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16 december 2014

Corporate clients support elite residential real estate market

According to ASTERA an alliance member of BNP Paribas Real Estate, in Q4 the number of transactions reduced by two times on elite residential real estate market. The volume of supply significantly exceeds the demand. Yet, rental rates remains at the level of Q3.

The activity on elite residential market has been decreasing since the end of Q3. “The volume of supply doubled on the market for the last three months whereas in contrast the demand for the lease of expensive apartments decreased. The segment operates on account of corporate clients, especially, top managers of Asian and Middle Eastern companies. Employees of Gazprom Corporation continue selecting housing. At the same time top managers of the majority of European and American companies have been turned back to the head offices as early as October. Sanctions affected their work in Russia and made it impossible. As a result, the number of tenants of elite housing decreased in St. Petersburg”, - says Anna Kalinina, head of elite residential real estate department at ASTERA an alliance member of BNP Paribas Real Estate.

However, corporate clients have progressive decrease of their budget for lease of housing. “As early as September top managers had a budget of about 200 thou. rubles per month. Yet, for the last few months we receive inquiries with the budget of not more than 150 thou. rubles per month. Large companies optimizes their expenditures as well as other participants of the market”, - notes the expert.

The exposure time of the objects has also changed. ASTERA experts point out that potential tenants have become very demanding having such a vast choice. “Now there are hundreds of offers on the market, and clients visit elite apartments as they go to exhibitions. They may not like an apartment just because of some little thing like, for example, glazed tile in the kitchen. Objects are rarely leased out in the first visit. As a rule, the most liquid options find their tenant in a period of 1-2 months”, - adds Anna Kalinina.

The most requested ones are 2-3 bedroom apartments with the area of 100-150 sq.m located on Krestovsky Island, in the area of Chernyshevskaya metro station, and in Golden Triangle. Our clients prefer apartments with fresh repair and quality furniture. “Apartments offered without furniture became a thing of the past. Now there are no clients on the market who are ready to rent an apartment for 150 thousand rubles without furniture”, - states the expert.

However, it is difficult to find tenants for the opposite offers, such as apartments with design repair and very expensive furniture. As a rule, the owners of such apartments have acquired them for themselves, have made repair works and ordered all the materials according to their own needs. There you can find stucco molding, marble, mahogany furniture, and 1 million TV sets. Considering the exclusiveness of the offer, owners hold rental rate at the level higher than the market one. Such apartments cost from 200 to 450 thou. rubles per month. Moreover, the owner does not care that there is alike apartment with less expensive repair at the same building which is offered for rent 200 thousand rubles cheaper. These owners are ready to wait for their client who will value their taste. Today on the market the search for tenant can take up to one year’, - tells the head of elite residential real estate departments at ASTERA an alliance member of BNP Paribas Real Estate.

In Q4 rental rates for 1-bedroom apartments of premium class were within the limits of 40 and 60 thousand rubles per month, 2-bedroom apartments were rented at the price of 60-100 thousand rubles, 3-bedroom apartments were leased out at 80-200 thousand rubles per month. Apartments with the cost of more than 300 thousand rubles per month are single offers.

Experts note that despite the stagnation on the market rental rates on elite real estate have slightly decreased. “Owners of expensive apartments can be divided into two groups. The first and the most numerous group of owners (approximately 60%) would like to rent their apartment at the price of 100, 200 or 220 thousand rubles per month, not less. They are ready to wait for their client as long as needed. As a rule, for these kinds of people rent earnings are not the main source of living. Representatives of the second group (about 40% of owners) are interested in leasing out their apartments. If no tenant is found for an object in the period of 1-2 months, they agree to reduce rental rate. This group of owners thinks that real estate should function and they try to minimize the time for the search of tenants”, - explains Anna Kalinina.

Moreover, in Q4 a new tendency has appeared on elite residential real estate market: apartments that cannot find their tenant for several months are put on sale. Particularly, it concerns objects which are offered for rent for the first time as their owners need an additional source of income. “These apartments were put on market in September – October and owners hoped to lease them out quick. However, in two months it became clear that it will take long time to find a tenant for the apartment and the owner decided to sell the object”, - clarifies the specialist.

In the situation of crisis occurred in Russian economy, ASTERA experts forecast further decrease on elite residential real estate market. “This year there is a traditional lull in the segment of elite housing starting the end of Q4 and continuing until the end of Q1 aggravated by economic difficulties in the country. Despite this fact, rental rates will unlikely decrease. In contrast, the indexation is possible at the level of 2-3% as tenants also lose money in the situation of weakening of the ruble. All this means that elite residential real estate market will still remain tenant’s market in 2015”, - concludes Anna Kalinina.

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