OFFICE MARKET IN SAINT-PETERSBURG
In Q3 2008 office real estate market fell under slowdown on key characteristics (demand, supply, vacancy rate and rental rates). Occupancy rate of existing business centers is high, but one can see stock out of demand in projects under construction. Combined with difficulties in attraction of financing it influenced terms of delivery – most of projects announced to be delivered in Q3 were delayed. Requested Ruble rental rates slightly increased, wearers in view of strengthening of the US dollar requested USD rates even went down.
By the end of Q3 2008, the stock of high quality office premises (A and B class) in St Petersburg amounted to 1,394,000 sq m. Out of this total, 253,000 sq m are in A class and 1,140,000 sq m are in the class B class. In the Q3 2008, around 98,000 sq m of office premises were delivered (in almost equal proportion: A class – 48,800 sq m, B class – 48,700 sq m), which is significantly more than in the same period of the last year. A large part of the newly delivered business centers are in the central districts (Central, Admiralteysky, Petrogradsky, Vasileostrovsky).
Many projects announced to be delivered in 2008 (nearby 200,000 sq m) will be delivered in Q4 or later.
The biggest projects, delivered in Q3:
•Paradny kvartal (A class ) –15,000* sq m
•Tolstoy skver (A class) –14,200 sq m
• Gavan (B class) –19,000 sq m
•Moskva (B class) –15,000 sq m
* Here and further on we show the total area of a business centre (without considering parking places, retail and other functions if the business centre is situated within a multifunctional complex).
On average the vacancy rate of office premises within existing business centers amounts to 4-6%. Upon that, gradual increase of vacant premises is being forecasted due to the fact that delivery of office centers slightly outdistanced take up.
The structure of demand has not changed substantially during the last several years. But in Q3 2008 demand for premises < 100 sq m has increased and has decreased for large offices –>1000 sq m.
In view of the economic crisis demand has been reducing, but basically due to companies which planned enlargement or moving to more expensive offices. At the same time, there are a lot of companies which due to various reasons need new offices. So business centres with professional concepts and adequate rental rates will find thire tenants even in the crisis period.
Slowing down of business activity during the summer period and advancing growth of rental rates in the first half of the year resulted in the halt of the rental rates growth in Q3. And strengthening of USD had led to decrease of asking rental rates in USD. At the same time, rising tendency of rental rates remain, at least at the level of inflation, and in Q4 2008 Ruble rental rates growth can be expected in class B at 6-8%. Rates in class A will very likely stay at the same level, since their growth potential in 2008 was used up in the first half of the year.
RETAIL MARKET IN SAINT-PETERSBURG
By the end of Q3 2008, the total volume of modern retail premises in St Petersburg amounted to 2.9* million sq m. During Q3 2008 shopping centers of total area of 50,000 sq m were opened, that several times less than in previous quarters.
Examples of projects, delivered in Q3 2008 .
• Boutique gallery «Esfera»
Terms of delivery of most of the projects (about 250, 000 sq.m), announced to be open in 4Q, will be delayed till next year.
* Here and further on, we give the total area of a shopping centre (without considering parking places, office and other functions if the shopping centre is situated within a multi-functional complex)
Current situation on the market of retail premises shows extremely high competition and approaches to the market saturation. Further supply development will directly depend on changes in demand, which is dictated by level of prosperity and general economic situation. Demand in Q3 declined, which has led to increase of vacant premises in shopping malls, even the best shopping malls have vacant areas. In the future demand will be only for complexes, which can compete with SECs, in the districts without good multifunctional shopping centers.
• The process of stagnation, related to the world crises. Even large companies suspend projects.
• In view of investment policy of the city, the construction of local small shopping centers has increased.
• There is an increase in number of projects, where retail function combines with, for instance, office one.
/ Source: ?B Richard Ellis