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A good year awaits warehouse real estate in the Moscow region

According to Cushman & Wakefield over 500,000 sq. m. of warehouse space was leased or sold in the Moscow region during the first 6 months of 2013. This was 20% more than during first half of 2012. Demand remains to buy quality warehouse space and 20-30% of total offered volume was bought in the first half of the year. Cushman & Wakefield forecast for 2013 is that similarly to 2012, around 1-1.2 million sq. m. of quality warehouse space will be bought or rented out.

The basis of this demand comes from the retail company sector whose situation is especially stable compared to the economy as a whole. Indeed, the rate of GDP growth in 2013 slowed down and is 3 times less than what it was (from 4.8% to 1.6% in Q1 according to ministry of economic development) while retail trade turnover decreased 2 as much and was 3.9% in Q1 2013. The volume of warehouse space built in the Moscow region for first half of 2013 is not different for the same period of 2012. Around 310,000 sq. m. of new warehouse space was constructed. Second half of the year should be more productive and we expect that over 700,000 sq. m. will come online. This is almost 45% higher than analogous period in 2012 (which was 433,000 sq. m.). If there are no delays, then 2013 will become a record year since 2007 in terms of new space delivered. According to statements from developers, around 1.6 million sq. m. of space will be built in 2014. However, this number will most likely be corrected downwards at some point.

Moscow region continues to have a deficit of quality warehouse spaces that are ready for moving in while developers have substantially large portfolios of projects in almost all areas of the city. Most developers start building warehouses complexes after completion of leasing or selling contracts. Thanks to high demand, the warehouse market remains one of the most stable segments in commercial real estate. In class A segment of warehouse space, rents and vacancies are stable since 2011. Average rent is $135 per sq. m. (before VAT, utility bills, and operational expenses) and the share of vacancies is 1%.