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Яндекс цитирования

  Analytics
   Articles archive

02.06.2008

Saint-Petersburg Property Market Update 1Q 2008

OFFICE MARKET


As expected the office market continued to grow in 1Q 2008. Business centers, planned for delivery in 2007, were put on the market. The tendency to delay deliveries becomes more stable. The occupation rate in the business centers is still very high, but it has decreased from 99% to 93-96% (depending on business center class) comparing to 1Q 2007. Nevertheless, the market saturation hasn’t been reached yet. Supply


8 business centers were delivered during 1Q 2008, with total area about 93,000 sq m. All of them belong to “B” class and only one - to “A” class.


Business-centers delivered in 1Q 2008



    
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
    
Class Name Total size (sq m) Address
A Renaissance Plaza 38,000 69/71, Marata str.
B Avenue 21,000 7, Aptekarskaya emb.
B Ilich 8,170 8, Beloostrovskaya str.
B Maxima 7,480 6, Tobolskaya str.
B Medved 7,200 27, Bolshaya Konushennaya str.
B Griffon-2 4,500 19, Dostoevskogo str.
B Sofiyskaya ploschd 4,200 30, Bely Kuna str.
B No name 2,500 5, 26th line, V.O.

In 2, 3 and 4 Q2008 39 business centers, with total area of more than 600,000 sq m, are expected to reach completion (14 of them belong to “A” class, 25 – to “B” class), among them are:

    
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
        
    
Class Name Total size(sq m) Address
A RESO 25,000 Bogatyrsky pr./Gakkelevskaya str.
A Demidov House 10,370 4, Grivtsova per.
A Sovereign 9,317 Maly pr. V.O./9th line V.O.
B Arena Hall 18,500 16, Dobrolubova str.
B Gulliver 30,000 7, Torfianaya doroga
B Renaissance Tower 22,35014, Reshetnikova str.

The demand structure has not change a lot comparing to 2007. The most popular office size is still 100-150 sq m. The demand for the office premises expands geographically and has a tendency for decentralization. The reasons for that are heavy traffic in the city center and openings of new high-quality business centers in the suburbs areas. The total volume of transactions in 1Q 2008 is over 16,000 sq m.


Largest transactions in 1Q 2008



    
        
            
            
            
            
            
        
        
            
            
            
            
            
        
        
            
            
            
            
            
        
        
            
            
            
            
            
        
        
            
            
            
            
            
        
        
            
            
            
            
            
        
        
            
            
            
            
            
        
        
            
            
            
            
            
        
    
Class Name Sq m Company District
A Benua 500 Energomashbank Kalininsky
B Obuhov center 2,400 Art jim(fitness center) /TD> Nevsky
B Imperia 885 CMA CGM Kirovsky
B River House 800 Lenenergo Petrogradsky
B Tranzas 710 Peterstar Vasileostrovsky
B Kellermann-center 570 Skanway shipping Admiralteysky
B Senator 485 Skifia Vasileostrovsky

Rental rates


The rental rates growth was about 2% in 1Q 2008. The forecast of the annual growth is 8-10% for the office premises. It’s determined by the inflation, currency changes and the increasing costs of the building materials.


Tendencies


1. The office market decentralization and business areas development.


2. The announcement of new big-scaled projects (over 100,000 sq m).


3. The development of high-rise projects.


4. The increasing number of “A” and “B” class business centers in the total market supply.


5. “A” class business centers are offered for sale.


6. Gradual transition to “triple net” rental rate calculation.


RETAIL MARKET


3 Shopping centers, with total area of 115,000 sq m, were put on the market in 1Q 2008. Delays in retail market can be from half a year to 2 years. Just 50% of announced projects are put on the market in time. Although the retail market has already reached saturation the forecast for new development till the end of 2008 is about 1,000,000 sq m.


Shopping centers delivered in 1 Q2008



    
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
    
Name District Area of trading function (sq m)
Voyage Vyborgsky 29,000
Atlantic city Primorsky 52,000
Severny Mall Kalininsky 34,000

Shopping centers planned to be delivered in 2008

    
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
    
Name District Area of trading function (sq m)
Atmosphere Primorsky 40,500
Felichita Nevsky 63,000
City park Primorsky 55,000
Hors Kirovsky 37,000
Shkipersky Mall-2nd and 3d phase Vasileostrovsky 50,000
Cruise Primorsky 22,000

1 Q 2008 ratio “citizens per 1000 sq m” comes to 530/1,000 and can reach 820/1,000 at the end of the year. For comparison: Moscow’s ratio is 450/1,000 and can reach 620 /1,000 at the end of the year.


Demand MARIS PROPERTIES /MARKET VIEW/ 1 Q2008 Rental rates


High competition and saturation of the retail market influence rental rates. Trade operators choose shopping centers more carefully and can get better financial terms. More tenants are ready to pay turnover percentage fee (3-15%) instead of a rental rate. Having such system an owner/a property management company shall be more interested in promotion of the shopping centers. Due to the weakening of the US dollar the rental rates are given in conditional units in more than 80% of shopping centers in Saint-Petersburg. It allows developers to keep rental rates on the required level and even to increase them to a certain extent. The retail market saturation leads to the following tendencies in demand: - Areas of trade operators increase. Therefore, the size of shopping centers, parking, convenient ramp, new development and modern engineering systems become more important. Good location in densely populated areas is not enough now. - Demand from tenants’ side increases for shopping centers with a high-quality concept, strong anchor tenants and entertainment function. It leads to market structuring, to more accurate division of retail centers by size, specialization and pricing level: super-regional, district-format, specialized, premium-class shopping centers, discount centers etc. - Demand decreases for shopping centers without a well thought-out concept, with small-size lay-out (20-100 sq m), lack of parking etc. Demand decreases also for open-air markets and fairs due to the growing income of the population. Their tenants develop and move to new quality shopping centers. New shopping centers occupation rate is about 75-90% at the delivering stage, and it reaches 90-95% during 6 months after opening.


Rental rates


High competition and saturation of the retail market influence rental rates. Trade operators choose shopping centers more carefully and can get better financial terms. More tenants are ready to pay turnover percentage fee (3-15%) instead of a rental rate. Having such system an owner/a property management company shall be more interested in promotion of the shopping centers. Due to the weakening of the US dollar the rental rates are given in conditional units in more than 80% of shopping centers in Saint-Petersburg. It allows developers to keep rental rates on the required level and even to increase them to a certain extent.


Average rental rates in shopping centers



    
        
            
            
        
        
            
            
        
        
            
            
        
        
            
            
        
        
            
            
        
        
            
            
        
        
            
            
        
        
            
            
        
        
            
            
        
    
Tenant Average rental rate/$*/sq m/year, including VAT, excluding opex and utilities
Food 100-350
Electronics 250-400
Kids/sport goods 400-600
Joint products/ accompanying goods 800-1,000
Clothing and shoes 700-1,100
Accessories, souvenirs 1,100-1,700
Entertainment 230-340
Food court 600-1,200

*1 US $=23.5 rub.


Street retail rental rates/sale prices



    
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
        
            
            
            
        
    
Location Rental rate /$*/sq m/year, including VAT, excluding utilities and opex Sale prices/$*/sq m
Nevsky pr. 2,000-5,320 13,300-38,830
Bolshoy pr. P.S. 1,330-2,660 4,680-22,340
Kamennoostrovsky pr., Moskovsky pr. 400-2,000 4,415-13,300
Bedroom communities 400-1,600 3,300-6,650

Source: Maris Properties in association with CBRE


NVESTMENT


In Q1 2008 capitalization rates in all segments of the real estate market have stabilized on the reached level. The yields are still significantly higher than that of developed European countries and the USA.


Examples of investment transactions 1Q2008



    
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
        
            
            
            
            
        
    
Investment fund Country Details Investment volume
Plantation & General Investments Great Britain Purchase of 12 properties in the central part of Saint- Petersburg 40-60 mln.$
Evli Property Investments Russia Finland Purchase of the business center “Kellermann Center” 55-75 mln. $
Northern European Properties Great Britain Purchase of the hotel “Holiday club” and DIY store “KRauta” n/a

MARIS PROPERTIES in association with CB RICHARD ELLIS


Maris Properties is one of the leading and fastest growing real estates companies in St Petersburg. We offer a full range of commercial real estate services for the St. Petersburg market. The general scope of our work includes:


• Brokerage services for office, retail and industrial space


• Strategic planning & Valuation


• Corporative Services


• Investment Services


• Property management Our staff have a vast amount of experience in the Commercial real estate market (more than 15 years) which, combined with our strategic partnerships with world real estate service leaders means we can offer our clients a unique knowledge of the special qualities of the Russian market but combined with the resources of Western Europe and America. Maris Properties focuses first and foremost on the interests of its clients. We offer each client affordable and effective solutions to each individual real estate requirement. Our clients entrust us with their business because they know that our success has come as a direct result of our attentive attitude toward their business. Our client list already includes such companies as: Siemens, Sun Microsystems, American Express, Franke, Vimpelkom (BeeLine GSM), Teks, Avaya, Bristol-Myers Squibb, Finansbank, JTI and others. The goal of Maris Properties is to understand the requirements of the client and to evaluate the prospects for their business development in a changing market. Regardless of the fact that the Russian economy is in a state of dynamic change, to succeed in business it is necessary to have perspective and to overcome the challenges that arise from new opportunities while always ensuring maximum benefit to each client.

/ Source: Maris Properties



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