ILM met the first day of spring at a business breakfast for real estate and construction companies. The event is organized by KPMG, the leader of the Russian audit services market.
The main topic of the event was a discussion of key trends in the real estate market, summing up the results of 2017 and their impact on the book / fair value of real estate objects, as well as the application of Digital technologies in real estate based on practical cases.
In the first session, ILM managing partner Andrei Lukashev spoke about what was happening in the Moscow office real estate market in 2017, and shared expectations for 2018. In total, 380,000 office space was introduced in 2017, which is 9% more than 2016, and the total net absorption amounted to 980 thousand square meters. m, which is more than two times higher than in 2016. The main trend of 2017 was the increase in the number of transactions with an increase in the occupied area. Net absorption exceeded the volume of new construction by 2.5 times, which led to a decrease in the level of vacant space. As of today, 2.5 million office spaces remain unoccupied.
In 2017, the average rental rate in class A decreased by 2% and amounted to 25,000 rubles per sq. m.. in year. In 2018, the rental price will not change significantly. The average level of rates may vary depending on withdrawal from the market of cheap offers. In turn, the shortage of large office blocks in sought-after areas may also affect the growth of rental rates in individual submarkets.
The situation on the market is aggravated by low developer activity. In 2018, according to our forecasts, about 300 thousand sq. m.. m, which may be the minimum value over the past ten years, this is facilitated by the fact that the owners postpone the commissioning of the objects already under construction, waiting for anchor tenants. A number of business centers previously announced for commissioning in 2018 postponed the dates to 2019-2020. The practice of built-to-suite is gradually returning to the office market. Construction of new facilities expected to be commissioned can be completed for a specific client.
It is becoming more and more difficult for large companies to find a high-quality office. Taking into account the shortage of large areas and the lack of new offers, the activity of tenants in the office segment will increase. In the years 2019-2020. For tenants of large areas, conditions may arise when the owners will “dictate” the terms of the lease. Part of the owners against the background of stabilization of demand and reduction of vacant space will gradually increase the rental price, this suggests that the rental market will again become the “owner market” rather than the “tenant market”, as happened in 2014. The market is cyclical, the price bottom is reached, the next stage will be an increase in the growth of rental rates.