It is difficult to say which of the realty market segments suffered more in the crisis because each had its own problems. However, the greatest amount of dynamics was observed in the warehousing realty market. Mutual sanctions altered the pattern of deliveries. Logistics have changed, and thus needed to be addressed immediately. Presently, the main difficulties seem to have been passed, though.
It should be noted that the current volatility of the warehousing realty market is characteristic not only of Russia. According to recent CBRE research, “2016 was the most successful in the history of observations of the European industrial realty, and the investment volume reached a record €24.5 bln”.
It is clear that much has been built for the future; including even the mere investments happening now. New routes are being worked out and they are also for future use. Anyway, we can see a sustainable growth.
The condition of the Russian market is far from that, though. During the last two years the rates have steadily decreased, despite being interrupted with some sustainable periods. According to Cushman & Wakefield, in 2016 the average rent rate for A class warehousing decreased by 14% when compared with 2015.
Of course, against this background, the total volume of the closed rent deals and of warehousing realty purchasing appeared higher than the average index of 2011—2015. But not by much. The indices of 2016 (the total volume of the rented and bought realty was 1.2m sq. m) were 11% lower than in 2015.
The growth of the volume of vacancies has also been quite anticipated. “In 2016 the share of vacant areas in the warehousing segment increased”, stated Igor Kabatov, Director for Development of the ITKOL company. Head of projects of the AHill consulting group, Alexander Vusov, agrees with him, “As to the last two years’ results, the warehousing real property of the Moscow region has a large volume of vacant areas”.
If we limit ourselves to the parameters of rates and vacancies there is little reason for optimism. But there is one more indexing parameter — the demand. According to Alexander Kuntsevich, Cushman & Wakefield’s analyst, explicit growth of the demand in the sphere of production and logistics is being presently observed. During 2017, he thinks, the demand for warehousing premises will become quite predictable due to the improvement of the condition in the retail sphere.
Director of the CBRE research department, Olesya Dziuba, holds the same standpoint about vacancy stabilisation and demand recovery having occurred on the warehousing realty market of the Moscow region, which speaks for the gradual normalisation of the market condition.
Of course, the main indicator of the condition of any sector of the economy is the presence of investment interest. Experts are uncertain about it. “Putting objects in operation will continue to decrease in 2017”, Igor Kabatov asserts.
Olesya Dziuba also thinks that in 2017 the volumes of warehousing realty put in operation will reduce, saying, “The index of the new proposal is expected at the level of 500,000—600,000 sq.m, and new premises will be mainly built for a definite client”.
Yet still new objects are being planned. As an example, Alexander Vusov mentions a ready for commissioning А+-class warehouse distribution centre in Klin (over 50,000 sq.m), and a 300,000 sq.m large complex which is to be built near the Marushkinskoe settlement in New Moscow.
Despite this, the experts are careful in their assessments, especially when it comes to talk of the crisis’ recovery. On the whole, they appreciate the prospects of 2017 as favourable. Igor Kabatov singles out two main trends; namely an upturn in business activities of the regional markets of warehousing real property and the leading role of the demand in the development of the warehousing market.
Following him, the owners and managing companies will more often form individual offers for customers and renters. These will cover both warehousing premises’ categories and the list of additional services, bonuses and partners’ programs.
Alexander Vusov thinks that one of the most expected tendencies of the market will be the growth of the number of foreign investors interested in warehousing and commercial realty. He forecasts 15—20% of the whole volume of investments against the minimal 10% of 2016.
Besides, as far as the development of the competitive environment is concerned, the expert points out that the bias towards objects located far away from MRR regions may hardly be called a tendency, as anchor tenants are not always ready for moving and altering logistics, plus there are only a few new tenants willing to go there. However, as he makes clear, the competition within one direction or nearby districts might be spoken of.
According to Olesya Dziuba, the dynamics of positive changes may increase in the second half of 2017.
“The forecast volume of deals for 2017 may total from 900,000 to 1m sq. m,” the expert thinks. The low volume of putting in operation and sustainable demand may result in an 11% decrease of the share of vacant areas.
Alexander Kuntsevich shares this opinion:
“In the end of 2017 the share of vacant areas on the market of quality warehousing areas of the Moscow region will start decreasing, and the rent rates will stabilise.”
To sum up our short analytical review of the condition and prospects of the warehousing real property market, we shall agree on the standpoint of Anton Aliabiev, Director of the Department of industrial and warehousing realty the CBRE company in Russia, who remarked: “We are glad to note that, despite the difficulties, the warehousing market develops, changes and adapts to new conditions, and new drivers and partnership and cooperation mechanisms appear on the market.”
Indeed, we might say that the viability of the Russian economy is confirmed by the ‘behaviour’ of the warehousing real property sector.