2011 industrial and warehouse market › research › 596 › documents › ...2011 industrial and...

2011 INDUSTRIAL AND WAREHOUSE MARKET Moscow

MAIN POINTS • 2011witnessedafour-yearmaximumintermsofthevolumeoftransactionsmade

(990,000sqm)andaneight-yearminimumintermsofthenewwarehousespacecommissioned(366,000sqm).

• TheshareofvacantareainClassAwarehousesdroppedfrom5%to0.5%(asofJanuary2012).Asofthebeginningof2012,totalvacantareaintheconstructedpremisesdoesnotexceed50thousandsqm.

• RentalratesforClassAfacilitiesgrewby11%in2011to$130-135persqmp.a.

OVERVIEW


2

Key Events

• 2011setafour-yearrecordintermsoftransactionvolumebothforMoscow,wheretake-upofhigh-qualitywarehousepremisesstoodat990,000sqm,andforRussianonthewhole,withthetotaltake-upvolumebeinginexcessof1,350thousandsqm.

• Inthefirsthalfof2011,anumberofbiginvestmenttransactionsweremadeonthewarehousemarketinMoscowandMoscowRegion:HinesGlobalREITacquireda75,000sqmwarehousefacilityinKhimkyfromAIGEuropeanRealEstatePartners.Thiswasthefund’sfirstacquisitioninRussia.Thevalueof

thetransactionscouldbeashighas$80million.

• Apodofinvestors(representedbyPPFinvestmentfundandCEOofGiffelsManagementRussiaChrisVanRietwithhispartners)acquiredSouthGateindustrialparkfromGroveInternationalPartners(controllingGiffelsManagementRussia,theprojectdeveloper).Thisdealwasvaluedatsome$90million.

• ABritishdeveloperRavenRussiaobtainedcontroloverthreeconstructioncompanies,thusvirtuallybecomingthesoleownerofPulkovo(36thousandsq.moftotalarea)aswellasNoginsk-Vostochniylogisticpark(230,000sq.m

oftotalarea)inMoscowRegion.RavenRussiausedtoownthoseprojectsjointlywithEspro,adeveloper.

• Twomajordesign&buildtransactionsweremadein2011.PNKGroupwascontractedtoconstructa44,000sqmlogisticcentreforDIXYGroup.AsdirectedbyDixy,thiswillbedividedintoanumberoftemperaturezones.PNKGroupwillalsoconstructa50,000sqmwarehouseforCentrObuvatPNKVnukovofacility.Thiswillbethelargestwarehouseevertobeconstructedtothecustomer’srequirementsforfurtherselling.KnightFrankprovidedadviceforthisdeal.

• InApril2011,adealwasannounced

MOSCOW REGION WAREHOUSE MARKET REPORT: 2011 RESULTS

Main indicators Class А Class В Trend*

Totalsupply(ClassesА,В,С),thousandsqm 10950

TotalqualitysupplyinclassesAandB,thousandsqm

4610 1912

Deliveryin2011,thousandsqm 328.9 37.3

Expecteddeliveryin2012,thousandsqm700

Leaseandsaletransactionsin2011,thousandsqm990

Averagevacancyrate,% 0.5 2.0

Askingrentalrates,$persqmperannum** 130-140 105-125

Operatingexpenses,$persqmperannum 35-50 25-50

*Ascomparedtothepreviousyear

**WithoutVAT,operationalcostsandutilitybills

Source:KnightFrankResearch,2012

Vyacheslav KholopovDirectorofIndustrial,WarehouseandLand,KnightFrank

" Strong activity coming from the tenants

coupled with the low delivery resulted

in virtually all premises available in the

constructed warehouses has been washed

out from the market in the first half of

2011. This caused a comeback

to the preliminary agreement model.

As a result, most of the premises

under construction were rented

or purchased by the end of the year.

We expect that new projects

scheduled for commissioning in 2012

would hardly be able to saturate

the market, and a slight shortage

of premises will be observed throughout

2012, particularly in the first half

of the year. This will, in its turn,

facilitate further development

of the design&build market".

www.knightfrank.ru

3

tobethelargestoneonthepost-crisiswarehouserentalmarket:X5RetailGroupleasedover75,000sqmatRavenRussiaNoginsklogisticpark.

• Anotherrecordwassetinthe3PLsegment:Alidileasedanareaof40,000sqmatPNKChekhov.Thisappearedtobethelargestleasetransactionmadebyalogisticoperatorsince2008.KnightFrankprovidedadviceforthistransaction.

• Whendiscussinganorder“OnAdoptionoftheInvestmentPlan–“DevelopmentofMoscowRegion’sTransportandLogisticNetworkin2011-2015”,adecisionwastakenbytheMoscowRegionGovernmenttoconstructatleast20logisticcentresalongtheCentralRingRoadthatisunderconstruction.

Supply

Asofendof2011,totalhigh-qualitywarehouseareainMoscowandMoscowRegionstoodat6,522thousandsqm.2011setan8-yearantirecordintermsofthevolumeofnewhigh-qualitywarehousescommissioned–

366,000sqmClassAwarehousesaccountingfor90%ofthisfigure.Thisresultedfromalowerdemandforwarehousesin2008-2009and,consequently,fewerspeculativewarehousesconstructed.

Afterdemandstartedtorecoverinlate2010,investorsanddeveloperswouldannouncetheirplanstoconstructnewspeculativewarehousesandresumesuspendedprojects.However,commissioningofmanyfacilitieswasmovedto2012:outof600,000sqmannounced,slightlymorethan60%wereactuallycommissioned.Asaresult,asubstantialgrowthinnewpremisescanonlybeexpectedin2012.

Key Projects Commissioned in 2011

Property Name Property Address Total area, sq m Developer

PNK-Vnukovo BorovskoyeHwy,20kmfromMKAD 80,000 PNKGroup

RavenRussia-Кlimovsk SimferopolskoyeHwy,21kmfromMKAD 55,000 RavenRussia

PNK-Chekhov,Bld8 SimferopolskoyeHwy,49kmfromMKAD 39,500 PNKGroup

InfrastoyBykovo NovoriazanskoyeHwy,19kmfromMKAD 34,500 InfrastoyBykovo

BelayaDacha NovoriazanskoyeHwy,4kmfromMKAD 32,000 HinesInternational,BelayaDacha

MSK-SU9,phase3 NovoriazanskoyeHwy,1kmfromMKAD 22,500 MSK-SU9

Krekshino BetweenMinskoyeHwyandKievskoyrhwy,24kmfromMKAD

20,000 RosEvroDevelopment

CarloPazolini KievskoyeHwy,3kmfromMKAD 20,000 CarloPazolini

Khlebnikovo DmitrovskoyeHwy,8kmfromMKAD 20,000 Khlebnikovo


Source: Knight Frank Research, 2012

Average warehouse construction costs$ per sq. m (incl. VAT)

0.5

0.4

0.3

0.2

0.1

0 2007 2008 2009 2010 2011


4

Anotherconsequenceofthe2008-2009situationwasreducednumberofdevelopersofferingwarehousefacilities.Asaresult,thebulkofnewwarehouses(72%)weresoldbylargerdevelopersspecializedindevelopingindustrialandwarehousecomplexes.Theyconstructedatleast50thousandsqmofhigh-qualitywarehousepremisesforleaseorsele.

Thissituationwasdrivenbyseveralfactors.Firstly,itismoredifficultfornewplayerstoraiselowinterestratefinancingfortheirprojects,andthisinevitablyincreasesconstructioncosts.Secondly,largerdeveloperscancutconstructioncostsusingtheirexpertiseandscaleeffect.Theycanusemosteffectivesolutionswhilemaintaininghighquality.Maturedevelopershaveconstructioncoststhatareonaverage10-20%lowerthanthoseofnewmarketplayers.Thirdly,constructioncostsstartedtogrowin2011afterthedownturnobservedin2009causedbycheaperconstructionmaterialsandlowerlabourcosts.Bytheendof2011,constructioncostsreachedtheirpre-crisislevel($800-850persqm,incl.VAT).

Mosthigh-qualitywarehouseswereconcentratedinthenorthandsouth(over56%).Justlikein2011,greatestgrowthinnewpremisesofferedcamefromthesouthandsouth-west.Inadditiontothis,quitealotofnewsupplycamefromthesouth-eastwithtotalvolumesgrowingtherebyover60%.

Onecouldalsoclaimthatpotentialinvestorsarealsogettingmoreandmoreinterestedinthewarehousessegment.In2011,investmentstotalledalmost$400million.MajorinvestorswereRavenRussia,

Supply: geographic profile


www.knightfrank.ru

5

ofUK,andHinesGlobalREIT.Potentialinvestmentopportunitiesavailableonthemarketin2012couldbevaluedatover$1billion.

Demand

Throughout2011,therewasahighdemandforhigh-qualitywarehouses.Bytheyear-end,thetotalvolumesoftransactionsmadeinMoscowRegionexceeded990,000sqm(85%offacilitiesbelongtoClassA)whichisthepastfouryears’maximum.Thisisa29%increasecomparedto2010andanalmosttwofoldgrowthover2008.

Eventhoughtake-upappearedtobeslightlyhigherin2007thanin2011,onecouldclaimthatmarketrecoveryisalreadythecasewiththemarketgettingmore“mature”:mostcompanieshavealreadymovedtofacilitiesofhigherquality.

Themarketsituationcausedarapidreductionofvacantarea.Thiswaspartiallycausedbythelowvolumeofnewareacommissioned:developerswerenotpreparedforsuchastronggrowthindemandwithvirtuallynoprojectslaunchedin2009-2010.Asaresult,theshareofvacantclassAwarehouseareafellto0.5%(below50,000sq.m).Moreover,somepremisesunderconstructionhavealreadybeenreservedunderpreliminaryleaseagreements.Thiswascausedbythefactthat65%ofthecontractsduringthepasthalf-year


Demand, absorption and vacant areathousand sq m

1400

1200

1000

800

600

400

200

0

2006 2007 2008 2009 2010 2011 2012 F

New construction, thousand sq m Volume of closed deals, thousand sq m

Vacancy rate (Class A), thousand sq mRetailers

Other manufactors and distributors

Third party logistics providers (3PL)

FMCG (Fast Moving Consumer Goods)

Other


Transactions as broken down by renter or buyer profile%

2,4%

37,1%

14,8%

17,3%

28,3%

Take-up: geographical profile



6

weremadewhileunderconstruction.

Mosttransactionshaveretailoperatorsinvolvedwhoaretraditionalchampionsintermsofwarehousetake-up,havingwonthischampionshipfromlogisticoperatorsin2009.Itisworthmentioningthattheshareoflogisticoperatorsgrewoverthepreviousperiod(2009-2010)to166,000sqm.

Geographically,greatesttake-upvolumeswererecordedinthesouthandsouth-east.Thisispartiallycausedbymoredenseconcentrationofnewpremisesofferedtothemarketin2011.

Allinall,totalvolumeoftransactionsmadeinMoscowRegionin2011appearedtobethreetimeshigherthantheareacommissioned.Thistrendwasvalidforallgeographicalareas,exceptforthesouth-west,achampionintermsofspacecommissionedin2011;thedeliverywasslightlyaheadofabsorption.

2011witnessedmoremajortransactions(over30,000sqm)madewhichisalsoanindicatorofmarketrecoveryandpositivetrends.Particularattentionshouldbepaidtothelargesttransactionforthepastfouryears–rentalagreementforawarehouseatNoginsk-Vostochnylogisticpark(RavenRussiaactingasadeveloper)byX5RetailGroup.Totalarearentedamountedto75,700sqm.

Anotherimportanttrendobservedin2011wasthehighestnumberandvolumeofdesign&buildtransactions.Thiswascausedprimarilybystrongreductionofvacantareaavailableatspeculativewarehouses.Whencustomerswereseekingtorentbigwarehouses,theywouldfaceaproblemofshortsupply.Additionally,anumberofcompaniesstartedtoplacespecificrequirementsforthepremisesrented.Shouldtheyfailtofindaproperwarehouse,theywouldoptfor“design&build”construction.Outoffivetransactionsover40,000sqmfacilitiescommissionedmadein2011,twoonesfollowedadesign&buildpatternwhichisakindofrecordforthismarketastherehas


Number and share of the transactions over 30,000 sq munits

12

10

8

6

4

2

0

2006 2007 2008 2009 2010 2011

Number of 30+ thousand sq. m Transactions Share of 30+ thousand sq. m Transactions

%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0


Growth of the share (total area) of design&build transactions %

25%

20%

15%

10%

5%

0 2006 2007 2008 2009 2010 2011 2012 П

www.knightfrank.ru

7

beennosuchbigdealofthekindbefore.

ThoseprojectswillbeconstructedatPNK-Vnukovowarehousecomlexinthesouth-west.Thosedealsareexpectedtoraisetheaveragetransactionvolumeinthisareato21,000sqm,twicehigherthananaveragetransactionmadeinMoscowandMoscowRegion(approx.11thousandsqm).Anotherrecordsetbythemarketin2011wasthevolumeofareasoldwithitssharereaching15.5%(143thousandsq.m),anearlyfourfoldincreaseyear-on-year.

Commercial Terms and Conditions

2011appearedtobemoreofthe“handlords’market”.Asubstantialgrowthindemandandlimitedsupplyhelpedownerstoraiserentalratesthroughouttheyear.Itismoreandmoredifficultforcustomerstonegotiate.Asaresult,bythebeginningof2012,askingrentalratesforClassAwarehouseswereintherangeof$130-135persqm(withoutVATandoperationalcosts).Weexpectthataskingrentalrateswillgrowslightlyinthefirsthalfof2012to$135-140persqmandwillstabilizeinthesecondhalfoftheyear.

AscomparedtomostEuropeancountries,RussiaisoneofthefewnationswhererentalratesforclassAwarehousesdemonstratedasteadygrowththroughout2011.Asofthebeginningof2012,MoscowrankedseventhnumberamongEuropeancitiesintermsof

Average transaction volume: geographical profile, thousand sq m



Warehouse rental rate profile $ per sq m per annum

1,600

1,400

1,200

1,000

800

600

400

200

0

2006 2007 2008 2009 2010 2011 2012 F

Class А, $ per sq m per annum Class B, $ per sq m per annum

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV


8

rentalrates.GiventhecompllicatedeconomicenvironmentinEuropeandcurrentdynamics,onecouldexpectMoscowtobecomeoneoftheTop5Europeancitiesintermsofwarehouserentalrates.

Leaseagreementswereusuallymadein2011inMoscowandMoscowRegionforatermof5-7years.Supplyofhigh-qualitywarehousepremisesisprimarilyfocusedoncompaniesreadytoenterintolong-termleaseagreements(5andmoreyears)atratesnominatedinUSdollarsandtotalareaof5,000andmoresqm(morepreferably,10,000andmoresqm)–forMoscowandSt.Petersburgregions.Amoreconvenientoptionforatenantseekingawarehouseforashorterperiodoftimeistocooperatewithlogisticoperatorsratherthanlease.

Forecast

WeexpectthatmostofthepremiseswillonlybeofferedtotheMoscowRegionmarketinthesecondhalfof2012.Atotalofsome905thousandsqmofnewspeculativewarehouseshasbeenannouncedtobecommissionedduringthisyear,andwebelievethatabout700thousandsqmwillactuallybesupplied.

2012,anditsfirsthalfinparticular,willcontinuetodemonstratedeficitofhigh-qualitysupplycausingmostofthetransactionstobemadebywayofpreliminaryleaseagreementsforpremisesunderconstruction.Givenasimilarlevelofactivitycomingfromtenantandquiteastablepoliticalandeconomicsituation,vacantareawillnotexceed1-2%bytheendof2012,meaningthatnewwarehouseprojectscouldbeexpectedthisyear,particularlythoseimplementedbylargedevelopers.

Rentalrateswillcontinuetoslightlygrowinthefirsthalfof2012.However,inspiteofthelowvolumesofvacantareaavailable,thiswillbebalancedbythetenants’limitedpaymentcapacity.Inthesecondhalfoftheyear,therateswillstabilizeasalotofsupplywillemerge.Asaresult,askingrentalratesforClassAwarehousescouldaverage$135-140persqm(withoutVATandoperationalcosts)bytheendof2012.

Moreover,moredesign&buildtransactionsareexpectedtobemade.Weassumethat20-25%oftotalabsorptionvolumeswillhavetodowithconstructionofwarehousestothecustomer’sspecificrequirements.

3PL Market

In2011wasrecordedthehighershare(17%)oflogisticoperatorsinthetotalvolumeoftransactionsmade,5percentagepointshigherthanin2010(166,000vs.113,000sqm).Thisisanindicatorofrecoveryofthe3PLmarketthatsufferedmostduringthecrisis.

Positivechangeswerecausedbyanumberoffactors.Firstly,thereisaremarkablegrowthindemandfromexistingcustomers.Secondly,somecompaniescannotleasetheirownwarehousesduetotheshortageofwarehouseareaavailable,andtheyengage3PLoperators.

Inthissituation,logisticoperatorscanselectcustomersthataremostreliable.

Activateddemandfor3PLservicestriggeredincreasedcostsoffreightstorageandhandlingofferedbylogisticcompanies.Anotherfactorcontributingtohigherlogisticcostswashigherwarehouserentalrates.

Weexpectfurthergrowthofpricesin2012,primarilydrivenbyhigherwarehouserentalrates.Thisgrowthcanreach7-10%bytheendoftheyear.Anotherreasonofincreasingpricesfor3PLservicesisthegrouthoftherentalratesforthewarehousespaces.


European cities in terms of warehouse rental rates for Class A warehouses$ per sq m per annum

250

200

150

100

50

0

L

ondo

n

Zuri

ch

Gene

va

Oslo

Stoc

khol

m

Hel

sink

i

Mos

cow

Edin

burg

h

Barc

elon

a

Fran

kfur

t

Vien

na

www.knightfrank.ru

9

Land Market

Currently,greatdemandforcommerciallandcomesfromlargeretailoperatorsandcompaniesplanningconstructionofmanufacturingandlogisticfacilities.

LargeretailcompaniesarefocusedonthelandsiteslocatedalongDmitrovskoe,Yaroslavlskoe,Simferopolskoe,Mozhaiskoe,Minskoe,NewRigaandVolokolamskoehighways,andinparticular–ontherightsidesofthosehighways(ifdrivingfromMoscow)andwithin20kmofftheMoscowRingRoad.

Inaddition,thereisahighdemandforlandintendedforcommercialconstruction(especially,forindustrialpurposes)alongNewRiga,LeningradskoeandDmitrovskoehighways.ConstructionoflogisticfacilitiesthereisdrivenbythecargotrafficcomingfromSt.PetersburgandFinland.Industriallandofferedthereisverylimitedcausingunsatisfieddemand.

Itisworthnotingthatanumberofspecializeddevelopersengagedinwarehouseconstructionarecurrentlyconsideringoptionsforexpandingtheirownlandassetstosupporttheirconstructionactivityin2013-2015.

Themarketsituationisimproving,buttheaveragelandpriceisstillcomparableto2009-2010afterthefallinearly2009.Thepriceforindustriallandplotssituated10-30kmofftheMoscowRingRoadaverages$700,000perhectar.Forlandplotslocatedonthefirstlinealongmajorhighwayswithin10kmofftheMoscowRingRoad,thepricevariesintherangeof$1-2millionperhectares.Oneofthetransactionsmadein2011wasacquisitionofa14hectarlandplotalongYaroslavlhighway,15kmofftheMoscowRingRoad.Thepricewas$825,000perhectar.

Onecouldexpectfurtherincreaseinthevolumeoflandplotssoldatthebackofquiteafavourablemarketsituation:landpricesarequitelow,andmanycompanieshavesufficientfinancialresourcesinplacetoinvestintheirowndevelopmentonthewholeandacquisitionoflandinparticular.Weexpectanincreaseinthevolumesoflandtransactionswithaslightpricegrowth(5-10%)inthefirsthalfof2012.

Industrial Park Market

Forseveralrecentyears,quitealotofattentionhasbeenpaidbothbythemarketplayersandgovernmentauthoritiestoarelativelynewtypeofindustrialrealproperty–industrialparksthatareterritoriesorganizedspeciallyforhousingnewmanufacturingfacilities.Theyhaveappropriateutilitylinesinplace,

allrelatedinfrastructureaswellasproperadministrativeandlegalenvironment.Thesearemanagedbyspecializedcompanies.TotalareaoccupiedbyRussianindustrialparks(bothexistingandprojected)amountstosome62,800hectares.

Industrialparksaremostlygreenfieldprojects(69%),i.e.preparedsitesthatusedtobe,asarule,agriculturalfarmingland,withorwithoutrelatedutilitylinesavailable.Brownfieldindustrialparks,i.e.sitesusedbefore

forindustrial,constructionorotherpurposes,accountfor31%.

ItisworthmentioningthatindustrialparksarecurrentlyundergoingacertificationprocesswiththeRussianIndustrialParkAssociation.Witheffectfrom2012,theRussianMinistryofEconomicDevelopmentwillnotacceptrequisitionsforstatebudgetfinancialsupportfromindustrialparkslackingsuchacertificate.


Share of logistic companies in total take-up%

50%

40%

30%

20%

10%

0

2007 2008 2009 2010 2011 Brownfield


Share of brownfield and greenfield industrial parks%

31%

69%

Greenfield


3PL services price dynamicsrub. per day

140

120

100

80

60

40

20

0 2008 2009 2010 2011 2012 F

Materials-handiling operations, rub. for 1 p/s per day

Storage, rub. for 1 p/s per day

Piking, rub. per 1 box

OVERVIEW

EuropeAustriaBelgiumCzech RepublicFranceGermanyIrelandItalyMonacoPolandPortugalRomaniaRussiaSpainSwitzerlandThe NetherlandsUKUkraine

AfricaBotswanaKenyaMalawiNigeriaTanzaniaUgandaZimbabweZambiaSouth Africa

Middle EastBahrainUAE

Asia PacificAustraliaCambodiaChinaIndiaIndonesiaMalaysiaNew ZealandSingaporeSouth KoreaThailandVietnam

Americas & CanadaBermudaCaribbeanCanadaUSA

Office Real EstateStanislav TikhonovPartner [email protected]

Warehouse Real Estate, landViacheslav Kholopov Director [email protected]

Retail Real EstateSergey Gipsh Regional Retail Director, Partner [email protected]

Professional Consulting ServicesKonstantin RomanovPartner, Director [email protected]

Elite Residential Real EstateElena YurgenevaDirector [email protected]

Financial Markets and InvestingEvgeniy SemyonovPartner, Director [email protected]

Valuation ServicesOlga Kochetova Director [email protected]

Saint PetersburgNikolai Pashkov

General Director [email protected]

KyivYaroslava ChapkoBusiness Development Director

Marketing, PR, Market Research, HRMaria KotovaPartner, Executive Director [email protected]

Established in London more than a century ago, Knight Frank is the renowned leader of the international real estate market. Together with Newmark Company, Knight Frank’s strategic partner, the company encompasses 243 offices in 43 countries across six continents.

Knight Frank has been a symbol of professionalism for tens of thousands of clients all over the world for 116 years. After 16 years, Knight Frank has become the leading company in the commercial, warehouse, retail and residential real estate segments of the Russian real estate market. More than 500 large Russian and international companies in Russia have already made use of the company’s services.

This and other Knight Frank overviews can be found on the company website www.knightfrank.ru

© Knight Frank 2011

This overview is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects.

Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank.

MOSCO W

Russia, 119021, 11 Timura Frunze Str.Phone: +7 (495) 981 0000 Fax: +7 (495) 981 0011

ST. PETERSBURG

Russia, 191025,3B Mayakovskogo Str.Phone: +7 (812) 363 2222 Fax: +7 (812) 363 2223

KYIV

Ukraine, 04071, 39-41 Horyva Str.Phone: +380 (44) 545 6122 Fax: +380 (44) 545 6122

[email protected]

2011 industrial and warehouse market › research › 596 › documents › ...2011 industrial and...

Documents