Commercial real estate in Russia

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Commercial Property in Moscow

In Russia’s commercial real estate market there is a segment that is experiencing a positive trend, and this segment is storage facilities. Businesses are keen to shift their focus from trading on the basis of retail commercial real estate to reaching their customers through online retailing, and the latter operating model heavily relies on warehouses. We believe that by the end of 2021 the total amount of real estate bought or leased for use as storage facilities in Russia will increase by 3.5 times and thus constitute an all-time record. Currently, the leasing or purchasing of this type of commercial real estate happens even before the commissioning of the properties. According to the results of the previous year’s third quarter, only 2.2% of Moscow’s storage facilities remain unused. This fact indicates that the demand for warehouse-type commercial real estate in Moscow is only going to increase with time, and it is even possible that this demand will be greater than the supply made available through new warehouse construction.

It is expected that in 2021 the demand for offices shall make a comeback, however, this indicator will not reach the level it was at in previous years. At the same time, the supply of office spaces available for lease is continuing to grow.

Preliminary data suggests that the volume of new construction of class A, B+ and B- office space in Moscow was 790 682 sqft or 241 000 m² over the past year. The total empty office space at the end of 2020 was 7.2 million square feet or 2.2 million square meters (12.1% of all existing office space in the capital). The aggregate floor area of properties leased and purchased on the capital’s office real estate market was 5.05 million square feet or 1.54 million square meters.

In 2020, new construction of retail properties (retail spaces with floor areas starting from 4 921 sqft or 15 000 m²) in Moscow totaled around 761 155 sqft or 232 000 m². Over the year 2021, new construction of commercial property of this kind in the capital is expected to amount to 656 168 sqft or 200 000 m².

And so, the commercial real estate market has greatly stratified in terms of its indicators and prospects, and these are inevitably experiencing adjustments as reality sets in. For investors, the current situation grants a choice of instruments for the growth of their capital, because select niches on the commercial real estate market do indeed have good prospects for growth.

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