackwood research Source: Blackwood research Major projects announced in Q1 2008 • «DS Development», a member of «Don-Stroy» group of companies made a presentation of its project aimed at the construction of three multi-functional complexes in Moscow. The total area of the project will exceed 1 mln. sq. m. The first of these complexes will comprise a trade center, hotel, premium class fitness club and office premises. It will have the total area of 650 thous. sq. m and will be located on MKAD near Strogino sub-district. The second one will be a multi-functional complex of more than 400 thous. sq. m to be erected on 5th Donskoy pr. In addition, there is a plan to build one more multi-functional complex totaling 200 thous. sq. m that will incorporate a 9 thous. sq. m. shopping center. • A trade and entertainment complex that is to become one of Moscow’s largest centers of this type is planned for construction on Khoroshevskoye shosse. According to the announced project, the trade and entertainment part of the complex will occupy the total area of more than 500 thous. sq. m, the rentable shopping area will have 150 thous. sq. m and the entertainment zone will have almost 20 thous. sq. m. The shopping mall will provide space to operators working in two- or three-level department store format. The complex will have some inherent features like big-size atrium, ice hockey stadium, landscape park and national museum of aviation and cosmonautics. Commissioning is expected in 2011. * - do not include VAT and operational expenses ** - do not include VAT RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 10 So ut So ut COMMERCIAL REAL ESTATE MARKET OVERVIEW RETAIL REAL ESTATE Q1 2008 • «River Mall», a project of major trade complex introduced in Q1 by «Kuznetsky Most Development» company, is planned for implementation by the end of 2009. It is expected that the complex will be located in South Administrative District (SAD) on the land plot of Likhachev Automobile Works (Avtozavodskaya ul. 16-18). The complex will have the total area of 250 thous. sq. m and will include: supermarket of household appliances and electronics, food retail outlet, bowling club, multiplex cinema etc. Moreover, Moscow’s largest car park for 3,36 thousand cars will be built there. Х5 Retail Group announced a major development project. A trade and business center with a retail park totaling 250 thous. sq. m is to be erected within the framework of this project in 3 km from MKAD on Kievskoye shosse. The retail park (trade complex where operators of DIY-format will form the core of the tenants’ pool) will occupy the area of 100 thous. sq. m. Project implementation is to commence in 2010. Major entertainment component is planned in a multifunctional complex to be erected at the junction of Starovolynskaya ul . and Minskaya ul. near Setun River. 62 thous. sq. m of the complex will be occupied by an entertainment area that will include cinema, catering outlets and other tenants. Construction of the complex is planned for completion in 2013. • A trend towards network-based development is demonstrated by a project undertaken by Amma Development jointly with Accent Russia Opportunity Fund. The goal of this project is the construction of twenty trade centers of Power Center format in Russia. The average area of a standard project is around 55 thous. sq. m. According to preliminary data, trade centers may appear in Moscow Region, Bryansk, Voronezh, Kaluga, Ryazan, Tver, Tula and Yaroslavl. According to different estimates, the total of investments may reach $1,5 bln. A trade complex construction project was formally approved in March 2008 at the meeting of the Public City Planning Board of the Mayor of Moscow. According to this project a new trade center of about 30 thous. sq. m will be erected at the junction of Akademika Sakharova prosp. and SadovayaSpasskaya ul. Aboveground floors of the complex will accommodate a shopping mall and four underground levels will be occupied by a car park for 385 motor cars. Construction of «Brateyevo» trade complex on ul. Borisovskiye Prudy is to be completed by 2009. It will have the total area of 105 thous. sq. m. An underground car park of 153 parking stalls is also planned within the framework of this project. • • • • Forecast No significant changes are expected in the trade realty market in the mid-term. Objects with the total space of more than 1, 3 mln. sq. m are planned for construction by the end of this year. However, taking the trend towards an increasing number of commissioning delays into account, one could forecast the actual market entry of no more than 50% of the declared areas. Some shopping centers initially planned for opening in 2007 are now expected to be built in Q2 2008. Among them are such trade and entertainment centers as «Marcos», «Tryapka», «Novoyasenevsky», «Megapolis», «Zig Zag». The key factor affecting the levels of rates and sales prices in Moscow is the availability of vacant areas which are still extremely scarce in high-quality objects. A slight increase in rental rates in CAD and SAD is forecasted after some major trade objects are commissioned. Moreover, a growth in demand for large-size premises is expected due to a potential market entry of some operators of «total look» operators, i.е. tenants that work in the format of two- or three-level department stores (e.g. H&M, C&A, BHS, Debenhams, Peek&Cloppenburg, C&A, Macy's, John Lewis etc.). Noteworthy also is the apparent shift of trade space construction outside MKAD due to the intensive development of cottage housing and towns of the Moscow Region. RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 11 COMMERCIAL REAL ESTATE MARKET OVERVIEW HOTELS Supply No significant changes were seen in Q1 2008 in the hotel realty market. The only important event of the quarter was the opening of «Leningradskaya» Hotel after renovation. It is a 4* hotel located on ul. Kalanchevskaya 21/40. The new «Hotel Hilton Lenigradskaya» is managed by Hilton, an international opera- Q1 2008 tor. It should be noted that this is the chain’s first hotel in Russia. Therefore, the high-category hotel realty market obtained 273 rooms of international standards. As a result, the total volume of supply in 4* and 5* categories reached 20 493 rooms. Demand Spring is usually the time of exhibitions, international conferences, symposia and other public events that require conference halls and hotel accommodations. This is why spring sees a slight increase in demand for hotel rooms. Summer months are no less popular as it is the time when more and more visitors come to the Russian capital for sightseeing or business. The medium hotel segment is still in the highest demand. The reason for this is as follows: foreign and Russian tourists as well as most of the Russian business travelers prefer medium level hotels while foreign business travelers prefer to stay in the hotel rooms of the upper segment. It should be stressed in this context that the number of Russian guests in Moscow’s hotels is almost twice as large as the number of foreigners. All this is due to an under-development of the market of world class tourist services, difficulties in obtaining visas and some other factors. Nevertheless, the market retains the trend of an increase in the number of people coming to Russia that has manifested itself earlier. Accommodation cost Accommodation prices in hotel rooms remain high and keep on rising. Growth is seen in all categories. The key factor in this increase is higher demand for hotel premises in the periods of exhibitions and conferences. At present the cost of stay in a hotel, depending on room category is: • • • • Average cost of accommodation in Moscow’s hotels, Rubles per night 70 000 60 000 50 000 40 000 30 000 Hotels of 2* category: 1 685 - 3 660 Rubles per night; Hotels of 3* category: 3 960 - 9 100 Rubles per night; Hotels of 4* category: 6 600 - 14 000 Rubles per night; Hotels of 5* category: 13 300 - 60 000 Rubles per night; 20 000 10 000 0 2* 3* 4* 5* Average maximum prices for rooms in 3*, 4* and 5* hotels increased by almost 40% versus the previous quarter. Source: Blackwood research min max Such increase may negatively affect the number of tourists who come to the Russian capital for sightseeing. Business tourists are usually less sensitive to the cost of hotel stay. RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 12 COMMERCIAL REAL ESTATE MARKET OVERVIEW HOTELS Significant projects announced in Q1 2008 Q1 2008 Source: Blackwood research 14 projects of hotels and multifunctional complexes with a hotel component were announced in Q1 2008. The most interesting of them are: • tract for more than five years. By the year 2012 the company plans to build several hundred thousand square meters of hotel and office space on the 14-hectare land plot currently occupied by Aerostar and the air terminal; • Kempinski Hotel Lubyanka, a de luxe category hotel to be located on Nikiolskaya ul. near Lubyanskaya ploschad. The hotel will have almost 200 rooms. Construction is to begin in June 2008; Mos City Group became the owner of 4* Aerostar Hotel of 416 rooms and 50 700 sq. m of total area. This hotel was closed in August 2004 and its re-opening is scheduled for June 2008. It will be operated by WEL Hotels & Resorts, a Russian company. WEL had concluded an operation con- • The project announced in March by «Inteco» company envisages the construction of a multi-functional complex at the junction of Starovolynskaya ul. and Minskaya ul. The complex will include a 4* hotel of 250 rooms, apartments totaling 7 520 sq. m, shopping and office areas, a 61500 sq. m entertainment zone (cinema, restaurants, cafes etc.), underground car park for 6 700 motor cars. The project will be launched in 2008 and will be implemented in 2013. RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 13 COMMERCIAL REAL ESTATE MARKET OVERVIEW HOTELS Trends and forecasts The trends that have manifested themselves in previous periods remain: • Q1 2008 Excess of demand over supply contributes to increases in the cost of accommodation in the hotels of all categories in spite of the fact that prices of accommodation in Moscow’s hotels are among the highest in Europe; Developers still prefer to erect high class hotels as their profitability is higher; Long hotel payback period contributes to the development of multi-functional complexes with extra incomes from areas of other purpose; Lack of land plots in the central part of the city and their high price is a factor that facilitates the construction of hotel complexes outside Third Ring Road an in proximity to MKAD; An increase in accommodation prices may negatively affect the flow of tourists, especially the ones that come from other parts of Russia; 3* hotels are in the highest demand, but no serious changes are expected in their supply in the near future. With a view to implement the large-scale plans aimed at an increase in the number of three-star hotels, the Government of Moscow is taking some measures to attract investors. Among these measures are: • • various exemptions for those who intend to erect hotels; ban on the use of hotel areas for other purposes than the accommodation of guests; ban on the construction of offices in CAD accompanied by a proposal to re-profile the existing office projects into hotel projects; establishment of the Moscow Government’s City Hotel Coordination Section. • • • • • • An increase in the number of 3* hotels can also be attained by way of reconstruction of dilapidated hotels and hostels. However, such large-scale plans can be implemented only in the course of active interaction between the developers and the city government. • RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 14 COMMERCIAL REAL ESTATE MARKET OVERVIEW QI 2008 Blackwood has a wide range of commercial real estate offers Begovaya metro station Business Center Northern Tower, Moscow-City Co-Exclusive Class «A» Business center for rent Rent from 198 to 1 669 sq. m Shell&Core Ul. 1905 goda metro station Office center The Yard Co-Exclusive Class «B+» Business center totaling 12 700 sq. m for rent Rent from 500 sq. m Shell&Core Kievskaya metro station Business Center «Federation Tower» Exclusive Class «A» Business center for rent/sale Rent/sale from 550 to 6 700 sq. m Shell&Core Arbatskaya metro station Granatnyi per. Exclusive Mansion for rent Area for rent 2 000 sq. m Shell&Core Moscow Golden Mile district Luxe Mansion Exclusive Total area - 1 850 sq. m Available area: 569, 727 and 554 sq. m Underground parking Shell&Core Vodnyi stadion metro station Gorod Yaht Exclusive Premises on the 1st floor Rent/sale: 296, 333,7 and 349,4 sq. m Shell&Core Kurskaya metro station Business center Exclusive Class «A» Business center totaling 5 600 sq. m Partial finishing Underground parking Ryasan’ Business center Exclusive Class «A» Business center totaling 10 000 sq. m Available area from 500 sq. m Shell&Core If you want to know more, call 730-55-22 RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 540 540 15 Blackwood Real Estate Blackwood Real Estate formed in 1991 is one of the leading companies in the Moscow Residential and Commercial real estate markets. • Provides the wide range of transaction advisory services in both selling and renting of residential and commercial premises. • Recognized for high quality analytical and consulting research in all segments of Russian Real Estate market. • Offers the wide range of management services in the development and realization of the investment projects in real estate market. • Has established itself as a reliable partner both of domestic and international leading companies and affiliations. • The first Russian company to become a member of the Association of Leading Real Estate Companies in the World. Due to this membership, the company is continuing to gain access to the world real estate directory with over 2 million in assets. Research and Consulting Department The Research and Consulting Department of Blackwood Real Estate is a team of professionals, consisted of experts in real estate segments, economy, investment and financial fields. • Provides the full complex package of consulting and analytical services: residential and commercial real estate strategic consulting, concept development, financial analysis, architectural concept developing, monitoring of the major real estate market segments, periodical reviews, special research tailored to the client’s Specific Requirements. • Full and well-structured databases of the basic real estate segments, economic and financial fields represent a reliable foundation for carrying out research and quality consulting and analytical services. Notable clients: Air France, Adventa, Halliburton, Coca-Cola, Alcatel, Sun Interbrew, DHL Worldwide, ABN Amro, LG Electronics, Commerzbank, Brunswick UBS Warburg, Novartis, Liggett-Ducat LTD, Wrigley Moscow, L’oreal, Ernst & Young, Procter & Gamble, Adidas, American Chamber of Commerce, IKEA, Volvo, Samsung, Peugeot, Renault, Canon, British Airways, Dresdner Bank, Phillip Morris, Nestle, Sumitomo, Sibneft, Bank of Moscow, Vneshtorgbank, Norilsk Nickel, Sberbank of Russia and many others. RESEARCH AND CONSULTING DEPARTMENT www.blackwood.ru / E-mail: research@blackwood.ru Phones: +7(495) 730 5585 ; +7(8622) 960 355 CONTACT INFORMATION Blackwood Real Estate 119019, Moscow, Volkhonka st., 6-1. tel.: Moscow +7 495 730-5585, Sochi +7 8622 540-540 fax: +7 495 203-6072 e-mail: research@blackwood.ru www.blackwood.ru Research and Consulting Department Olga Shirokova Director of Department shirokova@blackwood.ru Alexandra Mamokhina Elena Domchenkova Maksim Golubkov Residential Real Estate Analyst&Consultant Office Real Estate Analyst&Consultant Financial Analyst mamokhina@blackwood.ru domchenkova@blackwood.ru golubkov@blackwood.ru Nina Shlelenko Vladlena Mashkovskaya Residential Real Estate Analyst&Consultant Office Real Estate Analyst shlelenko@blackwood.ru mashkovskaya@blackwood.ru Marina Volkova Hotels&Residential Real Estate Analyst&Consultant mvolkova@blackwood.ru Anastasia Lobanova Expert in Marketing lobanova@blackwood.ru Nina Schadenko Office Real Estate Analyst schadenko@blackwood.ru Anna Danchenok Trade Real Estate Analyst danchenok@blackwood.ru Ekaterina Simonova Expert in Marketing simonova@blackwood.ru Petr Mordanov Real Estate Appraisal mordanov@blackwood.ru Tatiana Shitikova Real Estate Appraisal shitikova@blackwood.ru Olga Ziablova Projects Manager ziablova@blackwood.ru Vladimir Kashirtsev Projects Manager kashirtsev@blackwood.ru Managing Partner Konstantin Kovalev kovalev@blackwood.ru Executive Director Maria Litinetskaya litinetskaya@blackwood.ru