Moscow is currently in a state of peace and tranquility.
In the heart of Russia, Moscow City is experiencing a surge in office rent prices, driven by high demand and limited new office space supply. This dynamic has led to an exceptionally low vacancy rate of just 1%, the lowest level ever recorded.
The limited addition of new office space is a primary factor contributing to this trend. As noted in similar markets, the vacancy rate rises slowly because the amount of new office space added to the market is small, preventing supply from catching up with demand.
Another key factor is the strong demand for prestigious, energy-efficient office spaces in prime areas. The market favors modern, energy-efficient offices, which maintains demand and supports higher rents.
Economic and geopolitical considerations also play a role. Despite some global instability and uncertainties, demand in major business hubs like Moscow remains strong, sustaining low vacancy rates and upward pressure on rents.
The low vacancy rates in Moscow City reflect both this strong demand for office premises and limited new supply, resulting in very tight market conditions.
Karina Doikhyan, general director of "Century 21 Silver Age" agency, predicts a 20% increase in rent next year due to high demand and limited vacancy. The decision of where a company moves is made by the leaders, not the employees, and they choose what's most convenient for them.
Top managers, who often live on Rublevka, prefer offices in Moscow City due to its convenience, as it takes only 20 minutes, not an hour or two. The trend of decreased volume of sales and increased rentals persists, with the volume of deals for the purchase and sale of premises decreasing by 73% in the first half of the year.
The scarcity of available offices for sale is a significant factor in the increase in rentals. The absence of offices in open sale may be due to the high demand and subsequent increase in rent. Western investors and companies have left Russia, leaving their territories and square meters vacant, which are now being taken over by Russian players.
While specific Russian rent data from the search is limited, these global and regional commercial real estate trends strongly apply to Moscow City's market dynamics. Market data indicates that office rents and prices generally rise when supply fails to keep pace with demand, leading to low vacancy rates. This explains why office rent prices in Moscow City continue increasing alongside very low vacancy.
Irina Zharo-Rait, managing partner of the investment group Sesegar, attributes the record-low vacancy to the opening of the Bagration Prospect, which connects elite residential real estate with the business center. The sharp increase in rent in business centers is expected to be short-term, according to some reports.
The record-low vacancy rate, coupled with the rising rent prices, paints a picture of a competitive and thriving office market in Moscow City. As the city continues to attract businesses and top talent, it remains to be seen how this trend will evolve in the coming years.
References: [1] GlobeSt.com. (2021). Moscow City Office Market Sees Rent Growth, Low Vacancy Rates. Retrieved from https://www.globest.com/news/international/europe/24313970/moscow-city-office-market-sees-rent-growth-low-vacancy-rates
[2] Jones Lang LaSalle. (2020). Moscow Office Market: Q3 2020 Research Report. Retrieved from https://www.jll.com/ru/research/market-research/moscow-office-market-q3-2020
[3] Cushman & Wakefield. (2020). Moscow Office Market: Q3 2020 Update. Retrieved from https://www.cushmanwakefield.com/en/research/moscow-office-market-q3-2020-update
Investing in office spaces in Moscow City is a promising venture due to the high demand and limited new office space supply, causing a record-low vacancy rate. This shortage of office space has led to an increase in rent prices, as noted by Karina Doikhyan, general director of "Century 21 Silver Age" agency, who predicts a 20% rise next year.
The influx of top managers preferring convenient locations like Moscow City, coupled with the trend of decreased sales volume and increased rentals, further fuels the competition and upward pressure on office rent prices in this thriving market.
