Developers ramp up industrial property delivery in Moscow to meet high demand

Developers have ramped up new build of industrial property in the Moscow region but not enough to off-set the near-zero vacancy rate in the market, according to Colliers International.

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Colliers reported that the volume of new industrial premises coming on the market continued to rise in the third quarter of 2013, reaching 295,000 m2 (up 28% quarter-on-quarter) and bringing the year’s total to 685,000 m2. Notably, 98% of the new buildings delivered to the market over the past three months have been Grade A premises. The total volume of Grade A and Grade B industrial space in the Moscow Region is now estimated at 9 million m2.

During the third quarter take-up of quality industrial space in the Moscow market totalled 350,000 m2, staying at the same level as the previous quarter. Total take-up since the beginning of the year has reached nearly 1 million m2, matching the pace observed in 2012. Vacancy rates continue to remain very low, although increasing slightly to 1.6% for the industrial segment (1.3% for Grade A and 2.5% for Grade B).

Lease rates on average have not changed over the past three months, remaining steady at $137/sq m/year for Grade A and $120-125/m2/year for Grade B accommodation. In terms of the sales market, the demand for Grade A industrial premises remains quite high and the average offering price for completed facilities is $1,300/m2 and in those under construction or in the planning stages – approximately $1,150/m2.

Experts at Colliers International expect the traditional lag in the actual volume built compared to the volume of industrial premises previously announced to remain. If another 500,000 m2 or more were announced for completion before the end of the year, it is anticipated that the actual volume will be closer to 350,000 – 400,000 m2.

Vladislav Ryabov, regional director of the warehouse, land and industrial property department, Colliers International Russia: 'The total volume for the year could reach as high as 1.1 millionm2, which is approaching the maximum seen before the crisis – 1.15 million m2 in 2007. At the same time, with a vacancy rate of under 2% there is a clear deficit of quality industrial space. Even factoring in the slower economy growth, we expect vacancy rates and lease rates to remain stable through to the end of the year.'