MOSCOW-Vacancy rates in Moscow’s office sector dropped to 15% in second quarter 2010 from 19.6% in the fourth quarter 2009, buoyed by demand for quality space, Jones Lang LaSalle reports.
JLL board member Andrey Postnikov said he believes the decline could signal a stronger market. “After 2010, we expect the supply pipeline to slow considerably, while absorption will continue to grow. We expect a slight correction with vacancy rates edging towards 15.5%-16% over the next two quarters, but after that the figures will decrease,” he said.
The frozen pipeline during the economic slowdown was expected to constrict supply in 2011. But pressure on vacancy rates has already begun, due to a sudden increase in demand from both state and private entities in Russia and abroad. Important second-quarter deals included RusHydro’s purchase of an office building on Malaya Dmitrovka Street.
No new Class A or B projects were introduced in Q2, while take-up volumes accelerated to 4.4 million square feet, doubling the first-half total to 7.6 million square feet. The first half 2010 volume of completed space dropped by 69% to the lowest level since 2004. Falling vacancy rates have boosted base rents. For Class A space, rents increased by 10-15% in 2Q10, with most properties leasing within the range of $500-$700 per square meter, while Class B+ rates were up 15-20% at $400-$500 per square meter. Prime rates were steady at around $800 square meter.
Vacancies were mostly seen in newer projects that had not yet signed leases, or in less competitive properties. Take-up volumes nearing pre-crisis levels and the slowdown in completions are driving rents, especially in relatively scarce quality office projects.
Allan Saunderson is a managing editor of Property Investor Europe and a contributor to GlobeSt.com.
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