Market overview 2nd Quarter 2017: Office Sector

Offer

  • By the results of the first half of 2017 the total market volume of quality office real estate in St. Petersburg has exceeded 2.5 million sq m
    Nearly 43 000 sq m of quality office spaces were commissioned in the first quarter of 2017 , against 160 000 sq m with comparable period of the last year.
  • According to our forecasts, the total market volume will increase to 135 000 sq. m. (already commissioned projects are included in this number) until the end of 2017
  • The new offer will be reduced by more than 80 000 sq m compared to the results of the end of 2016, the new trend of commissioning of the objects with 100% occupancy is continuing.

Key office projects commissioned in 1Q 2017

Name

Class

Total area

Graffiti

B

16 000

Polis

B

13 000

Senator (Bpolshaya Morskaya)

А

7 235

Ekaterininsky

А

7 160

Key office projects commissioning at the end of 2017

Name

Class

Total area

Premier League

B

18 000

Senator (Chapaeva, 2 turn)

А

23 884

Riverside

В+

18 000

Ponomarev

А

12 000

Renaissance business Park (Built to suit)

А

20 930

New spaces commissioning dynamics

Offer structure

Demand

  • For the end of the first half of 2017, the total volume of net absorption amounted to 60 000 sq m, which is lower in 2 times if to compare with the same period in 2016.
  • The relatively high rate of net absorption is due to the fact that many projects had close to 100% occupancy rate before commissioning
  • IT sector demonstrated the high activity in the second half of 2017
  • The major transaction for 1st half of 2017 is leasing of 10 000 sq m in the "Megapark" office center.
  • The "MegaFon" company leased 6,000 sqm in the office center "Smolenskiy" on the Ural Street., 4

Vacancy rate

  • The vacancy rate in the high quality office centers is continuing to decline from the end of 2016, due to a shortage of a new speculative offer.
  • Average vacancy rate in the first quarter of 2017 was about 8%, for comparison, at the end of 2016, the figure was 9%.
  • The vacancy rate in class A equals to 10% against 12% by the results of 2016. The vacancy rate in B class also decreased to 5% and by the end of 2016 the vacancy level in the B class was 5.5%. We expect that current vacancy rates will decline against the backdrop of the high demand and limited commissioning of the new premises.

The structure of demand according to the tenants industry

The structure of demand according to the tenants industry

Dynamics of absorption and vacancy level


Rental rates

  • In the first quarter of 2017 the average rental rates declared for office space demonstrated growth compared to the beginning of the year. So, rental rates increased to 3% for A class; in the B class segment class rates rose for 5%.
  • Now the average rental rates for A class office spaces amount to 1 520 rubles per sq m per month, including VAT and operating expenses.
  • In В/В+ class offices spaces rates amount to 1 075 rubles per sq m per month, including VAT and operating expenses.
  • The geographical distribution of rates level has not changed – the leaders are still Moscovsky , Petrogradsky and Central districts.

The geographical distribution of rental  and vacancy rates

District

Average rate

Vacancy level

Primorsky

1 100 12%

Petrogradsky

1 600 4.5%

Vasileostrovsky

1 150

7%

Admiralteysky

1500 6%

Kirovsky

880 18%

Moscovsky

1600

4%

Viborgsky 1070 13%

Kalininsky

1120

15%

Krasnogvardeysky

1000

17%

Central

1620

5%

Nevsky

900

17%

Frunzensky

950

16%

Dynamics of rental rates

Trends and forecasts

  • The tendency of commissioning of the objects with close to the maximum rate occupancy is continuing.
  • We are expecting that the demand for quality office space will exceed supply until the end of 2017. At the moment the demand exceeds supply in Moscovsky and Petrogradsky districts: the number of major applications are more than the available space. The highest demand here is for 1000 sq m offices.
  • We are expecting that the number of large transactions will increase up to 20 000 sqm and the absorption level will reach 160 000 sq. until the end of 2017.

IPG.Estate’s specialists have over 10 years’ experience in the commercial and residential real estate industry.

Our company is one of the leaders in the real estate sector at the Russian and European market.

Owing to integration of a longstanding international experience, wide local partnership connections and cooperation with major international partners in Europe, we do not only set up-to-date trends and standards, but also offer to our clients beneficial solutions producing an unequalled effect and ensuring best results regardless of the task assigned to us – consulting and facility development or search for an optimum property option.

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