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Commercial real estate market overview. January 2009


In January 2009, rental rates and sales prices continued to decrease. The market saw almost no deals. As for the prices, some landlords prefer to maintain prices at old levels while other landlords offer serious discounts.

Still, we don’t see any deals in this segment. The average sales prices decreased by 15-20% in January. Despite price reduction and lack of demand, total supply volume of buildings for sale hasn’t grown.

Vacancy rates are growing. In segment of class A offices, the vacancy rates reach 15%, as for class B offices, the vacancy rate amounts to 20%. This trend is likely to continue in the first half of 2009. In early 2009, we may expect termination of many preliminary lease agreements made in June-September 2008.

In early 2009, one of the largest Austrian developers Immoeast plans to liquidate some of its assets by putting up for sale nearly 20% of the shares in Eastern Property Holdings investment company which owns Berlin House business center measuring 13 000 sq. m.

Masshtab Company decided to correct the concept of its business park measuring 0,5 mln. sq. m. (which was to be implemented in 2 phases by 2014) within the framework of the A101 project. The developer considers decreasing the area, changing the delivery date and focusing on construction of the industrial park which is likely to generate more interest in the market.

Rental rates for office space continue to go down. For some properties, this reduction has already reached 50% (first of all, for the space previously overestimated), for others, the reduction is 10-30%. Yet, some landlords opt for maintaining rates at old levels. On average, rental rates in Moscow decreased by 7-10% in January.

Despite the fact that potential tenants showed higher activity in late 2008 and many requests for searching of office premises were registered, no transactions have been finalized so far. Tenants are actively renegotiating their lease agreements with landlords. Many tenants fail to make rental payments on time.

In January 2009, Turkish construction company Enka which owns Paveletskaya Tower business center filed three suits against Sibir Airlines for $1,52 mln. Sibir Airlines rents 2 floors in Paveletskaya Tower for its headquarters and it failed to pay this amount of money for 6 months of 2008. This is a rare precedent of such a long delay of rental payments but it’s likely that we see other similar cases considering the current market situation.


In the end of January, Metropolis retail center by Capital Partners Developer Company was opened in NAD. Its total size is 205 thous. sq. m., the rentable area being 80 thous. sq. m. Total amount of investments was $800 mln.

Among its anchor tenants are Perekrestok, M.Video, Stokmann, Sportmaster, Snezhnaya koroleva, Marks & Spencer, Kinostar De Luxe. Besides, it will accommodate the first H&M shop in Russia and the second Gap shop.

The food court includes such brands as Starbucks, T.G.I. Friday’s and Shokoladnitsa. It is planned to open 16 shopping malls in 2009, their total area amounts to over 600 thous. sq. m.

Among January’s events, we should mention closure of all 5 mono-brand Diesel shops. Besides, such retailers Krasny kub, Bookberi, Evroset, Rigla, Samokhval and Diksis scale back their presence. Low-price brands, however, hope to grow in the crisis situation, McDonald’s announced opening 30 new restaurants in Moscow and Saint Petersburg and Wal-Mart intends to enter the Russian market by acquiring local companies hit by the financial crisis.

In January, rental rates in Moscow tended to go down versus the previous period. The amount of retail premises for lease and sale also decreased. If we analyze the rental level throughout the whole crisis period starting from October, we see that rental rates tend to stabilize; we don’t see such sharp fluctuations as in October – November.

It shows that some balance may be reached between supply and demand in the financial crisis.


No new hotels were opened in Moscow in January 2009. Moscow Government’s hotel construction plans are only partially implemented. Now due to the financial crisis delivery dates of many hotel projects are postponed and some hotel projects are put on hold.

As for the price situation, the period following New Year holidays is traditionally called low season, and hotels usually offer special accomodation prices. Besides, in order to attract more clients during the financial crisis, many hotels reduce prices. Even though we saw decrease of demand for hotel services in October-November, hotel operators began to reduce prices only in early January. They’re reluctant to take such measures and prefer to announce special offers and PR events other than reduce prices directly. Several hotels published price lists with new, decreased prices: Izmaylovo hotel complex reduced prices till mid-February, Cosmos and Holiday Inn Lesnaya offer special prices. Hotels struggle to attract more clients, some of them pay higher agent fees, and in Azimut Hotels, you may stay 18 hours for free.

7 projects with a hotel constituent were announced in January:

• The development concept of Izmaylovo hotel complex envisages construction of the fifth building and an apart-hotel with 190 rooms. As a result, the total number of rooms will amount to 5 050.

• Renaissance Moscow Monarch Center is expected to be opened in 2009. It will be the seventh hotel in Moscow operated by Marriott International. The hotel will be located in a multifunctional center located at the intersection of the Third Transport Ring and Leningradskoe highway. The hotel will consist of 366 rooms.

• Reconstruction of Sretenskaya hotel will start in 2011. Today this 38-room hotel is operated by GOST Hotel Management Group of Companies. After reconstruction is completed, it will be a luxury hotel.

• By 2012, a hotel will be constructed in Rogozhsky Val street, within the framework of the technology museum and exhibition complex construction project. The complex will be located on a 2,56-ha land plot, the area of the complex will be approximately 68 000 sq. m.

• A hotel including 300 rooms and 60 suites will be developed above Ulitsa 1905 goda metro station as part of the multifunctional hotel and business complex construction project. The investor is the film directors guild trading house «Forum XXI vek».

• By 2011, a boutique hotel with an attic for 65 rooms will be built on the territory of Borodino hotel and business complex.


/ Source: Blackwood

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