CONDITION OF COMMERCIAL REAL ESTATE MARKET OF SAINT-PETERSBURG:  2ND HALF OF 2009

Since the year 2009 PETERLAND has been monitoring the offers for the construction of commercial real estate, basing on surveys conducted by our specialists. In contrast to such surveys this brief review depicts the condition of the market of existing, i.e. already constructed and operational objects of commercial property.

This review contains the summary of commercial real estate market indices of Saint-Petersburg, obtained in the result of surveys conducted by the leading consulting and realtor companies, operating on this market.

The main purpose of such consolidated reviews is to get answers to such simple questions as: How many commercial property objects are there in Saint-Petersburg? How many of them are in use, and how many new ones are under construction? What is the occupancy rate of commercial floor space? What are the market needs? Prices? Rental rates?

In the result of regular publications of main indices of Saint-Petersburg commercial property market, one may get an insight into the existing situation and trace the primary trends of this market. This shall undoubtedly be useful for both analysts and developers and investors studying the issues on the construction of new objects and investment into new projects. This will prove to be especially useful when comparing two sections: market of offers and market of existing objects.

It is proposed to publish such consolidated data (kind of informational profiles) twice a year – in the end of every six months.

Review object

The following segments of Saint-Petersburg commercial property market have been studied:

1. Office property.
2. Retail property.
3. Warehousing property.

Information sources used

The information about some segment of the market or another can be found in public sources pretty often, but it should be noted that such information is rather fragmentary, sketchy and poorly systematized. Moreover not all companies, who publish such reviews, make them available to the general public. Thus it proved to be uneasy to make the adequate overview on the market.

In order to make the consolidated review of the commercial property market of Saint-Petersburg the data of the leading consulting companies such as: Knight Frank,  Colliers International,  GVA Sawyer,  Jones Lang LaSalle,   Maris Properties,  ASTERA,   were used as the most complete and more or less systematized ones. These date were published in the mass media, special printing matters or were available on the Internet.

The summary figures of Saint-Petersburg commercial property market for the 1st six months of 2009, obtained from the said sources are given below in tables and on diagrams. Whereas the direct data on some indices were missing in one source or another, such indices were obtained through recalculation of figures taken from the said sources.

At calculation of rent rates, the following currency exchange rate was adopted: USD 1 = RUB 30.

Indemnity against liability

This review is for reference only. It contains data received from the open sources and depicts figures, stated in reports and overviews of the mentioned companies. Therefore, PETERLAND bears no responsibility for the accuracy and reliability of such data.

Introduction

From the results given below one can see that the major figures of commercial property market, obtained from reviews by different companies, vary considerably. Most probably, this is because the object of ыгср surveys is not the same all the time. Unfortunately in reports and reviews being published the object is not always stated clearly; neither do its selection criteria. Where possible this review gives comments on such criteria and parameters.

But despite all this said above, we hope that this summary will give the insight into the market of operational commercial property of Saint-Petersburg.

1. Office property

The major figures on office property in A and B-class Business-Centers are given below:

Notes:
Floor space data by Colliers Int. are given under GLA profile (suitable for rent).
Floor space data by GVA Sawyer are given under GLA profile (suitable for rent).
Floor space data by ASTERA are given under GBA profile (common).

For illustration, the total volume of office space in A and B-class Business-Centers subdivided by classes is shown on Diagram 1.

Thus, out of the given forecasts one can make the following conclusions:

• Office property market has stopped its decline and became stable at new level;
• It is predicted that in 2010-2011 the pace of introduction of new office property objects will slow down; the volume of new A and B-class office objects in 2010 will be within the range of 110-300 thousand sq.m;
• In 2010 the rent rates are expected to stabilize at current levels, and the share of vacant space will decrease gradually;
• By 2012 the equalization of supply and demand as well as the gradual growth of rent rates are predicted.

2. Retail property

Below one can find major figures on retail space in shopping centers and malls, multipurpose centers and hypermarkets of different types.

Notes:
Floor space data by Knight Frank are given under GBA profile (common);
Floor space data by Colliers Int. are given under GBA profile (common), reflecting the total space of supermarkets, hypermarkets, DIY, furniture centers, shopping centers with rentable space over 4 000 sq.m;
Floor space data by GVA Sawyer are given under GBA profile (common), reflecting the total space of hypermarkets and shopping centers with rentable space over 3 000 sq.m;
Floor space data by ASTERA are given under GBA profile (common), reflecting the total space of malls, shopping centers, DIY, and hypermarkets.

As you can see, the major indices – volumes of retail space – vary significantly from one source to another. The reasons have already been mentioned above, i.e. a large number of formats and selection criteria of retail objects, that hinder the unification of space calculations.

The total volume of retail space is given in Diagram 2 below for illustration.

Thus, out of the given forecasts one can make the following conclusions:

• The retail property market has stopped its fall and entered the stage of stabilization, however the recovery process shall move at slow pace and one should not expect dramatic positive dynamics in the year 2010;
• In the year 2010 the growth gain of new retail space will be more significant than in 2009. In the end of 2010 the rate of introduction of new retail objects will reach the level of 400000 – 500000 sq.m;
• The rent conditions of retail premises in 2009 became more attractive for tenants.

3. Warehousing property

Figures on A and B-class warehouses are provided in table below.

Notes:
According to Knight Frank, the volume of high-quality space for rent (speculative warehouses) makes 909.6 thousand sq.m.
Colliers' data on space include logistical complexes and speculative warehouses, excluding warehouses for personal needs and cold storage warehouses.
GVA Sawyer's data do not include warehouses for personal needs.
ASTERA's data consider A and B-class warehouses for all purposes (speculative, logistical, for personal needs), including warehouses in Leningrad Region in the vicinity to the Ring Road. The share of vacant warehousing space commissioned before 2008 makes 7,5%, in 2008 – 52,5%, in 2009 – 70%.

For illustration, the total volume of warehousing space subdivided by classes is shown on Diagram 3.

Thus, out of the given forecasts one can make the following conclusions:

• Compared to other segments of commercial property market, the warehousing segment will need more time to recover;
• During the first six months of 2010 the gradual decrease of rent rates for warehousing space may continue (5-10%) while the share of vacant space may increase, after that the market will suffer the stagnation, which will sustain up to the end of 2010;
• “Build-to-suit" construction concept will become one of the most prospective and sought after;
• Manufacturing companies start showing interest in high-quality warehousing space, for they may use warehousing premises with engineering facilities and good transport accessibility for production needs.