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According to the results of the third quarter of 2021, 395,000 square meters of office space in Moscow found new owners. Taking into account the figures for the first two quarters of this year, it is clear that 1,076,000 square meters were the subject of transactions. This is practically in line with the data for the same period pre-pandemic 2019, when the total transaction volume in the first three quarters amounted to 1,286,000 square meters. Therefore, it is safe to say that the crisis in the Moscow office real estate market is behind us.
This year, the market has expanded with new supply. In the third quarter alone, 16,000 square meters were commissioned, and since the beginning of the year, 462,600 square meters have been commissioned. By 2022, another 366,000 square meters are planned for delivery. However, the possibility of a postponement to next year cannot be ruled out.
Among the key projects promising to expand the market in the near future are the AFI Business Center (Belorusskaya metro station) and the Park Huaming business complex (near the Botanical Garden). These are Class A buildings, and their completion in 2021 will add an additional 40,000 and 50,000 square meters of office space, respectively.
By the end of Q3 2021, 8.4% of office space remained vacant. Compared to the first half of the year, this figure increased by 0.3 percentage points, which is explained by the vacancy of offices in Class B buildings. However, in Class A complexes, the number of offers is progressively decreasing. While 11.5% of office space remained vacant in the first half of 2021, today only 10.7% is vacant.
As usual, the shortage of space is particularly acute in Moscow City. The number of available properties there has fallen to 3.7%. However, the upward trend in rental prices continues. Over the past three quarters, they have steadily increased by 2-3% quarterly. Consequently, in the third quarter, the average weighted rental rate per square meter was 21,350 rubles per year. Compared to similar figures at the beginning of this year, the rate has increased by 2,229 rubles.
Natalia Bonneli, the current Director of the Office Real Estate Department at Colliers, commented on the market situation. She believes that the growth rate of demand for office space will soon slow somewhat, driven by a shortage of vacant space. This is already noticeable, but will worsen in the future. Bonneli also noted that greater demand is being seen for offices with high-quality, expensive renovations. Since the prices of construction materials and services have risen sharply recently, tenants are unwilling to incur additional costs for finishing their rented premises and are choosing those that require minimal expenses. This is also driving the growing popularity of flexible workspaces, which offer turnkey offices. This has certainly been noticed by office owners. Consequently, there is a growing trend toward increasing the volume of built-to-suit flexible office space.
