Q3 results: the supply on the market grow by 2 times

Offer

For 9 months market of quality industrial and warehouse real estate in St. Petersburg was replenished with 7 complexes with a total area of 171,429 sqm, which is 26% lower than Q1-Q3 2021. However, if last year, the increase was provided mainly by industrial and warehouse complexes built according to the built-to-suit scheme, then this year - mainly by speculative objects. Thus, the volume of the introduction of speculative projects in the first nine months of 2022 exceeded the indicator of the same period last year by 70%.

About 400 ths sqm of warehouse facilities are to be put in operation by Q4 2022. 39% of the properties are related to speculative supply. The total volume of new speculative offer will exceed the final figure of 2021 by 2.4 times, subject to compliance with the stated terms of commissioning.

Warehouse projects, planned to be commissioned in Q4 2022

Source: Maris

Demand

During Q3 2022, at least 296 ths sqm of high-quality warehouse space were sold on the market. Activity mainly focused on expanding the presence of major market players in the region. In January-September, the gross volume of transactions in the industrial and warehouse real estate market was 49% lower than in the same period of 2021.

63% of the areas were leased out in Q3 2022. In absolute terms, the gross volume of industrial warehouse lease transactions is 28% lower than the same indicator last year.

The leading positions in the gross volume of demand in Q3 were occupied by transport and logistics companies (59%). The volume of warehouse space sold to logistics companies on lease terms increased 5 times in nine months compared to the results of the same period in 2021.

The real sector of the economy has slightly reduced the volume of absorption of warehouse space, in contrast to the second quarter of 2022. According to the results of three quarters, manufacturing companies leased 46% less capacity than in Q1-Q3 2021.

Vacancy

The growth of new speculative supply and the release of space in the secondary market, along with a decrease in the volume of demand, led to an increase in the average vacancy rate in the market for the first time since 2015. The average vacancy rate was fixed at 2.6% gross supply volume in the region (+1.8 p.p. to December 2021 indicator).

According to Q3 results the vacant rate in the class A warehouse complexes increased by +3.0 p.p. (compared to December 2021) and was 3.1%. In class В vacant rate decreased by –1,5 p.p. compared to Q4 2021. Average vacancy is 1.2%.

In total 100,000 sqm are vacant on the market of high-quality warehouses for the results 3Q 2022. (excluding the areas offered for sublease).

Rental Rates

2021 was characterized by an unprecedented increase in the requested rental rates in the industrial and warehouse real estate market of St. Petersburg - +17.6% in annual terms

The increase in the volume of vacant space and the increase in new speculative supply exerted little pressure on the price indicators of the warehouse real estate market in January-September 2022. So, the rates level saves achieved points at the end of 2021.

The average range of rental rates is RUB 550 – 800 sqm per month, including VAT and operating expenses. Utility costs are paid according to actual consumption.

Development forecast

Provided that the development activity and demand remain, and the relative stability of the economic situation in the country and in the region is achieved, in particular, the average vacancy rate in the market of high-quality industrial and warehouse premises may increase slightly in 2022: to 4% - 5% the gross volume of the offer.  Such indicators of the volume of vacant space are uncritical for the market, experienced a permanent shortage of quality supply for a long period of time.

In such a scenario, a slight negative correction of the requested rental rates is likely to be observed in Q4.

Currently, the largest development potential remains with companies involved in the field of import substitution.