Offices for sale in Moscow are now at the peak of demand from companies that need square meters in new business centers. But why not think about renting?
Renting a class A office in Moscow costs an average of 36 thousand rubles per 1 sq. m. m per year, calculated at the beginning of 2024 in the brokerage company Core.Xp. Offices cost almost the same amount (35.5 thousand rubles per 1 sq. m.) a year ago, at the beginning of 2023. By the end of this year, rent will rise in price under the influence of inflationary processes by only 3.5%, Core.Xp clarified. The technical growth of rates for offices in Moscow was also confirmed by the editorial office in the brokerage companies NF Group, Nikoliers, IBC Real Estate, developers Stone, Gals Development and Pioneer.
On the one hand, such a market situation speaks about the equilibrium in the office market in Moscow, and on the other hand, about the lack of maneuver for developers and investors. However, in a number of locations and in individual business centers, rates are rising faster than the market. Together with other commercial real estate experts, in this article we talk about the opportunities for those who rent offices or are considering buying space in new business centers for themselves or their company.
Where rent is getting more expensive
First of all, analysts record an increase in rates above the market in locations with insufficient office space. “The shortage of supply can be stated in relation to the following categories: 1) offices ready for occupancy in popular locations; 2) large office lots (more than 5 thousand square meters) in popular locations,” says Victoria Guseva, Director of the Nikoliers Office Real Estate Department. According to her, popular office locations include well-established business clusters located in the north, west of Moscow and next to the TTK. Ekaterina Belova, a member of the Board of Directors, head of the IBC Real Estate Office Department, adds that the rental market is heterogeneous in terms of rates. “As a rule, we all look at the average rate, forgetting about the maximum value in the best business locations, such as Moscow City, the Belarusian business District. In the future, the gap will only increase due to the introduction of new high—quality areas in such locations,” the expert concludes.
Rates are also rising in new business centers with a developed infrastructure. As explained by the senior director of CORE.XP Irina Khoroshilova, “rates are expected to increase in new business centers against the background of high demand for high-quality space and lack of supply.” “It is important to understand that there are established business districts, the average rental rates within their borders are 10-15% higher than the average class rates. And it is also obvious that the rates in new class A business centers, which are just being prepared for commissioning, taking into account the various cuts in them from small lots (from 70 sq. m.), which are generally scarce on the market, will be even higher. This trend is already noticeable in the existing requests from tenants, as there are few high—quality spaces ready to accept a tenant and competition for them is increasing,” explained Kristina Nedrya, director of Commercial Management at Stone.
Also, the rental rate is positively influenced by the qualitative characteristics of the business center. The positive dynamics of the rental rate will be noted primarily in projects with modern engineering systems, high-quality planning solutions, convenient column spacing, thoughtful landscaping. “All these factors will shape successful projects in the future, which are likely to demonstrate a positive trend in rental rates against the background of outdated business centers without these attributes,” says Ekaterina Petrova, Director of Analytics and marketing Concepts at Pioneer.
Another factor for rental growth is the increase in prices for the sale of office space. “According to our forecasts, in 2024-2025, the average increase in office rental rates in the Moscow market will be 5-7%. The increase in the cost of office space, in addition to the shortage of supply and the location of the facility, will also be influenced by an increase in the cost of construction, and certain items of materials and solutions — by more than 30%,” says Svetlana Mazur, director of the Department of rental and sales of commercial real estate at Gals—Development Group.
Another forecast for the growth of ratesEkaterina Belova announced the new offices: “During 2022-2023, fully finished, equipped, practically new premises from under foreign companies that left the Russian market were particularly popular with tenants. Due to the high demand, such an offer has actually dried up at the moment, and if single offers in this segment appear, owners may seriously consider increasing the cost of renting such premises. And also due to the fact that such a supply is limited, the new business centers introduced this year, with the existing shortage of available space for rent (part was bought out by the business for the end user), will show an increase in average rates by at least 10% of the average market.”
Sammari: The reasons for the increase in rates in Class A business centers with a deadline of 2024 and later
In addition to location, which is traditionally a key factor in the formation of rental rates, today an equally important influence is:
Opportunities
The technical increase in office rental rates today does not mean that this situation will always last. The office market “for sale” is now at the peak of popularity, and the shortage of supply of high-quality class A business centers for rent will lead to a further increase in rates. “In conditions of market volatility and economic instability, office rentals may remain the preferred option for investors who consider offices as a protective asset,” said Maria Zimina, Partner, Director of the Office Real Estate Department at NF Group. “The rental model is always a longer—term investment due to the fact that the refund begins only after completion of construction and completion of all finishing works within the offices, it happens progressively, stretched over time,” Ekaterina Petrova added. As noted in Stone, for the fastest return on investment, experienced and far-sighted investors think in advance about carrying out repairs to make the object more attractive to the tenant.
Moreover, due to the low input volumes, buying offices looks more preferable than investing in housing, which is being built by millions of square meters. “In 2024, according to our forecasts, 728 thousand square meters of offices will be put into operation in Moscow, 76% of them are the share of areas with a sales strategy. Almost 80% of the planned volume (728 thousand square meters) can be realized (sold and leased) by the end of the first quarter of this year. Thus, at the time of commissioning, a significant part of the office space for the open market will no longer be available,” Ekaterina Belova explained.
Experts also note that office sales prices continue to rise, and at a higher rate than in the residential sector. “Based on the dynamics of previous years and taking into account the increase in the cost of construction, prices for offices under construction will continue to grow — by the end of 2024, on average, it may range from 12% to 15%. In some projects with the expected start of sales in 2024, higher dynamics is possible in case of increased demand for office space at initial prices,” Ekaterina Belova clarified.
The cost of selling office space in business centers under construction is also influenced by several market factors, where one of the key factors is the stage of project readiness. “We always see the minimum price at the start — for example, a few months before obtaining a construction permit, as soon as the developer announces the project to the market. As each of the stages is reached (obtaining the RNS, entering the construction site, starting monolithic work), the price will steadily increase. The price is also influenced by the success of sales: if the product is in an excellent location and sales at the start went ahead of the developer’s plans, the price of lots can be increased unscheduled,” said Maria Zimina.
Where to look for new projects
In order for investors to navigate the office real estate market, RBC annually publishes a rating of development companies engaged in the sale or lease of office space in Russia. For the third time in a row, Stone holds the first place in terms of office sales. Pioneer took the third place in 2024 (in terms of sales), and Gals-Development took the second place (among developers specializing in renting office real estate).
The project portfolio of developer Stone today accounts for a little more than 380 thousand square meters. m. As follows from the results of the RBC rating, at the moment this is the largest volume of office real estate for sale in blocks both in terms of the number of meters and the geography of objects. Stone’s current portfolio includes seven business centers under construction, where sales are open. The other day, the developer announced plans to implement the eighth object in his portfolio — an office block on the Khodynka field “Stone Khodynka 2”. In 2024, the developer plans to commission two office facilities with a total area of 80 thousand square meters (the second stage of Stone Towers on Belorusskaya and the Stone Kurskaya office building). Considering the commissioning of a large volume of offices on Belorusskaya, the company has launched a tenant search direction. One of the main tasks of Stone Realty is to take into account the interests of our investors and keep rental rates for their spaces at the market level and above,” said Kristina Nedrya.
Pioneer plans to complete in 2024 the construction of two Class A business centers with a total total area of more than 60 thousand square meters – Ostankino Business Park and a business center as part of IFC Botanica. “Usually, by the time of commissioning, only individual units can remain on sale. For example, more than 90% of the total volume has already been sold in Building 6 in Ostankino Business Park,” Ekaterina Petrova noted.
A new project in the Gals-Development portfolio is the Dubininsky business Center near the Paveletskaya metro station, the company plans to put it into operation in the third quarter of 2025. “Today there is every reason to believe that up to 100% of the area will be sold in the facility even before commissioning,” Svetlana Mazur clarified.
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