How much the Moscow office real estate market has suffered
The oil war and the coronavirus pandemic caused a serious crisis in the country. The ruble exchange rate collapsed, quarantine paralyzed the work of many companies, some had to close their businesses. The Moscow office real estate market was also affected; its indicators reached the lowest values for the last 3 years.
However, the current situation in the segment is not the worst. Over the period of 10 years the market has experienced a more serious decline, which allows making optimistic forecasts.
The first quarter of this year showed a decrease in demand for office space in the capital by 34% compared to the same period of 2019. In total 190 thousand sq.m. were occupied. However, despite the crisis, the record minimum in the segment of Moscow commercial real estate remains 167 thousand sq.m., which was recorded in the first quarter of 2017.
The leaders in the demand for offices in early 2020 were companies that specialize in providing business services, they own the market share of 33%. Financial institutions and banks account for 27% of all occupied premises in the capital. As compared to the previous period, the demand from these companies has decreased.
During the quarantine period, Internet trading, online services, delivery of food and other goods became more relevant than ever. Therefore, in the near future, analysts expect a surge of interest in commercial objects from companies in the category e-commerce.
In March, there was a sharp decline in market subsidence, some business processes were suspended. The segment was coming out of this state rather painfully, and only now it began to recover. However, experts are not in a hurry to make long-term forecasts due to the instability of the economy in the country and the world in general.
During the pandemic, many companies had to radically change the structure of their operations to optimize them for the realities of remote work. That is why the organization of the business space has also been transformed, which is still functioning after the quarantine.
Tenants faced a number of difficulties. Instability in the market forced them to reconsider the cost of office space, to reduce their area or to find a cheaper option. While companies are not in a hurry to return to the scale of 2019, they are still analyzing the general situation and are not in a hurry to spend on rent, directing capital to business development.
At the beginning of this year, 61 thousand square meters of commercial real estate appeared on the Moscow market. This figure is 2 times more than in 2019 – at that time 27,5 thousand square meters were put into operation. These figures were achieved due to the fact that at the time of the pandemic a number of projects were in the final stage of construction, and developers rushed to complete them.
A total of 522 thousand sq. m. of new offices were announced for 2020, but it is still unknown whether this plan will be able to be implemented.