2012 IndustrIal market report - Knight Frank...2012 IndustrIal market report Moscow Knight Frank...
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RESEARCH 2012 INDUSTRIAL MARKET REPORT Moscow Knight Frank HIGHLIGHTS • In 2012, the vacant space in delivered objects remained in deficit on the warehouse market. The volume of new construction remained at a low level, while demand was comparable to the highest in history of the market (1.28 million sq m in 2007). In this situation, tenants and buyers of warehouses often made deals on assets under construction. • The total volume of new construction amounted to about 640 thousand sq m, which is 70% higher than in 2011, when the rate was the lowest in history of the market (366 thousand sq m). In 2012, the developers were fairly active, as a result, we expect an increase in the volume of new supply to 955 thousand sq m (ac- cording to the statements made by developers) in 2013. • The results of 2012 indicate a record-high take-up volume of high-quality warehouse space, both on the Mos- cow region market and in Russia as a whole, where the index reached a value of 1.5 million sq m. It should be noted that about 1.2 million sq m of these belong to the Moscow region. • Rental rates for the past year have increased by 5–6% and amounted to 135–140 $/sq m/year for Class A objects and 115–117 $/sq m/year for Class B objects (triple net). • The highest volume of acquisition transactions by the end-users (including the build-to-suite format) in the history of warehouse market has been achieved: about 300 thousand sq m in the Moscow region, which ac- counted for a record 20% of total transactions of high-quality storage space.
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2012IndustrIal market reportMoscowKnight Frank
HIGHlIGHts• In2012,thevacantspaceindeliveredobjectsremainedindeficitonthewarehousemarket.Thevolume
ofnewconstructionremainedatalowlevel,whiledemandwascomparabletothehighestinhistoryofthemarket(1.28millionsqmin2007).Inthissituation,tenantsandbuyersofwarehousesoftenmadedealsonassetsunderconstruction.
• Thetotalvolumeofnewconstructionamountedtoabout640thousandsqm,whichis70%higherthanin2011,whentheratewasthelowestinhistoryofthemarket(366thousandsqm).In2012,thedeveloperswerefairlyactive,asaresult,weexpectanincreaseinthevolumeofnewsupplyto955thousandsqm(ac-cordingtothestatementsmadebydevelopers)in2013.
• Theresultsof2012indicatearecord-hightake-upvolumeofhigh-qualitywarehousespace,bothontheMos-cowregionmarketandinRussiaasawhole,wheretheindexreachedavalueof1.5millionsqm.Itshouldbenotedthatabout1.2millionsqmofthesebelongtotheMoscowregion.
• Rentalratesforthepastyearhaveincreasedby5–6%andamountedto135–140$/sqm/yearforClassAobjectsand115–117$/sqm/yearforClassBobjects(triplenet).
• Thehighestvolumeofacquisitiontransactionsbytheend-users(includingthebuild-to-suiteformat)inthehistoryofwarehousemarkethasbeenachieved:about300thousandsqmintheMoscowregion,whichac-countedforarecord20%oftotaltransactionsofhigh-qualitystoragespace.
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IndustrIal market
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Key events
• Since June 1, 2012, the territory between Varshavskoye and Minskoye Hwy, South-West of the Moscow region, was formally annexed by Moscow. For now, however, the site devel-opment plans for the territory remain uncer-tain. Existing storage facilities here amount to roughly 700 thousand sq m and the planned ones to about 300 thousand sq m. Besides the measures to expand the city boundaries, Mos-cow authorities have put forward a number of other initiatives to change urban environ-ment and improve the transport situation. For instance, the plans include prohibiting the transit trucks with a maximum permissible weight of over 12 tons from entering and us-ing the MKAD between 6:00 and 22:00 o’clock as of March 1, 2013. A program to create park-ing lots for 20–30 trucks at patrol stations on MKAD has also been developed. This measure is expected to be more effective than building giant intercept parking lots.*
• Several investment transactions took place on the warehouse market in 2012. In par-ticular, a British company Raven Russia has acquired a logistics park Pushkino (total area 212 thousand sq m) for $215 million**, and a warehouse complex in Sholokhovo (total area 45 thousand sq m) for $49.8 million**. The B&N BANK group ventures are considering buying a warehouse at Tomilino (total area 89 thousand sq m) for investment purposes.
• In September 2012, the construction plans of transport and logistics complex Yuzhnoy-uralsky in the Chelyabinsk region have been announced. The project envisages construc-tion of Class A warehouse space (total area 400 thousand sq m), customs clearance sta-tions for goods and TSW (21 thousand sq m), railway container terminal, and production sites. In fact, this is the first such project on the Russian market, aiming to improve logis-tical situation by reducing the path of goods transported by the Trans-Siberian Railway.
• In 2012, Russian warehouse market de-velopers paid attention to the use of technologies that improve energy ef-ficiency and the buildings’ safety. The first "green" warehouses were introduced:
warehouse complex South Gate (total area 550 thousand sq m) received certificates of compliance with the international environ-mental standard BREEAM, the logistics park Radumlya intends to pass the certification requirements as well. Some companies, such as PNK Group, are characterized by the construction of buildings with the use of materials and technologies in line with FM Global standards. The most important fact remains the application of systems impro-ving efficiency and safety of buildings. In order to attract tenants and buyers, developers are willing to bear additional costs, using the modern technologies and techniques when building the warehouses (non-combustible materials, sprinkler systems with high capacity, ESFR-25, en-hanced perimeter and roof insulation, LED lights with motion sensors, etc.).
Supply
Total high-quality warehouse space volume attheendof2012amountedtomorethan7mil-lion sq m, with Class A facilities comprisingabout three-quarters of this volume. In 2012,about640thousandsqmofqualitywarehousespace was put into operation, increasing thetotalstockbyalmost10%.Itisworthmention-ing that in 2011, the new construction volumehashit thehistorical low,but in thepastyear,
Viacheslav Kholopov, DepartmentDirectorIndustrial,WarehouseandLand,Russia&CIS
«The past 2012 turned out to be a record year for the market according to multiple characteristics: such a high take-up volume has not been recorded in the past five years. It was also a very successful year for the team of Industrial and Warehouse Department of Knight Frank. We managed to realize almost 420 thousand sq m – every fourth square meter of all high-quality warehouses leased and purchased in 2012 on the Russian market.
In my opinion, one of the components of our success and we are in the leading position for eight years in a row is the fact that our key specialists are working as a team for over 6 years, and that experience of collaboration contributes to the continuous growth of their professionalism».
Main indicators. Dynamics*
Totalsupply(ClassesA,B,C),thousandsqm 11,573.8
Indicator Class A Class B Trend*
TotalqualitysupplyinclassesAandB,thousandsqm 5,245.2 1,923 5
Deliveryin2012,thousandsqm 635.2 10
Expecteddeliveryin2013,thousandsqm 955 5
Leaseandsaletransactionsin2012,thousandsqm 1,215.4 5
Averagevacancyrate,% 0.8 2.0 5
Askingrentalrates,$persqmperannum** 135–140 115–117 5
Operatingexpenses,$persqmperannum 35–50 25–50 5
*ascomparedtothepreviousyear**withoutVAT,operationalcostsandutilitybillsSource:KnightFrankResearch,2013
*source–"Vedomosti"newspaper,dated03.12.2012**RCAAnalyticsdata
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it has grown considerably, exceeding the 2011figure by 70%. Interestingly enough, that themarkethasexperiencedthe lackofClassBde-liveredprojectsaswellasprojectsbeingunderconstruction,exceptforthosethatarebuiltforownuse,orproductionfacilities,whereClassAcomplianceisnotrequired.Thisisprimarilyduetothefactthatincaseofspeculativedevelop-ment(thatis,whentheend-usermaybeyetun-determinedatthetimeofthefacilityconstruc-tion)theownersaretryingtomaximizeliquidityoftheobjectforbothend-usersandinvestors.The expenses required for the construction ofClassBwarehousearenotsignificantlylowerinthatcase:onaverageonlyby5–10%,whileitisClassAobjectsthatareprimarilyindemand.
It should be noted that the tenants still useClass C objects and reconstructed industrialareas, abundantly present in all regions of thecountry,tomaximizesavings.
The increase in new construction volume isinpartduetoaparticularlyhighactivityofte-nantsandbuyersinthepast2years.Presently,a significant number of companies, which arebuildingtheirfirstobjects,joinedthedevelop-erswhohadbeenworkingwithwarehousefacili-tiesforalongtime.Forexample,ifin2011,thesenewcompaniesbuiltalittlemorethanathirdofthetotalnewconstructionvolume,in2012theyaccountedformorethan70%ofit.
Geographical distribution of new storage facili-tieshaschangedlittlein2012:thehighestdeli-veryvolumeisstillobservedintheSouthernandSouthwesterndirectionsalmost70%ofthespacenewly realized in the past year is located here.Compared to 2011, the share of new construc-tion in the Northern part of the Moscow regionhasincreasedto12%from5%,furthermore,itisinthisareathatthelargestamountofconstruc-tionisannouncedfortheyears2013–2014(nearMoscow Small Ring A-107 "pervaya betonka").
Geographic distribution of warehouse projects delivered in the Moscow region in 2012
Source:KnightFrankResearch,2013
Key projects delivered in 2012
Property Name Property Address Total area, sq m Developer
PNK-Vnukovo BorovskoyeHwy,20kmfromMKAD 140,800 PNKGroup
MLPPodolsk,Bld5,6 SimferopolskoyeHwy,17kmfromMKAD 76,500 MLP
VnukovoLogistic BorovskoyeHwy,17kmfromMKAD 62,000 TPLogistic
DmitrovLP DmitrovskoyeHwy,33kmfromMKAD 61,182 Ghelamco
Salaryevo KievskoyeHwy,2kmfromMKAD 55,000 DDTLogistic
InfrastoyBykovo,BldM,P NovoryazanskoyeHwy,19kmfromMKAD 54,000 InfrastoyBykovo
SouthGate,Bld2 М4"Don",30kmfromMKAD 51,000 RadiusGroup
Rumyantsevo KievskoyeHwy,3kmfromMKAD 27,000 –
Rodniki,phaseII NovoriazanskoyeHwy,25kmfromMKAD 17,000 –
SpringsPark* YegoryevskoyeHwy,15kmfromMKAD 16,240 SpringsGroup
Gruenestadt* LeningradskoyeHwy,16kmfromMKAD 15,183 Gruenestadt
*projecthasbeendeliveredpartlyin2012
Source:KnightFrankResearch,2013
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Demand
Year2012ischaracterizedbyarecordamountofhigh-qualitywarehousespacetake-upthathas reached the pre-recession level of 2007.Itamountedtoabout1.22millionsqmintheMoscowregionand1.509sqmontheRussianmarket as a whole. We continue to observecentralization,ratherthanoptimizationoflo-gisticsmarket:about80%ofthetotaltake-upisconcentratedintheMoscowregion.
Traditionally,thewarehouseslocatedatadis-tanceof50kmawayfromtheMKADwithcon-venientaccesstothemainroutestotheNorth
and the South are in the highest demand.However,due to theshortageofhigh-qualitywarehouses and low vacancy rate (which hasslightlyincreasedin2012from0.5%to0.8%),the demand is dictated by the available sup-ply. The largest warehouse space uptake(86% of take-up volume) is in the Southerndirection.
In the past year 2012, retail companies (dis-tributors, on-line and off-line retail opera-tors)prevailedamongthetenantsandbuyersof high-quality warehouses: they accounted
for about a half of all acquisitions of high-quality warehouses in Russia. The share ofon-line operators has significantly increasedfrom1–3%inpreviousyearsto13%.Demandfrom logistics operators is rather stable: for4yearsalready,itremainedat15–17%ofthetotal take-up. Furthermore, logistics opera-tors are still not in a hurry with speculativedevelopment, instead renting space on the"bytheclient"basis.
Wenoteagradualincreaseinthesizeofsto-rages requested acquired by the tenants: av-erage transaction size in 2012 has increasedby 16% compared to the previous year andamounted to 12.5 thousand sq m. Moreover,since the area acquired for ownership by theend-users is traditionally somewhat largerthantheleasedone,theaveragesizeoftrans-actions for the building purchases amountedtoalmost24thousandsqm.Theshareofmajor(startingfrom20thousandsqm)transactionsin the take-up structure also grew from 11%in2011to18%in2012.
Furthermore, in 2012, the share of acquisi-tions in the total transactions volume onthe warehouse market has considerably in-creased.About300thousandsqmofmodernhigh-quality warehouse space was purchasedalmost a third of the total take-up. This is arecordfigureinthemarkethistory(consider-ingthesalesofbuildingstoend-users,andnottheinvestmentsales).
Although an acute shortage of high-qualityspace has slightly diminished, comparing tothepreviousyear,interestinthe"turnkey"for-mat (built-to-suit) remains. For example, Na-tionalComputerCorporation(58thousandsqminPNK-Vnukovo),Labyrinth(22thousandsqminthewarehousecomplexSpringsPark),Lenta(42thousandsqminPNK-Chekhov),whichhave
thousand sq m
+30%
0
1,200
1,400
200
400
600
800
1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013F
The volume of take-up in 2012 exceeded the same numbers of last year by 30%
Source:KnightFrankResearch,2013
80%
12%
8%
Moscow
Saint Petersburg
Other regional cities
Almost 90% of high-quality warehouse space take-up in 2012 occurred in the Moscow region and Saint Petersburg
Source:KnightFrankResearch,2013
thousand sq m %
0 0
2
4
6
8
10
12
1,200
200
400
600
800
1,000
14
Vacancy rate, Class ANew delivery
2005 2006 2007 2008 2009 2010 2011 2012 2013F
+70%
In 2012 warehouse facilities realization volume has increased by 70% comparing to 2011, which is characterized by the lowest figure in the whole history of the market
Source:KnightFrankResearch,2013
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concluded such transactions in 2012. Mean-while,anumberofcompaniesarenegotiatingconstruction of build-to-suite facilities for
theyears2013–2014aswell. It isalsoworthnotingthat insomecasesdevelopersarenotrushing to build the objects speculatively,
preferringtosignacontractwithafuturete-nantorbuyerfirst.
Key warehouse space lease and sale transactions of 2012
Tenant / Buyer Property Name Total area, sq m Transaction type
Adidas PNK-Chekhov 65,000 Lease
Enter* PNK-Chekhov 61,250 Lease
NationalComputerCorporation* PNK-Vnukovo 58,300 Sale
Lenta PNK-Chekhov 42,000 Sale
Decathlon SouthGate 33,000 Sale
PRVCompanyGroup* PNK-Vnukovo 32,800 Sale
NetLab Businovo 27,300 Lease
Santens-Service WarehouseinLeshkovo 27,000 Lease
Fortex PNK-Vnukovo 25,200 Sale
FMLogistic SouthGate 22,800 Lease
Korablik PNK-Vnukovo 22,600 Sale
Labyrinth* SpringsPark 22,000 Sale
*KnightFrank–transactionconsultant
Source:KnightFrankResearch,2013
0%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
2008 2009 2010 2011 2012
0.4% 1.8% 2.6%12.8%14.4%
34.6%25.4%
34.8%
23.5%18.7%
17.3% 28.6%
20.1% 26.1%
52.5% 16.7%17.1% 17.4%
18.3%
22.6% 18.7%11.2%
4.7% 4.5% 6.4% 8.1%
9.3%
22.8%
8.6%
On-line retail
Retail
Distribution
Logistics operator
Producer-company
Others
Volume of lease and sales transactions by tenants and buyers profiles in 2012
Source:KnightFrankResearch,2013
0 0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2
4
6
8
10
12
14
2008 2009 2010 2011 2012
Average lease transaction in the Moscow region
Average lease and purchase transaction in the Moscow region
Share of the transactions over 20,000 sq m
thousand sq m
In 2012, users of warehouse space on average leased/purchased 11–12.5 thousand sq m
Source:KnightFrankResearch,2013
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Commercial terms
The average lease rates have not changed sig-nificantly: for the year, they rose by 5–6%to 135–140 $/sq m/year for Class A* and 115–117$/sqm/yearforClassB*.Operatingcostsare35–45$/sqm/year,utilities8–12$/sqm/year.
Itisworthanotice,thatifattheendofthe2011,transactions commonly concluded with somediscount comparing to the average indicatedrental rate, in 2012, however, due to high de-mand,thedevelopersbecamereluctanttolowertheirratesduringthenegotiations.
Duetothedeficitofavailablespaceonthemar-ket,thecontractswereoftenprimarilydeterminedby the object’s location and date of realization/occupancy. Consequently, transactions for someClassAwarehousespace in2012concludedwitheven higher lease rates: up to 150 $/sq m/year.
The sale prices of warehouse space comparedto2011havenotchanged,onaverage,asqmofClass A warehouse space costs from $1,200 to$1,400,ClassBfrom$900to$1,300.Capitaliza-tionratesalsoremainedatthelevelofmid-2012:theaveragefigureis11%.Asarule,thisisthemaximum capitalization rate value for Class Afacilities and the minimum – for Class B ones.
*triplenet–excludingoperatingexpensesandVAT
$/sq m/year
Class A
40
60
80
100
120
140
160
180
200
220
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
120
132
120125
132 130
100
117
132140
100
120
100105
129124
80
97
110
115
Class B
London
Geneva
Oslo
Stockholm
Helsinki Moscow
Amsterdam
Munich
Copenhagen
Rental rates dynamics for warehouse space in Moscow and the values of premium lease rates (Class A) in major European cities at the end of 2012
Source:KnightFrankResearch,2013
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Forecast
In2013,wedonotexpectsignificantchangesonthemarketofhigh-qualitywarehousespace:themajor trends such as high demand, new con-structionvolumegrowth,and theuseofnewtechnologies in warehouse construction willremain.Developers’activityduring2012wasquitehigh,andthemajorpartoftheprojectsannouncedin2012willbebuiltin2013–2014.About 2.5 million sq m of high-quality ware-house space projects are about to enter therealization phase or are under construction.In 2013, we expect a slight increase in leaserates up to 137–143 $/sq m/year for Class AwarehousespaceintheMoscowregion.
Regarding the consistency of tenants andbuyersactivity,itisquitedifficulttopredictan take-up volume as high. Despite the factthat the provision of high-quality warehousespaceevenintheMoscowregionisstillfarfromthelevelofmajorEuropeancities,andacertaingrowthpotentialofthemarketcanbeconsidered,aslightdeclineinthetake-upvolumefromtherecordyear2012istobeexpected.Thetake-upvolumein2013willdependonmacroeconomicsituation and the development of upwardtrend in thedynamicsofdemandestablishedinthepastyear.
Moscowoccupies theseventhposition in therankingofpremiumratesforwarehousespaceamongthemajorEuropeancities,andretainssomeleaserategrowthpotential.Mostlikely,towardstheendof2013,therentalrateswillslightlyincrease.Theadjustmentcangoupto10%,andwilldependonexternalfactorssuchas inflation, growth in consumption volumeand the state of Russian and world economyasawhole.
thousand sq m %
0 0
2
4
6
8
10
12
1,400
1,200
200
400
600
800
1,000
14
Vacancy rate, Class A
Take-up
New delivery
2005 2006 2007 2008 2009 2010 2011 2012 2013F
About 15% of space planned for realization in 2013 has already been leased out on
preliminary agreements
In 2013, the new construction volume will be almost 1.5 times higher than 2012 figure, and although we do not expect as major an increase in demand accordingly, the vacancy rate will remain at the level of up to 3%
Source:KnightFrankResearch,2013
sq mper capita
0 61
Moscow
London
Budapest
Prague
Warsaw
Madrid
Paris
2 3 4 5
5.1
1.7
1.6
1.3
0.9
0.8
0.4
The storage market scale in Moscow remains one of the lowest among European cities
Source:KnightFrankResearch,2013
research
Europe
Austria
Belgium
CrechRepublic
France
Germany
Ireland
Italy
Monaco
Poland
Portugal
Romania
Russia
Spain
Switzerland
TheNetherlands
UK
Ukraine
Africa
Botswana
Kenya
Malawi
Nigeria
Tanzania
Uganda
Zimbabwe
Zambia
SouthAfrica
Middle East
Bahrain
UAE
Asia Pacific
Australia
Cambodia
China
India
Indonesia
Malaysia
NewZealand
Singapore
SouthKorea
Thailand
Vietnam
Americas & Canada
Bermuda
Caribbean
Canada
USA
EstablishedinLondonmorethanacenturyago,KnightFrankistherenownedleaderoftheinternationalrealestatemarket.TogetherwithNewmarkCompany,KnightFrank’sstrategicpartner,thecompanyencompasses243officesin43countriesacrosssixcontinents.
KnightFrankhasbeenasymbolofprofessionalismfortensofthousandsofclientsallovertheworldfor116years.After16years,KnightFrankhasbecometheleadingcompanyinthecommercial,warehouse,retailandresidentialrealestatesegmentsoftheRussianrealestatemarket.Morethan500largeRussianandinternationalcompaniesinRussiahavealreadymadeuseofthecompany’sservices.
ThisandotherKnightFrankoverviewscanbefoundonthecompanywebsitewww.knightfrank.ru
© Knight Frank 2013Thisoverviewispublishedforgeneralinformationonly.Althoughhighstandardshavebeenusedinthepreparationoftheinformation,analysis,viewandprojectionspresentedinthisreport,nolegalresponsibilitycanbeacceptedbyKnightFrankResearchorKnightFrankforanylossordamageresultantfromthecontentsofthisdocument.Asageneralreport,thismaterialdoesnotnecessarilyrepresenttheviewofKnightFrankinrelationtoparticularpropertiesorprojects.ReproductionofthisreportinwholeorinpartisallowedwithproperreferencetoKnightFrank.
Professional Consulting ServicesKonstantinRomanovPartner,[email protected]
Valuation ServicesOlga Kochetova Director, Russia & CIS [email protected]
Marketing, PR, HRMariaKotovaPartner,[email protected]
Market ResearchOlgaYaskoDirector,Russia & [email protected]
Saint PetersburgNikolaiPashkovGeneralDirectornikolai.pashkov@ru.knightfrank.com
KyivYaroslavaChapkoBusinessDevelopmentDirectoryaroslava.chapko@ua.knightfrank.com
Office Real EstateNikola ObajdinDirector [email protected]
Warehouse Real Estate, landViacheslav Kholopov Director, Russia & CIS [email protected]
Retail Real EstateSergey GipshPartner, Director, Russia & CIS [email protected]
Residential Real EstateElena YurgenevaDirector, Russia & CIS [email protected]
International [email protected]
Financial Markets and InvestingEvgeniySemyonovPartner,[email protected]
Business [email protected]
MOSCOW
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