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Q3, 2011


Dear Reader, We can all appreciate that having a firm grasp on market dynamics is critical to most of our decision-making. Having a single resource, a single point of reference from which you may easily access this information is also important. We have combined these two necessities into our latest Research publication – ‘Insider’. As both a guide to market dynamics and quarterly data, our Insider also offers insight into key topics and issues facing market players today. We have endeavoured to create a tool that will be of greatest use to you. Inside this report you will find coverage on both Moscow and Saint Petersburg markets, detailing the quarterly trends and dynamics across all sectors, including offices, retail, industrial and the investment market. We also offer special feature commentaries on rouble dynamics, mixed-use development in Saint Petersburg and an editorial on Moscow’s urban expansion. As a single source of research, the Insider offers you an intelligent and convenient way to stay informed. I want to thank our Research and Marketing teams for assembling this report and as always we look forward to your feedback. All the best,

Charles Boudet Managing Director, Jones Lang LaSalle, Russia & CIS

2


Direct Speech Valentin Stobetsky, Head of Office Group Supply of office space in the Moscow center is shortening. Potential tenants should take advantage of the existing situation while there is still a choice for high quality office space. With new completions in the city center reducing each quarter and currently active take-up level, rents are expected to increase in 2012.

Petr Zaritskiy, Head of Industrial Agency Despite growing uncertainty on financial markets, several big built-to-suit deals were executed in Q3 2011. Terms are quite long with the construction phase lasting up to one year. Demand overhang from potential tenants will stimulate future growth in supply. Foreign exchange fluctuations are likely to influence only indirectly the warehouse market.

Andrey Rozov, Head of St. Petersburg Branch One of the key trends observed in Q1-Q3 2011 is consistent and stable recovery of demand in office, retail and warehouse segments of commercial real estate. At the same time, rental dynamics throughout the year were quite moderate. The highest rental growth was observed in the warehouse sector due to a lack of supply of quality space. As a result of the market recovery, we see a significant decline of vacancy rates in existing projects in all three real estate segments. We also see growing activity from developers in resuming stalled projects and starting new ones. It is also worth mentioning an increasing level in quality of these new projects.

3


4


Investment Market

Russian Economy Russian economic performance remains comparatively stronger

Moreover, recovering consumer lending provides an additional

than large developed and emerging countries. Although due to a

boost. Due to decreases in personal savings and growth of

recent rise in market uncertainties and a slowdown in major

consumer credit, non-food sales increased by 10.4% YoY in

European and U.S. economies the World Bank decreased Russia’s

January-September 2011, while food sales grew by only 2.1% YoY

GDP forecast by 40 BPS, to 4.0% in 2011. However it remains

over the period, according to Rosstat.

attractive on the back of the World Bank’s forecast for advanced economies of 1.6% in 2011.

Real wages and retail sales growth, YoY 12%

According to the Ministry of Economic Development, Russian GDP expanded 4.2% YoY in January-September 2011 vs. 3.9% for the same period of 2010. The pace of industrial production growth

9% 6% 3% 0%

accelerated to 6.2%in August and slightly moderated to 3.9%YoY

-3%

in September. Consumer sector continue to be the major driver of

-6%

Russia’s economic growth in 2011. Oil prices, currently above

-9%

Real wages

Oc No t-09 v De -09 c Ja -09 n F e - 10 b M a - 10 rAp 10 Ma r-10 yJu 10 nJu 10 Au l -10 g Se -10 pOc 10 No t-10 v De -10 c Ja -10 n F e - 11 b M a - 11 rAp 11 Ma r-11 yJu 11 nJu 11 Au l -11 g Se -11 p11

USD100 per barrel, are supportive for budget revenues.

Retail sales

Source: Rosstat

Real GDP growth: International comparison, YoY 9%

Inflation is trending down, as this year’s harvest was prosperous,

6%

resulting in a local food price decline. According to Rosstat,

3%

inflation declined to 7.2% in September after reporting 9.0% in

0%

July. We expect inflation to moderate to 7.0% by the end of 2011.

-3%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011F 2012F

Key macroeconomic indicators

-6%

Nominal GDP (USD bn)

-9% CEE

Euro area

Russia

USA

Source: IMF, Jones Lang LaSalle

Debt: International comparison as of end-2010, % of GDP 679

Banks

Corporate

Government

Household

160

2009

2010

2011F

2012F

1,224

1,480

1,795

2,107

Real GDP growth (%)

-7.8

4.0

4.0

4.1

Unemployment (%, end-year)

8.2

7.2

6.8

6.5

CPI (%)

8.8

8.8

7.0

6.8

30.24

30.48

30.0

29.5

Exchange rate (RUB/USD, end-year) Real wage growth (%, YoY)

-3.5

4.2

3.5

3.8

Retail trade turnover (USD bn)

461

541

644

703

140

Real retail sales growth (%, YoY)

-4.9

4.4

4.0

4.6

120

Urals oil price (USD/barrel, end-year)

76.7

91.2

100.0

95.0

100

FDI into Russia (USD bn)

36.5

41.2

40.0

50.0

439.5

479.4

545.0

590.0

80

International reserves (USD bn)

60

Source: Rosstat, Ministry of Economic Development, Central Bank of Russia (CBR), Bloomberg, Jones Lang LaSalle

40

20 0 UK

France

US

Germany

Russia

Source: Central Bank of Russia, Eurostat, individual country databases

The Ministry’s of Economic Development data indicated an improving labour market: unemployment fell to 6.1% in August from 7.8% in the beginning of 2011. Recent increases in wages and retail sales add some optimism, contrasting Russia’s situation to other negative trends around the global.

5


Special Topic

Rouble dynamics On the back of recent global turmoil, panic has spread on all

Foreign currency sales by CBR were significantly lower in

financial markets, and especially those of emerging economies.

September 2011 compared to September 2008 – around

Urals oil price fluctuated significantly in Q3 2011 and has dropped

USD7bn vs. USD17bn respectively, according to official

to USD111 recently (October 17) from a peak of USD123 per

statistics.

barrel. Oil price volatility affected investor confidence. A trend of capital flight out of Russia has been noticed. This, combined with increased perceived risk levels due to global turbulence has

CBR net foreign currency purchases USD or EUR bn

USD net purchases

EUR net purchases

20

contributed to increased volatility for the rouble. Russian rouble

10 0

depreciated by 16%, from the strongest point in end-July to

-10

weakest in the beginning of October, approaching the level of

-20

early-2009 lows. As of September, the rouble recorded a rate of

-30

31.88 per USD.

-40 -50 -60

Oil price and RUB/USD exchange rate 35

150 RUB/USD exchange rate

Urals oil price, USD/bbl R axis

33

Source: Central Bank of Russia 120

The Russia rouble was not the only currency under pressure. 31

90

29

60

27

30

Some emerging market currencies lost more value from endJune until mid-October – South African rand, Mexican peso,

Source: Central Bank of Russia, Bloomberg

An additional factor that plays against local currency is the flexible rouble policy, announced by Central Bank of Russia (CBR). Inflation is coming down and we will not see an increase of interest rates in the near future. The rouble will not be a carry trade1 currency. On a positive note, upcoming federal elections will likely contribute to a stronger currency. The CBR is unlikely to allow the

Brazilian real, Polish zloty foremost among them. Exchange rate recent changes to USD, %, 29 June – 19 October South African rand Maxican peso Brazilian real Polish zloty Russian rouble Indian rupee Turkish lira Canadian dollar Euro Norwegian crone British pound Ukranian hryvnia Japanese yen Chinese yuan Australian New Zealand dollar -17%

-14%

-11%

-8%

-5%

-2%

1%

4%

7%

10%

13%

Source: Bloomberg

rouble to depreciate further, if Russian perceived political instability and risk increase. The CBR has already provided

The major risk for the Russian rouble is the potential for a global

support by selling dollars from international reserves, resulting in

economic downturn. If fears of global crisis materializes, oil

their decline to USD518bn as of 14 October 2011 from USD545bn

prices will fall, dragging the rouble down. In this situation, the

as of 1 September 2011. Following the CBR’s measures to

reaction of CBR will be vital for the rouble performance.

support the currency, rouble appreciated 6% back to 30.7 as of October 17.

1

The carry trade is an investing strategy in which an investor borrows money in one country at a low interest rate and invests it in another country at a higher rate.

6


Investment Market

Real estate investment market In the situation of global turmoil international investors are

International investors resumed their activity in mid-2010. After

becoming more cautious and taking their money out from financial

having evaluated market prospectives for a year, exploring assets,

markets, especially emerging market – investing in core assets

conducting due diligence, they are now closing deals. Thus, US-

such as gold and real estate.

based Hines Global REIT acquired Gogolevsky BC in Moscow. Jensen Group purchased Nevsky Passage, one of the oldest

This year we will report a record high investment volume in Russia.

shopping malls in St. Petersburg. US-based real estate investment

Investment into real estate is gaining momentum, with the total

fund Heitman European Property Partners IV acquired Office

volume of Q1-Q3 2011 investment in Russia up 80% YoY, to

Building 2, part of the Metropolis mixed-use scheme in downtown

USD5.2bn. Commercial real estate investments increased 134%

Moscow. Finnish real estate investment company Sponda signed

YoY in Q1-Q3 2011, to USD5.1bn. We expect a further increase in

an agreement with SRV, Illmarinen, Etera and Onvest to establish

real estate investment volumes in 2011, with the annual volume

Russian Invest company to invest in property projects in Moscow

reaching USD7.0bn, of which the commercial real estate

and St.Petersburg. Several other funds are actively evaluating new

component will account for about USD6.4bn. Moreover, if all the

investment opportunities in Russia. At the same time, local

deals currently under active marketing are closed, volumes could

investors continue to demonstrate significant activity, accounting

possibly increase to USD8.5bn.

for 56% of the total Q1-Q3 2011 investment volume.

Investment volume dynamics, USDbn*

Investment by investor origin

10 Q4

Q3

Q2

Q1

8.5

8

Russia

Confidential

China

UK

Canada

Other

Global

USA

Kazakhstan

Finland

2007

2008

100% 90%

7.0 6

5.1 4.0

70%

4.8

60%

3.9

50%

3.2

4

80%

40% 30%

2 0.1

0.3

20%

0.8

10%

0

0%

2003

2004

2005

2006

2007

2008

2009

2010

2011

* Investment deals, excluding share acquisitions of less that 30% of assets, land purchases, JVs, direct residential sales to end-users.

4%

5%

22%

25%

7% 28%

9%

16%

24%

16% 60% 40%

27%

26%

21%

23%

27%

26%

20%

18%

2007

2008

20%

22%

21-50

24%

28%

26%

21%

2009

2010

Q1-Q3 2011

51-100

101-300

– 40% of Q1-Q3 2011 total investment volume each. RMB Invest acquired three Metromarket SC’s in Moscow from Capital Group. Romanov Property Holdings Fund purchased Dream House SC in Barvikha village. Moreover, deal size increased this year: in Q1-Q3 2011 the number of deals exceeding USD100m increased to 33%

35%

0% <20

Q1-Q3 2011

2011. Retail and office segments attracted the bulk of investments

Investment by deal size (by quantity) *

80%

2010

Sector wise, investments were bilaterally diversified in Q1-Q3

Source: Jones Lang LaSalle

100%

2009

Source: Jones Lang LaSalle

>300

of total number of deals vs. 23% in 2010. Investment by sector Office

Retail

Mixed

Hotel

Residential

Industrial

100% 90%

*Deal quantity by size vs. total deal number

80%

Source: Jones Lang LaSalle

70% 60% 50%

Q1-Q3 2011 in Russia was marked by the real closures of deals that included foreign capital. Foreign investor activity increased remarkably in Q1-Q3 2011, comprising 44% of the total Q1-Q3 2011 investment volume, compared with 14% in 2010. We saw clear evidence of a rise in international real estate investment funds on the Russian real estate market.

7

40% 30% 20% 10% 0% 2007

Source: Jones Lang LaSalle

2008

2009

2010

Q1-Q3 2011


Investment Market

Key CRE investment indicators

Investment breakdown by type 100%

Q4 2010

14.4%

25.1%

36.4%

80%

15.1%

60% 85.6%

40%

74.9%

63.6% 20%

Q3 2011

9.5 10.0 11.5

9.0 9.5 11.0

9.0 9.0 11.0

9.0 9.0 11.0

10.0 10.0 13.5

10.0 10.0 13.5

-8.3 -6.0

-29.7 -39.5

St. Petersburg prime yields, %

84.9%

Office Retail Warehouse

43.7%

Q2 2011

Moscow prime yields, % Office Retail Warehouse

56.3%

Q1 2011

11.5 12.0 13.5

11.0 11.5 13.5

Equity market growth, %

0% 2007

2008 Standing

2009

2010

Q1-Q3 2011

Under development

RTS Index VTB Capital Real Estate Index

17.4 15.0

15.5 4.1

Source: RTS, VTB Capital, Jones Lang LaSalle

Source: Jones Lang LaSalle

Investors are still mostly focused on income producing standing assets, their share accounted for 85% of all completed deals in Q1Q3 2011, including purchases for own occupation. However, better financing availability will direct more investments to development projects.

Market liquidity Overall, due to globally growing risks and approach of presidential

Senior debt terms for Moscow projects in USD

elections country risks have increased in Q3 2011, with Russiaâ&#x20AC;&#x2122;s

Before crisis

Crisis

After crisis

five-year CDS spread increased 141 BPS.

Lending rate, %

LIBOR + (3-5 ppts)

LIBOR + (10-12 ppts)

LIBOR + (5 ppts)

The local credit market continued to recover in Q3 2011, with the

LTV, %

up to 75

up to 50

up to 75

> USD100 m

< USD 50 m

> USD100 m

average rouble lending rate declining to 7.9%, and the US dollar

Loan size

rate to 4.3% in August 2011. Local bank financing has become a

Source: Jones Lang LaSalle

strong source of funding in Russia. Commercial real estate lending is now easier to access. This is reflected in the rapid growth of

%

corporate loans, to 18% YoY in July 2011.

Rouble rate

19

USD rate

17.1

17

Russia and Gazprom five-year CDS spread

15 13

1,800 1,600

Average annual corporate lending rate in Russia, %

Russia

Gazprom

11 9

1,200

7

1,000

5

800

3

600 400

7.9 4.3

Au g0 No 7 v-0 7 Fe b-0 Ma 8 y-0 8 Au g08 No v-0 8 Fe b-0 Ma 9 y-0 9 Au g09 No v-0 9 Fe b-1 Ma 0 y-1 0 Au g10 No v-1 0 Fe b-1 Ma 1 y-1 1 Au g11

1,400

9.9

200

Ma y

-0 Ju 8 l Se -08 p No -08 vJa 08 n Ma -0 9 r Ma -0 9 y-0 Ju 9 l Se -09 p No -09 vJa 09 n Ma -1 0 Ma r-1 0 y-1 Ju 0 l Se -10 p No -10 vJa 10 n Ma -1 1 Ma r-1 1 y-1 Ju 1 Se l -11 p11

0

Source: Bloomberg

Source: Central Bank of Russia

Banks, predominately Russian, continued to provide construction financing in Q3 2011. At the same time, we observed significant increase in foreign bank lending.

8


Investment Market For example, Stockholm-based Nordea Bank provided USD170 m

Sector yields stabilized at the same levels as in Q2 2011. Moscow

refinancing at Four Winds BC to AFI Development and Snegiri

office and retail yields were recorded at 9.0% for both sectors in

Development. UniCredit Bank opened a USD205 m five-year credit

Q3 2011. Warehouse yields remained at 11.0%. Prime yields for

line to the Russian subsidiary of the US-based Hines for its Ducat

office and shopping centers in St. Petersburg measured 10.0% for

Place III in Moscow. EBRD agreed to provide EUR69.6 m for Aura

both sectors. St. Petersburg warehouse yields remained at 13.5%.

SC development in Surgut.

Office capital value dynamics, Index Q1 2006=100: European comparison

Banks continue to be cautious when providing real estate

Moscow

financing. First, banks prefer to refinance existing schemes or

220

participate in the acquisition of completed assets with strong

200

collateral, such as the facility itself and its rental income.

180

London

Paris

Brussels

Budapest

Madrid

160 140

Bank lending activity, % YoY

120 100

40% Corporate loans

Personal loans

30%

80 60

1

1 01

01 Q3 2

01

0 01

0

Q1 2

Q3 2

00

9 00

8 00

9

Q1 2

Q3 2

Q1 2

8

Q3 2

7 00

00 Q1 2

6 00

00

Q3 2

Q1 2

Q3 2

10%

7

40

20%

Source: Jones Lang LaSalle

0%

Shopping centre capital value dynamics, Index Q1 2006=100: European comparison

-10% -20% Ja n-0 Ma 9 r-0 Ma 9 y-0 9 Ju l-0 9 Se p-0 9 No v-0 9 Ja n-1 0 Ma r-1 0 Ma y-1 0 Ju l-1 0 Se p-1 0 No v-1 0 Ja n-1 1 Ma r-1 Ma 1 y-1 1 Ju l-1 1

200

Moscow

London

Paris

Brussels

Budapest

Madrid

180 160 140

Source: Central Bank of Russia

120 100

Prime yield dynamics in Moscow Warehouse

80

Shopping centre

60

Office

22% 20%

20

19.0% 18.0%

17.0%

18% 16%

40

20.0%

14.5%

16.0%

14% 11.5%

13.0%

12% 10%

11.0%

10.0%

11.5%

11.5%

9.0%

9.0%

8%

Source: Jones Lang LaSalle

12.0%

9.0%

6% 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Warehouse capital value dynamics, Index Q1 2006=100: European comparison Moscow

London

200 180 160

Source: Jones Lang LaSalle

140

120 100 80 60 40

Source: Jones Lang LaSalle

9

Paris

Madrid

Brussels

Budapest


Investment Market

What sector is winning the race? Historically, the office sector has been the most attractive for

Investment volumes by sector, USD m and YoY growth

investors, as it was the most familiar and transparent. But this year

3,600

has become unique in terms of the level of interest and volumes

3,000

transacted in retail and warehouse sectors. In this environment of high diversification, we are always asked a question – who is winning the race?

Office

Retail

623%

Warehouse

15%

2,400

409%

106%

1,800 1,200

In Q1-Q3 2011 we observed transactions of deals in different real estate sectors. Higher debt availability and increased investor activity spurred the market to move beyond pre-crisis investment volume distribution among sectors; with the retail sector taking a larger share. At the same time investors demonstrated interest in the office segment. In Q1-Q3 2011 retail and office segments attracted the bulk of investments – 40% of total investment volume each. Investment volumes in retail and office increased

37%

600

343%

0 Q1-Q3 2011

2011F

Source: Jones Lang LaSalle

Capital value dynamics by sector in Moscow, Index Q1 2006=100 Office

Retail

Warehouse

220

significantly in Q1-Q3 2011, 409% and 106% respectively

200

compared to the same period in 2010.

160

180 140 120 100

and we expect a number of large deals to be closed before end-

80

2011. Moreover, significant portion of investment deals is to be

40

in 2009. This year should record 37% YoY increase.

1 Q3 2

01

1

0

01 Q1 2

Q3 2

01

0

9

01 Q1 2

00

9

Q3 2

Q1 2

00

8

8

00 Q3 2

Q1 2

00

7

7

Q3 2

00

6

00 Q1 2

00

6 00

Q3 2

Q1 2

80

1,000

40

1

Q3 2

01

1

Q1 2

01

0

Q3 2

01

0

Q1 2

01

9

Q3 2

00

9

Q1 2

00

8 00

8

0 7

0 Q3 2

significant growth was recorded in 2010, after almost zero growth

2,000

00

will reach 623% YoY and 15% YoY for offices. As for logistics,

120

Q1 2

As a result, annual growth of investment volume for retail sector

3,000

7

by sectors.

160

00

investment volumes in 2011, but it will also remain much diversified

Warehouse

4,000

Q3 2

market is not only about to hit on historical peak in terms of its

Shopping Centre

200

00

PNK Chekov. That suggests that Russian real estate investment

Office 5,000

6

nearing completion. PNK Group will close on its industrial asset

00

sectors. A deal with a large shopping centre in St. Petersburg is

Prime annual rent by sector in Moscow, USD/sq m/year

Q1 2

center. At the same time, investment activity is high in other

Source: Jones Lang LaSalle

6

fund Wells REIT II has exposed on sale of its Dvintsev business

00

Ducat Place III business center in Moscow. US-based investment

Q1 2

closed particularly on the office market. Hines is due to sell its

60

Q3 2

Investors, looking for higher returns, recognize Russia’s potential

Source: Jones Lang LaSalle

We expect further increases of Russian assets’ capital values as unlike European capital values, Russian indicators have yet to recover to pre-crisis levels. As for logistics assets capital values are at 83% of pre-crisis levels, office – 63% pre-crisis level, retail – 82% pre-crisis level. Growth is driven by rental rates that are still not the same as they were before the crisis. As a result Russia still has potential to bounce back even further, thus offering highly sought after investment opportunities.

10


11


Moscow Office Market

The development market in Q3 is still dominated by Russian

Main trends, Q3 2011 Completions

142,326 sq m

Vacancy rate

16.6%

Take-up

developers â&#x20AC;&#x201C; accounting for more than 80% of the completed new space.

444,634 sq m

Prime rent

Currently, almost 2.5m sq m is under construction and scheduled

USD1,000-1,200 /sq m/y ear

to enter the market in the next 3 years. The location of such

Supply

projects is quite diverse: Oruzheiny BC is in Zone 1 (90,000 sq m); Moscow City projects such as Imperia Tower and Mercury

New completions of 142,326 sq m led the modern office stock in

City with a total of approx. 170,000 sq m office space are planned

Moscow to reach 13.1m sq m in Q3 2011. From the beginning of

to be finalized by 2012; SkyLight and Tricolor are in Zone 3

this year the level of new office space that entered the market

(around 150,000 sq m).

was almost 30% less compared to the same period last year.

Development pipeline

The class distribution is very disproportionate, with Class A only accounting for approx. 2m sq m, whereas Class B stands at 11m sq m. SkyLight

Olympia Park BC is one of the largest Class A business centers

ALCON

that was completed in this quarter. With a rentable area of 51,000

Oruzheiny

Imperia

sq m, almost 90% of its office space is already rented out. Tricolor

Aquamarine 3

Tower

New Class B+ and B- office space accounted for almost 60% of the total new completions. The top three Class B+ office centres that came to the market were: office space of Ochakovo MFC (24,000 sq m), Delta Plaza (20,000 sq m) and ECO BC (11,600 sq m). Source: Jones Lang LaSalle

Modern office stock dynamics '000 sq m 14,000

Recently announced plans of city expansion in the south-west

12,000

should have a great influence on the Moscow commercial real

10,000

estate market as well. Given the large scale of the proposed

8,000

project, the uncertainty around its concept and time required for

6,000

completion, its delivery to the market can be expected not earlier

4,000

than in the next 15-20 year.

2,000 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F

Class B-

Class B+

Class A

Source: Jones Lang LaSalle

New construction, Q3 2011 Building name Olympia Park Ochakovo Delta Plaza ECO BC Champion Park Dom Park Kultury Nevsky Dom

Address

Building class

Office area, sq m

Developer

Leningradskoe Shosse, 39 Ochakovskoe shosse, vl. 28 2 Syromyatnichesky Per. 1 Mironovskaya Ul. 25 Olimpiyskaya Derevnya, vl. 1 Zubovsky blvd., vl. 13 2 Yamskaya Ul. 4

A B+ B+ B+ B+ A B+

51,000 23,984 19,959 11,600 7,632 5,989 5,849

O1 Properties Alterra Capital ACCENT Development Capital Group Inteko AM Building Center n/a

Source: Jones Lang LaSalle

12


Moscow Office Market

Demand The take-up in Q3 2011 reached 444,600 sq m, which is a 30%

with 26%, with the largest deal of this quarter (30,000 sq m) in this

increase YoY. During the first three quarters of 2011 the total

sector. Several deals were signed by companies in the

take-up amounted to 1.3m sq m. We forecast the level of take-up

Manufacturing industry (17%). Both Wholesale & Retail and

to be almost 1.6m sq m by the end of this year.

Business services sectors accounted for 17%.

Office take-up dynamics

Take-up breakdown by business sectors

'000 sq m

Mining/Exploration 3%

1,800 1,600

Construction 1%

IT 27%

1,400

Banking&Finance 32%

1,200 Telecommunications 1%

1,000

800 Media&Publishing 2%

600 400

Business Services 10%

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F Class A

Class B

Class B+

Source: Jones Lang LaSalle

Class B-

The average deal size in Q3 2011 was about 2,573 sq m. From

Source: Jones Lang LaSalle

66 deals – 3 were in the more than 10,000 sq m range; 9 were in

The largest deals which took place this quarter were: 

Manufacturing 17%

Wholesale&Retail 7%

200

the over 4,000 sq m range and 13 were in the 1,500 – 4,000 sq m

Kaspersky Laboratory leased almost 30,000 sq m in

range. This indicates that large companies are currently

Olympia Park BC

expanding and looking for large premises.

Sberbank leased 20,000 sq m in Danilovsky Fort BC

UniCredit Bank acquired nearly 12,000 sq m in

Office deals 120

Nagatino i-Land Phase I

100

The proportion of Class A and B+ office deals were almost equal

80

(45% vs. 48%). This reflects the current occupier preference for

60

good quality office space (seen as an indispensable part of

40

company’s success).

20

Russian companies executed almost twice as many deals as

0

H1 2007

opposed to foreign lessees. Sector wise, the most active companies in the market were those from the Banking & Finance

H2 2007

H1 2008

H2 2008

H1 2009

Deals over 4,000 sq m

industry with 32% share, a fact which confirms the recovery of the

H2 2009

H1 2010

H2 2010

H1 2011

Q3 2011

Deals 1,500 - 4,000 sq m

Source: Jones Lang LaSalle

sector to pre-crisis levels of 2008. The IT sector came second Key deals, Q3 2011 Building name Olympia Park Danilovsky Fort Nagatino i-Land Phase I Nevsky Dom Donskoy BC Olympia Park

Address Leningradskoe Shosse, 39 Novodanilovskaya nab., 8 bld. 1,2 Andropova Prospekt, 18 bld. 1 2 Yamskaya Ul., 4 Ordzhonikidze Ul., 11, bld. 10 Leningradskoe Shosse, 39

* Calculated on the basis of deals known to the Moscow Research Forum Source: Jones Lang LaSalle

13

Building Office area, class sq.m A B+ B+ B+ BA

29,840 19,913 11,683 7,600 5,282 4,777

Occupier

Business sector

Type of acquisition

Kaspersky Lab Sberbank UniCredit Bank MRSK Svyaznoy market BMW

IT Banking&Finance Banking&Finance Manufacturing FMCG Manufacturing

Lease Lease Sale Lease Lease Lease


Moscow Office Market

Market balance The new completions in Q3 had a 45% increase QoQ, but overall

Stable demand, and delivery of several large business centers

for the first three quarters of 2011 remained at the same level

contributed to rental growth stabilization.

compared to last year. The market was characterized by strong take-up and stable vacancy rates. The available space was

Prime base rents remained at the level of USD1,000-1,200 sq

mainly represented by new completions that recently came to the

m/year (excluding operational expenses and VAT); Class A base

market, as well as the ones that came earlier but were less

rents ranged between USD600-850 sq m/year; Class B+ base

competitive.

rents accounted for USD400-600 sq m/year; Class B- base rents accounted for USD300-400 sq m/year. We expect the rents to

Vacancy rate dynamics

remain stable until the year end, with a gradual increase

% 30

thereafter.

20

We consider the supply-demand balance to be in favor of the lessors with the market still being a â&#x20AC;&#x2DC;landlord marketâ&#x20AC;&#x2122;, especially with regard to high-quality office space in central locations. The

10

less competitive buildings attract lessees with additional 0 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011F 2012F

Overall vacancy rate

Vacancy rate, Class A

Vacancy rate, Class B

Vacancy rate, Class B+

incentives: lower rental rates for the first year; a rent free period (4-6 months) and partial fit-out compensation. The average lease length is currently 5-7 years. Rents dynamics

Source: Jones Lang LaSalle

USD/sq m/year 1,800

Vacancy rate by submarkets

1,600

1. 2. 3. 4. 5.

*Third Transport Ring Source: Jones Lang LaSalle

Zone 1 (in side the G ard en R ing)

1,400

K re m lin a rea NW NE S out h W es t

1,000

Zone 2 (betw e en the G a rden Ring and TRR* ) 6. NW 7. NE 8. E as t 9. S out h 10 . W e st 11 . M os c ow City Zone 3 (outs ide TRR) 12 . N W 13 . N E 14 . E as t 15 . S ou th 16 . S W 17 . W e st

Across all zones in Moscow, some 2.2m sq m were available this

1,200

800 600

400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F2012F Prime rent

Class A base rent

Source: Jones Lang LaSalle

The new policy of Moscow authorities of prohibiting any new office scale projects in the city, forced the developers to review their existing plans. The trend of decentralization will amplify with office schemes located outside the TTR becoming more popular.

quarter with Class B office space being 4 times more than Class A. Almost half of the available space was located outside the

The uniqueness and prestige of the Kremlin zone will continue

Third Transport Ring (TTR) in Zone 3. The lowest availability was

attracting high-caliber occupiers that are ready to pay a premium

recorded in West and North West zone inside the Garden Ring.

for the prestige they receive. The North and West zones of

The overall vacancy rate this quarter was at 16.6%, with only

Moscow should still remain the most preferred by occupiers. We

Zone 1 levels lower at 13%.

see some good changes happening in the Moscow City project

14


Moscow Office Market

with other two high-rise buildings expected to be ready in 2012,

The flight for quality trend will persist and this will ultimately

inclusive.

impact rent levels. We predict rents will grow at an average rate of approx. 5% p.a., with a steeper increase in the Kremlin zone.

Currently occupiers strive for good quality space as this is seen as an important attribute of business success. Office market indicators, Q3 2011 Office stock, sq m Completions, sq m Take-up, sq m Vacancy rate, %

Class A

Class B+

Class B-

Total

2,134,519 56,989

6,682,146 78,407

4,278,668 6,930

13,095,333 142,326

180,210

171,177

93,247

444,634

19

16.5

15.6

Prime base rents, USD/sq m/year Base rents, USD/sq m/year

600-850

400-600

300-400

Operating expenses, USD/sq m/year

110-150

100-120

70-90

Source: Jones Lang LaSalle

15

16.6 1,000-1,200


Moscow Office Market

16


Retail Market: Moscow and beyond

Demand: Consumers and retailers Consumer trends

its drugstore chain Bud’ zdorov by opening 60-70 units this year.

According to Rosstat, real income grew slightly in August, by

2014 through franchises (10 of them will open in 2011).

Poland-based Redan will open 82 shops in Russia by the end of

1.1% YoY. This is moderately slower growth then in June 2011, with 1.5% YoY growth. Retail turnover however, accelerated to

Grocery: Auchan plans to treble the number of stores in Russia

7.8% YoY growth in August. In July retail turnover growth was

over the next five years (one of the stores will appear in

5.6% YoY.

Chelyabinsk). The group also plans to bring the Auchan Drive format for shops to Russia. Lenta is considering acquiring a land

Russian retail turnover and income 20

plot for a second hypermarket in Barnaul. X5 Retail Group

Real income growth, % YoY Retail turnover real growth, % YoY

16 12

opened its first Karusel hypermarket in Orenburg and intends to develop further in Orel region by opening 50-80 stores over the

8

next two years. The group has also received a permission to

4

acquire Mosoblfarmatsiya drugstore chain. Ten Globus

0

Aug-11

May-11

Feb-11

Nov-10

Aug-10

May-10

Feb-10

Nov-09

Aug-09

May-09

Feb-09

based O’Key plans to launch a chain of hard discounter stores.

Nov-08

Russian chains are also developing new formats. St. Petersburg Aug-08

-8 -12 Feb-08

hypermarkets are planned for Moscow Region. The largest

May-08

-4

The group also plans to develop in Krasnodar Region by opening two hypermarkets and at least 5 O’Key Express supermarkets.

Source: Rosstat, Jones Lang LaSalle

Dixy Group wants to open shops in a classic hypermarket format;

Retailer trends

the group also aims to open 160 stores this year and a further 250

Foreign retailers continue targeting the Russian market. Jimmy Choo, Joseph, Banana Republic, Victoria’s Secret and Diesel opened their first stores in Moscow in September. OVS Industry and Firetrap opened in Saint-Petersburg Galeria. Swatch Group will open its second Happy Hour shop in Moscow. Finland’s

units in 2012. DIY: Home Interior exited its franchise agreement with Austrian Leiner Group and will rebrand existing Kika hypermarkets into the Hoff brand, open 5 new Hoff stores in Russia. Leroy Merlin is looking for suitable land to construct a hypermarket in the city of

largest chain of fast food hamburger outlets Hesburger entered

Perm.

St. Petersburg market by franchisee. Spar will launch its first

W&B / Electronics: Euroset plans to open between 30 and 50

store in St. Petersburg in Q4 2011. Italian NAU! Ottica is in the

new format stores, each in a new format and 300-400 sq m in

process of negotiations to enter the Russian market.

area; this is in addition to 15 existing stores of this format. Saturn

The largest retailers, both Russian and foreign, continue to

will launch two stores in Chelyabinsk by the end of the year.

expand their development plans in Moscow and regional cities.

Eldorado opened its first rebranded shops in August.

Spanish Mango plans to open between 30 and 35 stores per year

Cash and Carry: Germany’s Metro Group has set a goal of

in Russia, with most units under franchise. Yum! Brands will develop its KFC and Pizza Hut brands in Russia. s.Oliver intends

building 100 new hypermarkets in Eastern Europe by 2013, mainly in Russia.

to open 6 new shops in Russia in 2012. Protek plans to develop Macroeconomic factors affecting consumer demand Indicator Average monthly income per capita, USD Real income cumulative growth, % YoY Retail turnover, USD bn, 12-month sum Real retail turnover cumulative growth, % YoY Inflation, % YoY Source: Rosstat, Jones Lang LaSalle

17

2010 620 3.8 541 4.4 8.8

Russia Jul-10 593* 4.5*** 512 3.9 5.5

Jul-11 653** -1.0*** 608 5.3 9

2010 1,516 3.1 95 6.8 9.1

Moscow Jul-10 1,542* 1.9*** 89 5.2 6.5

Jul-11 1,482** -7.3*** 106 4.7 8.8

2010 865 9.7 23 6 9.5

St. Petersburg Jul-10 Jul-11 779* 909** 14.8*** 2.8*** 22 25 4.8 1.3 5.5 8.9 * July 2009 - June 2010 ** July 2010 - June 2011 *** June YoY


Retail Market: Moscow and beyond

Supply Because of uncertainty with construction permits in Moscow, most

Retail parks (with small retail gallery) usually include grocery and

of new supply is planned for Moscow Region. In fact, about 52%

DIY hypermarkets, which are in high demand in Moscow Region.

of new stock is being developed in Moscow Region compared to

Outlet centres will be attractive both for Muscovites and those in

no more than 20% in 2010.

Moscow Region, as they offer branded goods with discounts.

Delivery Q3 2011

Apart from the capital, developers continue delivering new

The following retail projects were delivered in Q32011 in Russia:

shopping centres and announcing construction plans in other

      

MEGA in Ufa –110,000 sq m GLA; MEGA in Samara – 103,000 sq m GLA; Yuzhny in Kazan – 46,800 sq m GLA; RIO in Yaroslavl – 53,000 sq m GLA; RIO in Vologda – 35,000 sq m GLA; Rodnik in Chelyabinsk – 58,000 sq m GLA; Grenada in Lyubertsy – 15,000 sq m GLA.

Russian cities. We expect stock distribution in Russia to shift toward regional cities. The share of stock in smaller regional cities will increase from 24% to 27% by end-2013. Overall, we estimate the Russian shopping centre pipeline for the remainder of 2011-2013 to be about 3.5m sq m, of which 25% will be constructed in Moscow and Moscow Region.

Source: Jones Lang LaSalle

Updating concept design remains popular: reconceptualization of SBS Megamall in Krasnodar will begin this autumn. Kazan GUM is scheduled for launch after the concept is updated this winter. VIVA in Moscow will open with a new concept in

SC stock distribution: 2010 (inside pie chart) to 2013 (outside pie chart) Moscow

Other cities

December 2011. Arkada in Novosibirsk is being rebranded for the

24%

27%

premium Bon Marche gallery. Torgovy Kvartal is rebranding

28%

24%

SanMart in Kaluga. Sibir in Surgut is also changing its concept design.

3%

New concepts. Consumer habits in Moscow Region differ from

32%

those of Muscovites. Massive residential construction requires

13%

already seeing the two types of concepts being developed there: outlet centres and retail parks.

Shopping centre stock* Number of existing shopping centres Shopping centre stock per 1,000 inhabitants Completions, Q3 2011 Completions, Q1-Q3 2011 Pipeline of SCs through end-2013 Number of shopping centres in pipeline

Moscow Region

13%

construction materials for fit-out. This is expected to influence the choice of retail concepts developing in Moscow Region. We are

6%

Millionniki

30%

St. Petersburg

Source: Jones Lang LaSalle

Q3 2011 supply snapshot Moscow Moscow Region 000 sq m 3,152 386 80 24 sq m 274 000 sq m 0 0 000 sq m 126 33 000 sq m 426 455 10 20

St. Petersburg 1,552 44 320 44 173 386 12

Millionniki

Other cities

Russia

3,628 106 263 323 415 841 26

2,695 105

11,413 359

103 103 1,409 43

470 850 3,517 111

* Stock figures were revised. Source: Jones Lang LaSalle

18


Retail Market: Moscow and beyond

Market balance Rents Moscow shopping centre rents by profile, Q3 2011 (USD/sq m/year)

Prime rental rates and leasing terms in Moscow and St. Petersburg remained unchanged in Q3 2011. Turnover rent

Profile

Area (sqm)

Turnoverrent

Rents

continues to become more common and is offered to almost all

Hypermarket

retailers. Moreover, a minimum fixed rent is specified in lease

White and brown

1-3% 2-3% 5-6%

agreements. Anchor tenants are often allowed to fix the maximum

Sporting goods

>5,000 >2,500 <2,500 >3,000 <3,000 >3,000 1,500-7,000 300-500 <300 <300 >800 8,000-15,000 40-90 250-600 40-200 200-1,000 >1,000

120-300 220-300 280-380 180-250 220-600 180-250 120-150 1,300-2,000 1,600-2,400 600-1,500 350-600 160-250 1,000-2,500 500-800 900-4,000 500-1,000 500-900*

level of rents.

Vacancies

Cinema Entertainment Perfume and cosmetics Goods for children DIY Food courts Restaurants

Vacancy rate decreased to 4% in Moscow and to 6% in St. Petersburg in Q3 2011. No new shopping centres were

Fashion and apparel

opened in Moscow and existing shopping centres were in high

Source: Jones Lang LaSalle

5-7% 8-10% 4-6% 10-12% 10-12% 5-8% 3-4% 4-10% 10% 10-12% 10-12% 5-8%

demand and have been rapidly populated with retailers. At the same time, we do not expect to see many shopping centres

of the Moscow suburbs and Moscow Region are getting more and

delivered to Russia’s two major retail markets, so the vacancy

more attractive for domestic and international developers. Apart

rate is expected to decline further.

from that, developer interests are also expanding to Russia’s regional cities.

By contrast, Russian regional cities will experience significant new supply coming to the markets in the near future. However, it should be welcomed, as the retailer demand remains high and rents continue to recover.

Moscow market balance '000 sq m

Stock

Completions

Vacancy rate

4,000 3,500

Market outlook

10

3,000 8

2,500

Many more retailers are now showing interest in quality retail

2,000

premises in Moscow’s suburbs and regional cities, - many of

1,500

whom plan to open their stores this and coming years. Moscow’s

1,000

government initiatives will impact retailer and developer interests

500

toward outside the Moscow Ring Road. Non-saturated territories

0

6

4 2 0 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F

Source: Jones Lang LaSalle

Q3 2011 retail rents and yields Moscow

Indicator Prime SC base rent* Average SC base rent Prime street retail base rent Prime SC yield Vacancy rate

USD/sq m/year USD/sq m/year USD/sq m/year % %

* Represents the net rent for a prime position in the best shopping centre gallery. Source: Jones Lang LaSalle

19

% 12

min 2,700 500 3,000 9.0

max 4,000 1,350 4,500 9.5 4.0


Retail Market: Moscow and beyond

Project pipeline Moscow and St. Petersburg Expected year Project name GLA, sq m Developer Address of opening Moscow shopping centres Otrada 70,000 2011 Elt Pyatnitskoe Hwy. SC in Butovo 23,000 2011 MNTsES-Kapstroy Venevskaya Str. 7 GoodZone 70,000 2012 Fenix Development Kashirskoe Hwy. 12 Kaleidoskop 35,000 2012 A.N.D. Corporation Khimkinskiy Blvd. 7-23 Parus 17,150 2012 Midland Development Novokurkinskoe Hwy. River Mall 85,000 2013 Kuznetskiy Most Avtozavodskaya Str. 16-18 Vesna 56,000 2013 Finstroy MKAD 84 km RIO on Leninskiy Pr. 30,000 2013 Tashir Leninskiy Pr. 109 Maryina Roscha 17,000 2013 Tashir Sheremetyevskaya Str. 8 Moskvorechie 16,500 2013 Garant Invest Kashirskoe Hwy. 55A St. Petersburg shopping centres PiterLand 80,000 2011 Stryomberg Primorskiy Pr. 72 RIO 43,700 2012 Tashir Salova Str. Mezhdunarodny 20,000 2012 Adamant Bely Kuna Str. Pearl Plaza 50,000 2012 SRV Petergofskoe Hwy. Regional cities Expected GLA, City Project name year of Developer Address sq m opening Moscow Region shopping centres Mytischi June 75,000 2012 GK Regiony Voklhovskoe Hwy. Kotelniki Outlet Village at Belaya Dacha 38,000 2012 Hines Novoryazanskoe Hwy. Sheremetyevo Fashion House Outlet Centre 26,765 2012 Fashion House Development Leningradskoe Hwy. Sharapovsky Mytischi Krasny Kit phase II 45,500 2013 BTR Group Proezd, 18 Vnukovo Vnukovo Outlet Village 26,000 2013 Dion Kievskoe Hwy.8 km Domodedovo Torgovy Kvartal 22,300 2013 Torgovy Kvartal Gagarina Str. Krasnogorsk Park II 11,000 2013 Veles Development Dachnaya Str. Millionniki shopping centres Krasnoyarsk Ogni 42,200 2011 StroyInRos Belinskogo Str. Nizhny Novgorod RIO 39,000 2011 Tashir Moskovskoe Hwy. 34 Chelyabinsk Koltso 33,350 2011 YuzhUralMebel Darvina Str. Ufa June 25,500 2011 GK Regiony Komsomolskaya Str. Volgograd KomsoMall 68,000 2012 DVI Group Rokossovskogo Str. 7 Rostov-on-Don RIO 60,000 2012 Tashir M. Nagibina Str. Chelyabinsk Fiesta phase I 28,000 2012 Strela Molodogvardeitsev Str. Other cities shopping centres Ryazan M5 Mall 54,229 2011 PPF Real Estate Moskovskoe Hwy. Astrakhan Yarmarka 38,000 2011 PPF Real Estate Vokzalnaya Sq. 1 Togliatty Domoland 23,000 2011 Russkaya Zhemchuzhina Revolutsii Str. Barnaul Vesna 14,200 2011 Finstroy Malakhova Str. 86B Krasnodar OZ Mall phase II 118,473 2012 AIM Property Development Road Rostov Don Sochi More Mall 72,200 2012 TPS Donskaya Str. Surgut RD Project 65,000 2012 Renaissance Development Aeroflotskaya Str. Ulyanovsk Aqua Mall 50,860 2012 Dars Development Moskovskoe Hwy. Saratov Solnechny Retail Park 37,000 2012 ClubStrike Stroitelei Str. Saratov Vesna 36,000 2012 Finstroy Tekhnicheskaya Str. Orel RIO 28,000 2012 Tashir Moskovskoe Hwy. Nyagan Oazis Plaza 23,254 2012 MALL Agency Lenina Str. 28 Surgut Surgut City Mall 84,870 2013 Surgutgazstroy Engelsa Str. Tumen KomsoMall 47,000 2013 DVI Group Respubliki Str. Saratov June 45,800 2013 GK Regiony Chernyshevskogo Str. Source: Jones Lang LaSalle

20


21


Moscow Industrial Market

Key new projects

Main trends New supply

111,000 sq m

Project name

Developer

Vacancy rate

1.5%

Take-up

319,600 sq m

Prime rent

USD135/sq m/year

PNK-Chekhov III-b Belaya Dacha V Krekshino LP II(b)

PNK Group Hines RosEvroDevelopment

Overview Russian economy in Q3 2011 was influenced by increased uncertainty on global financial markets. However despite the high volatility on the stock market, real economy remained resilient. Several major deals were executed in the warehouse market, characterized by long construction and lease terms. Low availability of space and vacancy rates for Class A below 1% made built-to-suit (BTS) projects and forward contracts even more popular. These types of contracts are signed for 8-9 years, including at least 1 year of construction phase. Examples of BTS deals include the acquisition of more than 47,000 sq m in PNKVnukovo project by Dixy and the leasing of 21,000 sq m in Dmitrov LP by a confidential client2. Although several big projects were completed in Q3 2011, a large portion of them were preleased in previous quarters. The largest new completions in this quarter were Belaya Dacha warehouse complex (last phase, 32,000 sq m) developed by Hines and PNKChekhov complex (more than 40,000 sq m) completed by PNK Group. Following sharp growth in previous quarters the prime rents stabilized around 135USD/sq m/year. Although the USD denominated rents remained stable, their RUB equivalent went up due to recent fluctuations on the foreign exchange market.

Supply

Area, sq m 40,053 32,000 19,903

Speculative/ preleased fully preleased partly preleased partly preleased

Source: Jones Lang LaSalle

The market continues to experience strong supply deficit, exacerbated by the fact that most of the new construction is usually preleased well before the end of construction. Potential tenants have to make quick decisions and take into account both available stock and future pipeline. Available area dynamic '000 sq m 1000 900 800 700 600 500 400 300 200 100 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 Source: Jones Lang LaSalle

From the beginning of 2010 a sharp decrease in available space is noticed. This quarter vacant space amounted to 120,000 sq m which represents a 50% drop QoQ. A further decline to 60,00070,000 sq m is expected in the next quarter. Such a shortage of quality stock has led to the share of forward contracts and BTS deals to increase in Q3 2011, which accounted for 30% of the take-up. By the end of the year this share is expected to reach at least 50%. Specific tenant requirements (such as multi-temperature and cross-dock warehouses) are implemented through BTS schemes,

In Q3 2011 the total stock of high quality warehouse increased to

which at the same time guarantee a stable cashflow for the

8m sq m. Some 111,000 sq m of warehouse space were also

developer.

completed (23% up QoQ). Total completions of the last three quarters accounted for 277,000 sq m. Meanwhile, the take-up for

Future pipeline: Key projects

the same period reached 1,082,000 sq m. We expect this

Project name

Developer

LP Klimovsk

Raven Russia

55,000

Q4 2011

MLP Podolsk

MLP

80,000

Q1 2012

South Gate

Radius

51,000

Q2 2012

Vnukovo-logistic

Vnukovo-logistic

55,000

Q1-Q2 2012

Bykovo

InfrastroyBykovo

70,000

Q3 2012

PNK Vnukovo

PNK Group

180,000

Q2-Q3 2012

situation to change in the coming year, when several big projects are delivered to the market. In our opinion, total completion volume in 2011 will not exceed 430,000-470,000 sq m (the lowest level since 2005).

2

Jones Lang LaSalle was consultant of this deal

Area, sq m

Expected delivery

Source: Jones Lang LaSalle

22


Moscow Industrial Market

In the last two quarters several big speculative projects were

investments in their logistic operations schemes, which

announced (MLP Podolsk, LP Klimovsk, part of PNK Vnukovo).

substantially increased their share as many of them moved from

Most of them will be delivered in 2012 changing the current

Class B- and C warehouses to modern logistic complexes. Some

imbalance of stock. A large part of new 2012 completions will be

of them decided to use direct leases instead of 3PL (third party

leased by the end of this year.

logistic service) providers. The top three deals in Q1-Q3 were executed by retail companies of which two were forward sales.

Demand

Share of logistic companies had almost doubled during the last

In Q3 2011 take-up decreased by 42% QoQ and reached 319,600 sq. m. The decline can be related to the lack of available space, increased rents and overall uncertainty on financial markets. For the first three quarters the take-up reached 1,081,000 sq m. By the end of 2011 we expect the executed deals to reach 1.3m sq m.

quarters and they are now again playing a significant role on the market. During the crisis many of them had to sublease their premises and currently, as their operations expand they are looking for additional new space. Distribution of demand by sectors 100% 90%

The biggest deals of 2011 Tenant

Project name

80%

Area, sq m

Date of execution

70%

60%

X5 Retail Group LP Noginsk

77,500

Q2 2011

Confidential

PNK-Vnukovo

50,000

Q2 2011

Dixy

PNK-Vnukovo

47,116

Q3 2011

Alidi

PNK-Chekhov

39,500

Q2 2011

10%

Imperia Pharma Belaya Dacha

20,876

Q3 2011

0%

Confidential

20,847

Q3 2011

Dmitrov LP

Source: Jones Lang LaSalle

The biggest deal of this year (77,500 sq m) was signed in April by ĐĽ5 Retail Group in LP Noginsk. Importantly, 4 out of the 6 biggest deals were forward contracts and 3 of them were realized through the BTS scheme. Another indicator of demand growth is the number of executed deals. If we do seasonal adjustment (blue line in the graph below), it is clear that market activity demonstrated stabilization during the last quarters.

50% 40% 30% 20%

2009 Retail

Manufacturing

2010 Logistic

2011 Distributor

Đ&#x2DC;Source: Jones Lang LaSalle

A decrease of the number of manufacturing companies from 2010 levels indicates that for some of them the current rent levels are already too high. Retail companies will continue to lead the market, whereas the share of logistic and manufacturing companies will largely depend on economic growth, foreign investments and creation of new manufacturing projects in Russia. With limited available space, another peculiarity of future take-up is the increasing share of preleases and forward contracts.

Dynamics of warehouse market activity* 40

Number of deals

35 30

25 20 15 10 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011

*based on the deals done by the leading consultants Source: Jones Lang LaSalle

Sector wise, companies from the retail sector were the most active, accounting for 40% of all deals. Manufacturing companies were second with 30% share. Retail companies made huge

23

Market balance and commercial terms While there is some activity in the warehouse sector, due to the limited available stock, potential tenants have little choice but to look for space in newly completed projects or projects underconstruction. Our forecasts show that the take-up in 2011 will be three times higher than the level of new completions.


Moscow Industrial Market

Completion and take-up dynamics

Prime and average rents

'000 sq m

USD/sq

1800 1600 1400 1200 1000 800 600 400 200 0

160 m/year

14%

140

12% 10%

120

8% 6%

100

4% 2% 0%

80 60 2002 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F Take-up

2004

2006

Average rents

Completion

2008

2010

Prime rents

Q4 2011F

Vacancy rate

Source: Jones Lang LaSalle

Source: Jones Lang LaSalle

With a low level of available space, vacancy rates had fallen to 1.5%. In Class A it is less than 1%, whereas in Class B it is about 2.5%. We expect a further decline below 1% for the whole market in next quarters. We also hope that in 2012 the situation will gradually improve and vacancy rates will stabilize around 1.5-3% range.

Outlook In the coming quarters the supply deficit on the warehouse market will strengthen. Financial market uncertainty is without a doubt impacting the general sentiment of potential tenants and investors.

Rental rates grew by 20% on average during the first half of 2011 with the prime rent reaching USD135/sq m/year. In Q3 2011 the rental levels remained stable. Over the next year we expect them to demonstrate gradual growth of 3-5%. Rents for Class B warehouse space are only around 5% less than those in the Class A. It is not unusual for rent prices in different classes to be almost equal, reflecting tenant demand and low availability of specific locations.

In Q4 we expect the vacancy rate to reach lowest level since 2007. In 2012 several big projects are expected to be delivered and several others will start additional phases. Demand activity will remain quite high with 2011 take-up equal to 1.3m sq m, and 1m sq m in 2012. This decline is related to the high level of rents and low availability. Rents will continue to grow, but at a slower rate, with 2012 prime

Commercial terms also remained unchanged: rent-free period (1-

rents expected to be USD140-145/sq m/year.

2 months, given only for racks and equipment installation);

BTS deals and preleases of standard warehouses will became

deposit (2-3 months); bank guarantee (3-6 months); indexation (3-

more popular in the coming quarters. We estimate its share to

5%). The operational costs vary from 35 to 45 USD/sq m/year.

reach 50-70% by the end of the year.

The lease terms are quite long reaching 5-7 years. A break clause is rarely achievable in the first 3 years.

Key warehouse market indicators Completion, ‘000 sq m Stock, ’000 sq m Take-up, ‘000 sq m Vacancy rate, % Average rent, USD/sq m/year, Prime rent, USD/sq m/year

2006 823 3,286 710 0.4 130 140

2007 1,683 4,969 1,276 2.8 132 140

2008 857 5,827 813 2.3 125 135

2009 1,211 7,038 939 10.1 95 110

2010 679 7,717 1,500 3.8 105 115

Q1-Q3 2011 277 7,996 1,082 1.5 125 135

2012F 780 8,776 1,000 2 130 140

Source: Jones Lang LaSalle

24


Special Topic

Moscow expansion A great deal of change is expected to occur for Moscow over the coming years. One of the greatest challenges facing Russia’s capital at the moment is how to accommodate a growing population and overstressed public infrastructure. With urban migration and commuters swelling the city’s population to over 13 million inhabitants, Moscow faces problems not dissimilar to many urban centers across Europe, Asia and North America. First and foremost a city must be a livable and functional space. When the demographic profile of a city changes, the physical environment must adapt and reflect the changes in the populace. Failing to do so invariably creates socio-economic problems that can in some cases spiral out of control. Mumbai in western India for instance, while a wholly different city than Moscow, with distinct and highly localized urban problems, faces a similar problem of urban congestion. To alleviate this problem the city rerouted the inflow of urban migrants into an area adjacent on the mainland. Eventually known as Navi Mumbai (New Mumbai), this area swelled with the overflow from Mumbai and for a short time alleviated some of the stress on public infrastructure. But a coherent and comprehensive plan was needed to ensure that they simply were not transferring the problem from one location to the next. Moscow can learn a very real lesson from global precedent. Urban expansion must have a strong sense of purpose and be highly goal-oriented. Tokyo, another city that has undergone massive expansion, both in terms of population and physical space, went to great lengths to control its growth. The Japanese capital diversified and went from a monocentric city to a polycentric city. This meant that the city was no longer centered around a single point or region. Instead, various key industries, from finance, to IT, to logistics and entertainment, were clustered around locations outside the city center. As a result, stress was alleviated from public infrastructure, additional housing growth emerged around the new centers, and in the longer term, the city become more livable. Way Forward for Moscow Real Estate Whether it be the reclamation of post-industrial lands within the city limits or geographic expansion into the areas around the city, the ‘stress valve’ must be released if we are going to accommodate our growing population and relieve the stress we see on public infrastructure. As the urban economy diversifies, there is almost inherently, a need to redistribute specific areas of the economy to new locations. To this end, the most intelligent and sustainable way in which the city can expand will be through, what is colloquially referred to as ‘cluster development’. That is, specific industries, ranging from education and research and development, to pharmaceuticals, to the financial sectors be ‘repositioned’ both geographically and economically within the new spaces of expansion.

For the property market we see massive potential. We are projecting a very long term demand schedule (about 30 years) to generate spatial needs in the order of 5-10 million square meters of office space and more than 25 new shopping centers. For Moscow’s expansion to have more relevance to today’s property professionals – developers, investors, occupiers – we have to address, not only the long term, but the short and medium term as well. In a more practical sense, in the ‘near future’ we could see smaller scale, but no less significant changes occurring even within the city’s boundaries. Moscow’s immediate expansion plans are likely to manifest themselves in the reclamation of post-industrial, underutilized spaces within the city. Large swathes of Moscow are currently underutilized or lie bereft of economic activity. Rejuvenating these areas – performing what might be called ‘urban acupuncture’ – is probably one of the first areas of ‘expansion’ we are going to see in the coming years.

25


Special Topic

With current development restrictions on the city center, it’s reasonable to assume that developers will start looking for alternatives. Rublyevo-Arkhangelskoe might be targeted for the new financial district – or it might not; government administration buildings could be relocated to any number of places outside the city; Skolkovo could become the country’s Silicon Valley. This is, almost in its truest sense, tabula rasa for people in real estate. A certain level of uncertainty, seemingly limitless options and strong fundamentals all poured into the same shaker, creating a cocktail of opportunity and environment ripe for investment. Whether you are an investor, developer, occupier or consultant –all are going to be faced with seemingly boundless chances to help contribute to shaping the Moscow of the future.

26


27


St. Petersburg Office Market

Office market Completions and net absorption

Supply

'000 sq m 140

In Q3 2011, modern office stock (Classes A and B) in St. Petersburg

120

reached around 1.96m sq m, with the total volume of completions at

100

67,200 sq m. This is the highest value since the beginning of 2011.

80

Total volume of completed projects in H1 2011 was 71,200 sq m.

60 40

include four Class B office buildings totalling 25,700 sq m of leasable area, and one Class A office project Davydov at 3,900 sq m of leasable area.

Completions

Q3 2011

Q2 2011

Q1 2011

Q4 2010

Q3 2010

Q2 2010

Q1 2010

Q4 2009

Q3 2009

Q2 2009

Q1 2009

Q4 2008

Q3 2008

Q2 2008

Q1 2008

Q4 2007

Q3 2007

Petersburg Plaza (37,600 sq m of leasable space). Other projects

0 -20

Q2 2007

months, including speculative part of large-scale Class A project St.

20

Q1 2007

Six new office projects were delivered to the market in the last three

Net absorption

Source: Jones Lang LaSalle

In Q3 2011, Vasileostrovskiy and Moskovskiy Districts became

Class A and B stock dynamics

market leaders in terms of net absorption. Several districts showed

'000 sq m

negative net absorption, but as the changes are less than

2,000

1,000 sq m it is mainly explained by tenantsâ&#x20AC;&#x2122; rotation and lack of available quality office space.

1,600 1,200

Market balance and rents

800 400

Currently, the vacancy rate is slightly higher than in Q2, at 13.1%. The speculative part of St. Petersburg Plaza added 37,600 sq m of

0 2004

2005

2006

2007

2008

Class A

Class B

2009

2010

Q3 2011

Source: Jones Lang LaSalle

Future office projects currently under construction are limited. The volume of completions for next year is around 150,000 sq m, unless the projects announced will be postponed. Around 100,000 sq m are scheduled to be completed by the end of 2011.

available Class A space to the market. The stated increase of vacancy rate is temporary, and the trend will decrease as the building is leased out. Current volume of available space in absolute figures remains high, at 119,230 sq m in Class A office segment and 138,300 sq m in Class B office segment. Rent and vacancy rate dynamics USD/sq m/year 800

Demand

30%

700

25%

600 20%

500

There was subdued activity from tenants in Q3 2011. Net absorption figures for Classes A and B were at 48,040 sq m (vs. 59,760 sq m in Q2 and 108,570 sq m in Q1). This is common for the period of JulySeptember, when demand figures are the lowest within the calendar year due to seasonal slowing-down of the market activity.

400

15%

300

10%

200 5%

100 0

0% 2004

2005

2006

Base rent, Class A

2007

2008

Base rent, Class B

2009

2010

Q3 2011

Vacancy rate (R axis)

Source: Jones Lang LaSalle

Potential tenants remain price-sensitive, which limit rental growth. In Q3 2011, rental rates remained stable with only minor changes

28


St. Petersburg Office Market

explained by currency rate at USD330-400 for Class A and

change remaining at the level of USD550 per sq m/year (excluding

USD250-320 for Class B office buildings. Prime office rents did not

VAT and OpEx).

Key office market indicators Class A

Class B

Total

Modern office stock, sq m

509,920

1,452,940

1,962,860

Completions, Q3 2011, sq m

41,500

25,700

67,200

Completions, Q1-Q3 2011, sq m

84,170

54,230

138,400

Net absorption, Q3 2011, sq m

17,920

30,120

48,040

Net absorption, Q1-Q3 2011, sq m

86,800

129,570

216,370

Availability, sq m

119,230

138,300

257,530

Vacancy rate, %

23.4

9.5

13.1

Prime rents, USD/sq m/year

450-550

Base rents, USD/sq m/year

330-400

250-320

Operating expenses, USD/sq m/year

80-140

60-100

Source: Jones Lang LaSalle

29


St. Petersburg Office Market

30


St. Petersburg Retail Market

Retail market Demand

Supply

Real turnover growth in January-July 2011 was moderate, reaching

In Q3 new shopping centre supply was delivered to the market,

1.3% YoY in real terms. Growth indicators for retail sales remain

including two quality projects: Kosmos SC (GLA – 23,800 sq m),

buoyant with negligible changes.

which is not opened for business as of Q3; and Ligov SEC (GLA – 19,900 sq m), where Finnish retail operator Prisma opened its eighth supermarket (around 2,300 sq m).

Retail turnover and income dynamics 80%

Market balance

60%

'000 sq m 2,000

40% 20%

14% 12%

1,600

10%

Jun-11

Mar-11

Dec-10

Jun-10

Sep-10

Mar-10

Dec-09

Jun-09

Sep-09

Mar-09

Dec-08

Jun-08

Sep-08

Mar-08

-20%

Dec-07

0%

-40% Real income growth, % YoY

Retail turnover real growth, % YoY

Source: Rosstat

Interest in St. Petersburg market continues to grow for retail operators. Their expansion is restrained, however, by the lack of quality retail space in popular shopping centres. In Q3 the average vacancy rate declined from 7% to 6%.

1,200

8%

800

6% 4%

400

2%

0

0% 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F Stock

Completions

Vacancy rate (R axis)

Source: Jones Lang LaSalle

The rest supply that will be delivered in Q4 2011 includes such projects as Piterland SEC (80,000 sq m), with the largest covered

St. Petersburg’s main streets, such as Nevskiy Prospect and

aqua park in Russia, and Akadem-Park SEC (20,000 sq m) after

Bolshoy Prospect P.S., continue to see high demand from cafes &

refurbishment. Around 280,000 sq m of retail space will be delivered

restaurants, and stores offering accessories, watches, gifts and

to the market in 2012-2013.

other goods. Fashion brands have become less active in opening new unit shops in the city centre, due to rental increases, which

Key market indicators

limits street-retail expansion for this tenant type. However, there is a

Modern retail stock, sq m

strong demand for northern and southern districts of the city,

Announced pipeline of SCs through end-2013

including such streets as Prosvescheniya Prospect, Grazhdanskiy

Shopping centre stock per 1,000 inhabitants

Prospect, Moskovskiy Prospect, Leninskiy Prospect and locations

Completions, Q3 2011

43,700

near metro stations Kupchino and Akademicheskaya.

Completions, Q1-Q3 2011

172,700

Number of quality shopping centres Prime SC base rent Vacancy rate, % Source: Jones Lang LaSalle

31

1,551,700 385,400 320

44 2,000 6


St. Petersburg Retail Market

Rents Prime rental rates in high quality shopping centres remains at the level of Q2, at USD2,000 per sq m.

St. Petersburg shopping centre rents by profile, Q3 2011 (USD/sq m/year) Rental rate

Profile

Area (sq m)

offered as an option in new leasing contracts. Rents denominated in

Hypermarket

>5000

100-160

USD or EUR often specify a fixed lower limit of the exchange rate.

Supermarket

1,000-2,500

350-400

DIY

8,000-15,000

110-160

Household goods

<2,000

160-220

>4,500

140-180

2,000-2,500

250-350

>4,000

90-120

1,200-2,000

160-200

800-1,200

180-250

Cinema

>3,000

130-180

Entertainment

>1,000

90-180

Perfume and

300-500

800-1,500

cosmetics

50-100

1,200-2,000

>1,000

150-250

<150

700-1,100

Food courts

40-100

1,000-2,000

Restaurants

250-600

400-600

600-1,200

250-400

400-600

400-550

200-300

550-800

100-200

900-1,400

<100

1,000-2,000

Turnover rent, as an alternative for fixed rental rates, is rarely

Rouble-denominated rental contracts usually include an annual increase of 5-10%. Foreign developers are using LIBOR and HICP indices for rental indexation.

White and brown

Sporting goods

Goods for children

Fashion and apparel

(USD/sq m/year)

Source: Jones Lang LaSalle

32


33


St. Petersburg Industrial Market

Warehouse market Demand Demand for warehouse space continues to grow. Net absorption

Warehouse demand breakdown by company type

reached around 100,000 sq m from the beginning of 2011, with the

Logistic 11%

share of Q3 deals about a half of total volume. The most popular size of a single leasing deal in Q3 2011 was 5,000-10,000 sq m. Class A & B stock dynamics

Retail and distribution 53%

'000 sq m

Manufacturing 36%

1,600 1,400 1,200 1,000

Source: Jones Lang LaSalle

800

600

Market balance and rents

400 200 0

2004

2005

2006

2007

2008

2009

2010

The vacancy rate declined to 5.23% in Q3 2011. This was a result of supply/demand misbalance, when zero completion level was

Class B

Class A

Source: Jones Lang LaSalle

The most active occupiers on the warehouse market remained

accompanied with high absorption level throughout Q1-Q3 2011. Currently, the volume of available space in quality warehouse projects is around 90,000 sq m.

manufacturing, and retail and distribution companies, which accounted for about 90% (115,000 sq m) of all space leased in quality warehouse complexes from the beginning of 2011.

Stock and vacancy rate dynamics '000 sq m 2,000

Supply

25%

1,800 1,600

20%

1,400

In Q3 quality warehouse stock in St.Petersburg has been unchanged and remained at the level of 1.7m sq m. From the

1,200 800

beginning of the year no new warehouse projects were delivered to

600

the market. About 34,000 sq m of quality warehouse space will be

400

delivered in Q4 2011. The majority of new completions announced for delivery to the St. Petersburg market in 2011 are scheduled for

15%

1,000 10%

5%

200 0

0% 2004

2005

2006

2007

Existing stock

2012.

2008

2009

2010

Q3 2011

Vacancy rate

Source: Jones Lang LaSalle

Currently, there is a small number of projects under construction. However, some developers resumed work under previously stalled projects. PNK Group plans to start construction works under PNKKAD (73,000 sq m) till the end of the year.

34


St. Petersburg Industrial Market

Key market indicators

Prime rental rates USD/sq m/year

Modern warehouse stock, sq m*

1,717,920

160

Class A

1,075,560

140

Class B

637,560

120

Completions, Q3 2011, sq m

0

Completions, Q1-Q3 2011, sq m

0

100

80 60 40

Availability, sq m

89,590

Vacancy rate, %

5.23

Prime base rent, USD/sq m/year

20

Operating expenses, USD/sq m/year

0

2003

2004

2005

2006

2007

2008

2009

2010 Q3 2011 * Data were revised

Source: Jones Lang LaSalle

Stable growth of demand resulted in slight rental increase. In Q3 2011, rental rates increased to USD105-115 per sq m/year showing 5% quarterly growth. We expect increasing of rental rates in Q4 2011.

35

Source: Jones Lang LaSalle

105-115 30-45


Special topic

Mixed-use projects: offices inside Mixed-use development projects, i.e. real estate projects presenting more than one use (office, retail, hotel, residential), are gaining momentum in St. Petersburg. For several years, starting from even before the crisis, market players had been looking at this format of real estate as a way to diversify development risks. The crisis greatly affected these ambitious plans and the actual number of actively constructed projects subsequently declined. Today this issue has become relevant again. Strictly speaking, the term ‘mixed-use’ often implies at least three different usage types. However, the local market is still quite immature, so we usually refer to ‘two-function’ projects when speaking about mixed-use as well. Upon analyzing existing mixed-use projects in St Petersburg, one should note that most of projects are almost entirely commercial, with a residential component only rarely considered for inclusion. There are two reasons for this approach. First – the existing limits of permitted land use; the second – the size or scale of the mixed-use projects. ‘Full scope projects’ with residential components tend to be rather large and implemented in a format where different real estate functions are split into different buildings. This as a result, allows one to divide foot falls of people, who live there and who work there. Until now we have not seen such schemes completed on the market, although several notable projects with residential parts have been announced for future development. A feature observed in St. Petersburg’s existing mixed-use schemes is the strong presence of an office component within the project. Examples of this can be seen in Nevskij Plaza, Renaissance Forum, Tolstoy Square, Atlantic City, and several other projects, with the share of office space in these projects ranging from 20% to 70%. This characteristic will also be seen in upcoming complexes, including such notable projects as Airportcity St. Petersburg, and Nevskaya Ratusha, where the office component significantly exceeds 50%. The inclusion of a dominant office component in mixed-use complexes such as these is driven largely by profitability. Office projects, by comparison with other sectors of commercial real estate, are more profitable and the inclusion of such a component in a mixeduse development is usually regarded as essential, from a financial standpoint. Significant rental decreases, resulting from the economic downturn and observed in the last three years, may have temporarily contradicted this trend, but in the long-term perspective the more stable, higher cash flows stemming from offices within the project would seem to be measurably more attractive for developers. Simplicity of project implementation, including its construction and further management, in comparison to other schemes is considered a secondary reason to include an office component. The hotel segment, which is also widely used as a component for mixed-use development can also play a similar role in terms of ensuring profitability. Nevskij Plaza and Renaissance Forum are two such instances where hotels components have played a pivotal role. Returning to mixed-use complexes with office components, precedent on the St. Petersburg real estate market can be divided into two types. The first type relies on a concept wherein the office component serves as the core of the overall complex, around which other functions are developed; the second type offers a concept that sees the office component as merely a supplementary or additional component, often referred to as a ‘satellite’ within the overall mixed-use complex. Interestingly, the share of the office space in a project is often indirectly determined by its location. Specifically, when the developer’s precise needs are established in terms of feasibility of the project and how this works into a location strategy. There are of course basic market tenets such as demand and supply to contend with when developing such a strategy. In the city centre the share of office space in mixed-use projects is less significant than in decentralized areas, as long as quality hotels and retail space are in demand. This can be seen in such projects as Nevskij Plaza and Nevskiy Centre, where the office component is merely a supplementary or additional component. In Nevskij Plaza, a mixed-use redevelopment project consisting of three buildings in the historical centre of St. Petersburg, we see that the primary or core role was allocated to a hotel. The hotel was positioned both in the central building of the complex, which remained untouched during development process, and in a part of a

36


Special Topic

newly restored building. The second instance, Nevskiy Centre, presents an overwhelmingly retail-oriented project with only a moderate office component equaling to 6-7% of the total project’s area. In the city’s downtown area we see similar patterns of development for mixed-use complexes. With a rich commercial and social infrastructure, an office- or hotel-dominated project usually offers a comparatively smaller retail component (less than to 10-20% of the project). The retail function only takes leading position, when it presents a high quality shopping centre or department store. A notable example of a decentralised mixed-use project in St. Petersburg, is Airportcity St. Petersburg. This complex offers a main office component and a hotel. Due to the project’s decentralized location, the complex offers a large area to support retail services and is able to meet the needs of the hotel’s ‘temporary’ clientele as well as those tenants in the business zone. Similar components are presented in the centralized project of Nevskaya Ratusha, which is planned to offer a hotel in the latter phases of construction, whereas key role is attributed to offices. As this project is located in the city’s downtown area, a large proportion of support-retail is less necessary. Further proliferation of mixed-use development in St. Petersburg will happen in two ways depending on their location. They will be either developed in decentralized locations or in more central, city core areas. Until now offices played an important role in forming the picture of mixed-use complexes. We expect this trend to be preserved in future projects, whether they are developed in the centre, or outside it.

37


Jones Lang LaSalle Business Team Charles Boudet Managing Director

Valentin Stobetsky Executive Board Member European Director Head of Office Group

Maxim Karbasnikoff Executive Board Member European Director Head of Retail Department

Thomas Devonshire-Griffin National Director Head of Capital Markets

Petr Zaritskiy National Director Head of Industrial Agency

Andrey Postnikov Executive Board Member European Director Capital Markets

Andrey Rozov Associate Director Head of St. Petersburg Office St. Petersburg


Jones Lang LaSalle Research Team Daniel Demytrie Associate Director Head of Research Russia & CIS Moscow daniel.demytrie@eu.jll.com

Olesya Cherdantseva Associate Director Head of Retail and Capital Markets Research Moscow olesya.cherdantseva@eu.jll.com

Liliana Stoianova Consultant Head of Office and Warehouse Research Moscow liliana.stoianova@eu.jll.com

Veronika Lezhneva Associate Director Head of St. Petersburg Research Moscow veronika.lezhneva@eu.jll.com

Jones Lang LaSalle Moscow, 115054 Russia Kosmodamianskaya Emb. 52/3 Phone: +7 495 737 8000 Fax: +7 495 737 8011 Jones Lang LaSalle St. Petersburg, 191011 Russia Fontanka Emb. 13 Phone: +7 812 363 3231 Fax: +7 812 363 3230

INSIDER, Q3 2011

Insider report from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised surveys and forecasts that uncover emerging trends. www.joneslanglasalle.ru COPYRIGHT Š JONES LANG LASALLE IP, INC. 2011. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them. Printing information: paper, inks, printing process, recycle directive.


Insider Q3 2011