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10 october 2014

In Saint Petersburg 72 000 sq.m of warehouse premises were delivered in Q3

According to ASTERA an alliance member of BNP Paribas Real Estate, during the period from July to October two quality warehouse complexes with gross leasable area of 72 000 sq.m were delivered in St. Petersburg. In Q4 another 73 000 sq.m of leasable warehouse premises are expected to be commissioned.

In Q3 two warehouse complexes of Class A were delivered in St. Petersburg. First complex is located in the north of the city (3rd phase of ‘Osinovaya Roscha’ complex). Total area of the object amounts to 54 000 sq.m, and leasable area is 12 000 sq.m. Second object is situated in the south (‘Armada park’) and has total area of 76 340 sq.m. Its leasable area is 60 000 sq.m.

In Q4 another 5 warehouse premises with overall leasable area of 73 700 sq.m are planned to be commissioned: three objects are premises of Class A and two objects - of Class B.

Therefore, in the second half of 2014 seven warehouse complexes with gross leasable area of 145.7 thou. sq.m are to be commissioned. If all announced plans are fully delivered, overall supply on warehouse real estate market will increase by 9.4% and reach 1 702,5 thou. sq.m by the year end.

More than 80% of leasable premises announced to be commissioned in H2 are concentrated in the south and south-east of the city. Also, warehouse premises will be delivered in the north-west (11.3%) and east (4.3%) of St. Petersburg.
‘Despite significant volume of new supply, vacancy in warehouse complexes increased slightly compared to H1 remaining within 5-6% in many quality premises. The majority of tenants are not ready to move to complexes of lower class and prefer to optimize occupied space reducing rent costs’, - comments Vera Boikova, head of Client Relations Department at ASTERA an alliance member of BNP Paribas Real Estate.

ASTERA specialists mark that external political situation and economic sanctions introduced in Q3 have already affected warehouse real estate market: ‘In recent months we observed some examples when companies with European background suspended their work in St. Petersburg, but these cases are rare’, - comments Vera Boikova. ‘Generally, third quarter was more active than a period from April to July. If the majority of potential tenants took a break in H1 expecting further development, by Q3 many companies adapted to new work conditions and were ready to visit warehouse premises. Demand characteristics also had some changes: for example, if in the beginning of the year a company was looking for objects with area of 4 000 sq.m, now it would be ready to consider premises with area not more than 2 000 sq.m’, - notes the expert.

In spite of this fact, clients stay interested in warehouse complexes under construction in case if the offer meets all their requirements. ‘Particularly, presentation of OCTAVIAN warehouse complex of Class A located in the north-east of St. Petersburg, 7 km from the Ring Road. Such factor as closeness of the Ring Road is less important now when leasing a warehouse. Distance within 10 km from the Ring Road is considered satisfactory in case if there is a quality object outside the city with good transport accessibility’, - specifies Vera Boikova.

According to ASTERA, in Q3 main demand on warehouse premises was created by transport and logistics companies (30% of inquiries) as well as by manufacturing enterprises (26% of inquiries). Share of inquiries received from manufacturing companies decreased by 6% compared to Q2. Partially, this is due to strained external political situation which led to the change of supply pipeline, assortment and sales market of some industrial companies.

Warehouse premises with area from 1000 to 3000 sq.m were the most requested ones in Q3 (52% of inquiries). Warehouse blocks with area from 500 to 1000 sq.m were interesting to 23% of potential tenants.

Announced rental rates still remain at the level of Q2 2014: average rental rate (triple net) for premises of Class A amounts to $127 USD/sq.m, for objects of Class B - $117 USD/sq.m/year.

‘Today we cannot state that tenant’s market has been formed in warehouse real estate segment. However, everything is heading in that direction. If vacancy continue increasing, it will be easier for tenant to negotiate individual lease terms with owner. Particularly, the first question asked by potential tenants today is what currency is used in agreement. The majority of contracts in warehouse complexes of Class A are concluded using dollar equivalent. However, all tenants would like to have fixed rental rate in ruble equivalent. If dollar rate continue to grow, we expect owners to start reconsidering announced rental rates fixing them or changing them to ruble equivalent’, - adds Vera Boikova.

In the end of 2014 ASTER experts forecast more activity in warehouse real estate segment due to realization of postponed demand. ‘Clients, who did not make any decisions concerning rent and sale of warehouse space for some reason in the last few months, will be able to develop work strategy in new external political situation by the year end and will be ready to conclude new deals’, - suggests Vera Boikova.

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