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1. RESEARCH
H2 2008
MOSCOW
Office market report
Highlights
• Demand for offices in Moscow has reduced greatly in the wake of the global
economic crisis. Those companies who are looking for space are seeking much
lower rents and greater incentives than were previously available.
• Office rents have been falling since the end of Q3 2008. Rents for class A offices
are now generally in the range of $750-1,100 per sq m per annum (excluding
VAT and operating expenses) and between $500-800 per sq m per annum for
class B space.
• Vacancy rates have risen steeply. The class A vacancy rate, which had been
3.2% at mid-2008, ended the year at 13.1%.
• An increasing number of developers have been forced to put projects on hold,
in light of uncertain future demand and difficulties raising finance. The total
volume of space which has been put on hold comes to about 730,000 sq m.
2. H2 2008
MOSCOW
Office market report
Moscow City
(Moscow International Business Center)
19 18
19 Complete
18 17 1st Krasnogvarde
ysky proezd
Partially
16a 16b 1 Complete
20 21
13 14 15
12 2009
11 Expocenter
8a 8b 7 6 2010
2 Under design
10
9 4 3
Kras Suspended
nopr
esnens
kaya naberezhnaya
Mosc
ow River
0
Moscow City – developments
Site Development Total size (sq m) Office component (sq m) Status Completion
- Expocenter 85,000 - partially complete 2009
0 Tower 2000 61,067 50,000 complete 2002
1 Parking 170,101 - under construction 2010
2 Public Square and Moscow City Museum 19,000 - under construction 2010
3 City Palace Tower 169,000 80,000 under construction 2010
4 Imperia Tower 287,724 98,247 under construction 2009
6 Central Core Parking & Metro Terminal (Underground) 278,000 - under construction 2010
6 Central Core Public Complex 22,000 - under construction 2010
7-8b Mall of Russia 179,930 - under construction 2010
8a Multifunctional Recreation Complex 50,190 - under design n/a
9 Capital City Complex 288,680 72,315 partially complete 2009
10 Naberezhnaya Tower 254,000 150,000 complete 2007
11 Transport Terminal 228,000 122,450 suspended
12 Eurasia Tower 203,104 82,817 under construction 2010
13 Federation Complex 423,000 181,800 partially complete 2010
14 Mercury City Tower 158,528 86,000 under construction 2010
15 Moscow Government Administrative Complex 636,330 n/a suspended
16a Multifunctional Office-Administrative Complex 249,600 122,500 suspended
16b Parking 180,000 - under design 2011
17-18 Russia Tower 565,000 140,000 suspended
19 Northern Tower 136,580 78,000 complete 2008
20 Multifunctional Business-Expo Complex 180,000 70,936 under design 2011
21 Yuri Dolgoruky n/a n/a under design 2011
Source: Knight Frank
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3. www.KnightFrank.com www.KnightFrank.ru
Moscow
Fourth Transpo
rt Ring
Key projects due
to open in 2009
Class A
14
Class B+
Knight Frank is
project consultant
ay
Highw
10
oye
rovsk
Greenwood
Dmit
(130,500 sq m)
ra
Prospekt Mi
MirLand
(75,000 sq m)
16
Le
ni
ng
ra Ring
ds
ky Third Transport ya S
tr
Av ka
en vs
8
Str
ue
ko
sa
ya
Monarch 8.1
Ru
nue
ka
(192,800 sq m) Tv
ds
er
Mira Ave
sk
bo
ay r
Diamond Hall 8.2 St
slo
aS
tr (61,500 sq m) ya
na
Novo
rud
nop
12 White Square as
Garden Ring Domnikov
Kr
(74,000 sq m)
(132,000 sq m)
Nordstar Tower
4
(147,000 sq m)
7
9.1 13
7.1 5
WTC, phase III 7.2
(70,000 sq m) Novy Arbat Str 1
ue
Capital City en
(288,700 sq m)
ky
Av 3 Entuziastov Highway
ovs
tuz
Mirax Plaza
Ku Legion III, stage II
(46,000 sq m)
9.2 17
(368,000 sq m) Nizh
7.3 egorod
skaya S
Vo tr
2 lg
og
ra
ds
Tricolor
7.4
e nu
e ky
Av 9
(116,400 sq m) Av en
ue
y
Vivaldi Plaza
sk
(100,600 sq m) 9.3
Mytn
ol
om
ue
os
aya S
6.1
en
m
6
Av
Ko
ky
tr
ns
ni
6.2
Le
11
Nagatino i-Land
(216,900 sq m)
15
1. Central Business Districts 6. TTR South 8. TTR North 10. FTR North
2. GR South 6.1 Leninsky 8.1 Tverskoy-Novoslobodsky 11. FTR South
3. GR West 6.2 Tulsky 8.2 Prospekt Mira 12. FTR West
7. TTR West 9. TTR East 13. FTR East
4. GR North
7.1 Presnensky 9.1 Basmanny 14. MKAD North
5. GR East 15. MKAD South
7.2 City 9.2 Tagansky
Borders of business districts 16. MKAD West
7.3 Kievsky 9.3 Volgogradsky
Borders of subdistricts 17. MKAD East
7.4 Khamovniki
GR = Garden Ring
TTR = Third Transport Ring
FTR = Fourth Transport Ring
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4. Table 1
Moscow submarket data
Transport Direction Sub Max prime Average Average Transport ring Stock Vacancy Transport
ring district rent ($ per class A rent class B+ rent average rent (class A and rate ring vacancy
sq m pa) ($ per sq m pa) ($ per sq m pa) ($ per sq m pa) B+) (sq m) rate
1 Boulevard Ring Center CBD 1,300 1,100 900 1,000 509,700 11.9% 11.9%
2 Garden Ring South GRS 1,000 950 850 900 771,200 17.2% 14.0%
3 West GRW 1,050 1,000 800 566,000 15.9%
4 North GRN 1,150 1,050 800 584,200 16.4%
5 East GRE 1,100 1,000 750 211,300 14.7%
6.1 Third Transport Ring South LEN 950 850 700 750 134,200 11.0% 15.5%
6.2 South TUL 900 800 650 511,700 21.4%
7.1 West PRES 1,000 850 800 171,500 19.4%
7.2 West CITY 1,100 900 850 434,200 15.8%
7.3 West KIEV 950 900 800 95,200 10.0%
7.4 West KHAM 1,000 950 850 111,000 16.2%
8.1 North TV-NOV 1,000 950 850 502,000 11.3%
8.2 North PRM 950 900 800 286,600 15.5%
9.1 East BASM 750 – 650 351,800 16.0%
9.2 East TAG 800 – 600 245,200 10.0%
9.3 East VOLG 700 – 600 135,900 15.0%
10 Fourth Transport Ring North FTRN 750 – 650 650 339,600 19.1% 15.0%
11 South FTRS 850 800 600 662,300 13.0%
12 West FTRW 850 800 650 302,300 14.0%
13 East FTRE 700 – 550 313,500 12.0%
14 MKAD North MKADN 550 – 500 500 320,900 12.0% 14.5%
15 South MKADS 600 – 500 384,200 18.6%
16 West MKADW 650 600 550 640,500 10.0%
17 East MKADE 550 – 500 173,300 11.0%
Total 800 8,758,100 14.5%
Source: Knight Frank
Table 2
Key leasing transactions, 2008
Company Acquired space (sq m) Address Property Class Quarter
Lease
Sberbank 55,000 12A, 2nd Yuzhnoportovyi passage South Port B+ Q4
TNK-BP 37,000 22, Belovezhskaya st. West Gate A Q1
Video International* 20,700 7 km off the MKAD, Novorizhskoe hw. Riga Land B+ Q2
Schlumberger 13,030 16, Leningradskoe hw. Metropolis A Q2
TNK-BP 11,597 22, Belovezhskaya st. West Gate A Q2
Bayer* 10,700 18, 3rd Rybinskaya st. Burevestnik B+ Q2
Svyaznoy 10,457 19, Leninskaya Sloboda st. Omega Plaza B+ Q4
Rolf 9,897 8, Ivana Franko st. Kutuzoff Tower B+ Q1
ROSNO* 8,800 25, Varshavskoe hw. Chaika Plaza B+ Q3
Olympic Committee 7,813 40/3, Bolshaya Ordynka st. Legion I B+ Q2
Purchase (owner occupation)
Confidential client* 27,900 1-6, Nagatinskaya poima st. Nagatino i-Land B+ Q2
LBBW* 23,000 1-6, Nagatinskaya poima st. Nagatino i-Land B+ Q3
* Knight Frank acted as a consultant of the deal Source: Knight Frank
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5. H2 2008
MOSCOW
Office market report
Table 3
Key investment transactions, 2008
Company Acquired asset Price District Class
KanAm Grund Purchase of 4 class A office buildings projects n/a Tulsky A
Kapitalanlagegesellschaft mbH (101,000 sq m) at Kozhevnicheskaya str., 8/4
KanAm Grund Purchase of the Citydel business n/a Garden Ring East A
Kapitalanlagegesellschaft mbH centre (49,100 sq m) at Zemlynoy val st.
RP Capital Management Purchase of the Silver City business centre $350 million Garden Ring East A
(60,000 sq m) at Serebryannicheskaya emb.
Sponda Plc Purchase of the Ducat Place II business centre $185 million Garden Ring North A
(19,500 sq m) at Gasheka str.
BPT Arista S.A. SICAV-SIF Purchase of the Country Park business centre $90 million MKAD North B+
(19,530 sq m) in Khimki, Moscow region
Source: Knight Frank
Figure 1 Figure 2 Figure 3
Average Grade A rents Grade A rents by submarket Distribution of total office stock
US$ per sq m per annum US$ per sq m per annum sq m (000s)
1,400 1,200 3,000
1,200 1,000
800 2,000
1,000
600
800
400 1,000
600
200
400 0 0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 BR GR Moscow TTR* FTR MKAD BR GR Moscow TTR* FTR MKAD
2004 2005 2006 2007 2008 -City -City
Source: Knight Frank Source: Knight Frank Source: Knight Frank
* Excluding Moscow-City * Excluding Moscow-City
Figure 4 Figure 5
Vacancy rates** Prime office yields
% %
20 15
15
12
10
9
5
0 6
BR GR Moscow TTR* FTR MKAD H1 H2 H1 H2 H1 H2 H1 H2
-City 2005 2006 2007 2008
Source: Knight Frank
Nagatino i-Land * Excluding Moscow-City Source: Knight Frank
** Based on Grade A and Grade B properties
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