Q3 results: demand for offices is growing

Offer

According to Maris analysts, as at the end of Q3 2021 total rentable area of Class A and B office centers in St Petersburg made up 3.95 mln sqm. Among them: class A business centers made up 1.31 million sqm (33%), class В – 2.64 mln sqm (67%).

The leasable area of office centers is the difference between the total area of the building and the gross area of common areas and the premises of the engineering and technical service of the business center (technical premises, corridors outside the office blocks of the closed perimeter, elevators, back rooms, sanitary facilities, halls, lobbies, entrance groups, security and management company premises).

Five office centers were brought to the St. Petersburg market with total leasable area of 59,550 sqm during the first nine months 2022.

For Q4 2022 developers announced the commissioning of about 123 thousand sqm of speculative office real estate (leasable area).  

Big projects, planned, to be commissioned 2022 end

Source: Maris

Demand

Gross volume of rental transactions in class A and B business centers in the first 9 months of 2022 made up at least 196 ths sqm and by 7.7% exceeded the indicator of Q1-Q3 2021.

Relative to Q2 2022 indicator level of demand for office space increased by 25% in Q3 2022. It should be noted that the increase in demand occurred mainly in the segment of class A office centers.  High-quality office space with good finishes was released on the market, in some cases even furniture remained from previous tenants.

All this led to the realization of deferred demand, which remained unsatisfied for a long time. Some office centers at Q1-Q2 2022 declared full or partial liberation of their areas, however by the end of the Q3, many large facilities have found new tenants. Thus, Elezavetinsky business center (12,000 sqm) was leased out to mono tenant, Graffiti business center (7,500 sqm) - to two large tenants, Fidel business center (7,300 sqm) - for three new tenants.

The leading positions in the volume of demand were taken by companies in the oil and gas sector and the service sector with 34%. The IT sector reduced the volume of office space absorption in Q3 2022 and according to the results of three quarters the share of this sector in the gross volume of demand was 15%.

In the analyzed period, the volume of leased office space by construction companies doubled. There was a 20% increase in demand for office space from enterprises in the field of trade and 16% – service companies, respectively. Demand from the financial sector, on the contrary, decreased by 2 times compared to the indicator of the same period in 2021.

Big projects, planned, to be commissioned 2022

* The broker of the transaction – Maris.

Source: Maris

* The volume of transactions is estimated by Maris consultants based on the data, obtained from open sources (mass media, press releases posted on the websites of office centers), as well as information provided by the management companies of business centers.

Vacant  

According to the results of Q3 2022 the average level of vacant space in high-quality office facilities of class A and B has increased by +3,3 p .p., compared to the same indicator at the end 2021, and was at the end of September 2022 – 9%.

At the end of Q3 in class A office centers 122,600 sqm or 9.3% spaces are vacant (+4.6 p.p. to December 2021). In class B the vacancy rate was 8.8% (+2.6 p.p. to December 2021), or 233,200 sqm in absolute terms.

The leader in the growth of vacant space became Kalininsky district (+37,400) in Q3 2022, mainly as a result of the commissioning of Ferrum 2 business center. On the second place in terms of the increase in vacant space –Moskovsky district (+16,500 sqm or +22%). The share of this district accounts for the maximum number of empty office space 26% of the gross volume of vacant space on the market.

Rental rates

The average rental rates at the end of September in class A office centers amounted to 2,030 RUB per sqm per month, inclusive of VAT and operating expenses. The rental rates in class B office centers amounted to 1,400 RUB per sqm per month, inclusive of VAT and operating expenses.

Development forecast

Only due to the influence of the geopolitical situation in the region, according to optimistic estimates, about 50-70 ths sqm of office space will be released on the market in Q4. So, the vacancy rate on the market will increase to 11% – 12% of the gross market volume, which in principle is not a critical value for the St. Petersburg office market.

The further development of events will depend on many factors: methods and the period of resolution of geopolitical conflicts, the speed of economic recovery, landlords' policies regarding the settlement of disputes with current tenants.