marketbeat presentation q1 2013 [eng]

MARKETBEAT RUSSIA’S REAL ESTATE MARKET UPDATEQ1 2013

APRIL 2013

CUSHMAN & WAKEFIELD 1

MARKETBEATQ1 2013

INFORMATION RESOURCES

CWRUSSIA.RU

Market information, contacts news

MARKETBEAT.RU

Latest Marketbeat report, reports archive, interactive maps

ICUSHMAN

Mobile application for Commercial real estate professionals, available at iTunes

SOCIAL NETWORKSWEB

http://www.cwrussia.ru/

INTERACTIVE MAPSOFFICES SHOPPING CENTERS WAREHOUSES

You need Flash player installed and internet connection for the interactive map to run

Click to open in browser

http://www.cwsr.info/maps/off/officemap.htm

http://www.cwsr.info/maps/wh/whmap.htm

http://www.cwsr.info/maps/ret/retailmap.htm


MARKETBEATQ1 2013

AGENDA

MACROECONOMY

RETAIL

OFFICE

WAREHOUSE

LAND

CAPITAL MARKETS


MARKETBEATQ1 2013

MACROECONOMY


MARKETBEATQ1 2013

RUSSIA 2013: THE ECOONOMY IS UNDER PRESSURENoticeable slowdown in Q1

-10%

-5%

0%

5%

10%

15%

2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013

GDP growth, % CPI YoY, %

THE REAL ECONOMY HAS ALMOST STALLED IN Q1, WITH LESS THAN 1% GROWTH. IT WAS THE FORTH CONSECUTIVE QUARTER OF THE ECONOMY SLOWDOWN.

THE INFLATION HAS STEADY UPWARDS TREND WITH A SOFTENING ACTIVITY IN THE ECONOMICS.

GDP vs. CPI GDP MAIN DRIVERS

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

TO

TA

LG

DP

CA

RG

O

TR

AN

SPO

RT

AT

ION

S

IND

UST

RIA

L PR

OD

UC

TIO

N

AG

RIC

ULT

UR

AL

PRO

DU

CT

ION

RET

AIL

SA

LES

TEL

ECO

M

SER

VIC

ES

PAID

SE

RV

ICES

CO

NSU

MER

GO

OD

S A

ND

OT

HER

SER

VIC

ES


MARKETBEATQ1 2013

MACRO PERFORMANCE AND FORECASTS

Source: Ministry for Economic Development, URALSIB Capital, Renaissance capital

THE ECONOMY WILL LIKELY TO ACCELERATE IN Q2 AND FURTHER, HOWEVER THE GROWTH PACE WILL BE LOWER THAN EXPECTED.

ON APRIL 12TH MINECON OFFICIALY UPDATED THE 2013 FORECAST, WHERE ECONOMY GROWTH WAS LOWERED TO 2.4% FROM 3.6% FOR BASE SCENARIO. OTHER KEY ECONOMIC INDICATORS WERE DOWN BY 50 – 100 BPS.

ROSSTAT'S ACTUAL

2012 2013 2013 2014 2015 2016 2013 2014 2015 2013 2014 2015GDP, % 3.4 0.9 * 2.4 3.7 4.1 4.2 3.1 3.2 3.2 4 4 -

CPI yoy, % 6.6 7.1 6.7 5.3 5.1 5.1 6.9 6.7 6.5 5.8 5.5

Industrial production, % 2.6 -1.5 * 2 3.4 3.4 3 2.8 2.9 2.9 4 4 -

Retail trade turnover, % 5.9 3 * 4.3 4.9 5 5 5.3 5.7 5.7 5.7 5 -

Fixed Investments, % 6.6 0.6 * 4.6 6.6 7.2 7.6 5.2 5.8 5.8 6.9 7.2 -

Disposable income, % 4.2 3.5 3 4.4 4.6 4.7 4 4.7 4.7 - - -

Real wages, % 8.4 5.2 4.5 5.2 6 6.2

Mining and extraction, % 1.1 -1.7 * 3.6 3.7 3.8 3.3

USD / RUR rate, avg. 31.1 31.1 31.1 32.4 33 33.7 31.6 31.3 31.4 31.4 32.5 -

URALS, USD / bbl 110.5 113.1 97 101 104 108 109.6 114.0 117.0 - - -

* January - February

MINISTRY FOR ECONOMIC DEVELOPMENT

URALSIB CAPITAL RENAISSANCE CAPITAL


MARKETBEATQ1 2013

WORLD MAIN ECONOMIES IN 2013IMF forecast

0%

2%

4%

6%

8%

10%Brazil

China

India

Japan

Russia

Singapore

South Africa

United Kingdom

United States

Euro Area

0%

2%

4%

6%

8%

10%Brazil

China

India

Japan

Russia

Singapore

South Africa

United Kingdom

United States

Euro Area

GDP GROWTH, % CPI, %

THE RUSSIAN ECONOMY IS COMPETITIVE ON THE WORLD’S SCENE.

ONE OF THE MAIN CHALLENGES OF 2013 WILL BE THE INTERNAL DEMAND.


MARKETBEATQ1 2013

RETAIL MARKET

2013 FORECAST

NEW CONSTRUCTION IN MOSCOW 180,000 sq m

NEW CONSTRUCTION IN REGIONS 1,600,000 sq m

PRIME RENTAL RATE INDICATOR 3,800 USD per sq m per annum, triple net

FORECAST UNCHANGED


MARKETBEATQ1 2013

RETAIL MARKET VOLUMERussia is No.3 Retail Market in Europe

RETAIL TURNOVER IN EUROPE* RUSSIA RETAIL TURNOVER **

*Data of 2011, bn USD , GFK GeoMarketing**Source: ROSSTAT

RUSSIAN RETAIL TURNOVER GROWTH CONTINUES TO DECELERATE BUT STILL ONE OF THE LARGEST IN EUROPE

AND IS ONE OF THE DRIVERS OF GDP GROWTH

France 556.875

Germany 548.1

Russia 534.6

United Kingdom 459.54

Italy 332.505Spain 264.195

Turkey 170.1

Netherlands 130.275

Poland 110.025

Switzerland 108.27

Belgium 97.875

Sweden 94.5

Austria 66.15

Norway 61.155

Others** 60.615

Denmark 60.21

Finland 54.675Portugal 53.595

Greece 50.895Czech Republic 42.12

Ireland 36.45Romania 32.535

Hungary 31.86Slovakia 18.36

Croatia 16.605

-10%

-5%

0%

5%

10%

15%

20%

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

2007 2008 2009 2010 2011 2012 2013

Retail trade turnover growth YoY, % Real personal disposable income growth, % YoY


MARKETBEATQ1 2013

RETAILERSDevelopment plans

Fashion20

Children goods4

Consumerelectronics

1

Sport goods

7

Footwear2

Variety store 3

•At the beginning of the year, retailers announced their growth strategies.

•Below is the summary of official announcements (either company’s press-releases or other open sources).

DATA: Open sources

DEVELOPMENT PLANS NUMBER OF PLANNED NEW

WHEN WHERE

FAHSION, FOOTWARE, SPORTSWAREKari 330 2013 Russia, CIS, Melon Fashion Group 100 2013 Russia, Obuv' Rossii 60 2013 RussiaMango (Mango Kids , Mango 55 2013 RussiaInditex Group 50 2013 Russia Jeans Lab, Select 25, Kids Garden,(Tashir 50 2013 RussiaDeseo 50 2013 RussiaUniqlo 10 2013-2017 RussiaNike/ Inventive Retail Group 10 2013 RussiaCHILDREN GOODSELC (Detskiy Mir) 57 2013 RussiaGuliver 13 2013 Russia, CISRESTAURANTSMcDonald’s 150 2013-2015 RussiaKFC 60-70 2013 Russia, CISENTERTAINMENTDreamWorks Animation/Regions 3 by 2015 Russia

DEVELOPMENT PLANS NUMBER OF PLANNED NEW

WHEN WHERE

FOOD RETAILERS

X5 Retail Group 900 2013 Russia

Magnit 600 - 800 2013 RussiaDixy 80 2013 North-West Victoria (Dixy Group) 16 2013 MoscowSPAR 40 - 50 2013 - 2016 Moscow Miratorg 40 2013 North-West O'key 35 2013 - 2016 RussiaLenta 30 2013 - 2017 MoscowAzbuka Vkusa 15 2013 - 2016 North-West Auchan 10 2013 RussiaPrisma 10 2013 North-West DIYLeroy Merlin 15 2013-2018 Central Metrika 10 2013 TatarstanELECTRONICM.Video 35 2013 RussiaEldorado 14 2013 RussiaCash&CarryMetro 7 2013 Russia


MARKETBEATQ1 2013

•In 2012 all the major new international brands came to Russia mostly with Russian retail partners. The direct opining were rare.

•The typical new entrant is a retail chain with an average size of the shop from 30 to 300 sq m.

•80% of all brands are coming from Europe. There are a few American brands looking for Russian market (such as Crate&Barrel, Forever 21 and some other).

• New brands come to Moscow (or St.Petersburg) initially with expansion plans for the Russian Regions (mostly in the “millionniki” cities)

•For most of other Russian cities the potential is in the existing brands, which are interested in regional expansion.

NEW RETAILERSFashion, children good and some others

Fashion20

Children goods4

Consumerelectronics

1

Multi-Media 1

Restaurants, cafes

4

Sport goods

7

Homewear2

Footwear2

Variety store 3

*

* Accessories – 2 stores* Total area 42,035 sq m


MARKETBEATQ1 2013

NEW RETAILERSNew reasons for shopping

EXIS

TIN

G O

PER

ATO

RS

2013

22 3 71 3 22 8

SOON

Supermarket Consumerelectronics DIY Fashion Footwear Children Sport Homewear Restaurants,

cafesAccessories Cosmetics


MARKETBEATQ1 2013

QUALITY RETAIL FORMATS in RUSSIA,

Q1 2013 (BY SQ M)

RETAIL FORMATS Shopping centers dominate the market

RUSSIA RETAIL FORMATS

SHOPPING CENTRE

MIX-USE BUILDING / COMPLEX

DEPARTMENT STORE

RETAIL WAREHOUSE

STREET RETAIL

RETAIL PARK

FASHION OUTLET

Mixed Use

complex11.9%

Outlet centre0.2%

Shopping Centre88.0%

UNDER CONSTRUCTION : BellaVita, GLA 35,000 sq mNoginsk / Electrostal / Pavlovsky Posad, Service Management & Consulting

Solnechny, GLA 37,000 sq mSaratov, Midland Development

FAHSION OUTLET

2011 2013

2012

RETAIL PARK

Outlet Village Belaya Dacha (Phase 1), GLA 38, 000 sq m, Moscow, Hines

UNDER CONSTRUCTION: Vnukovo Outlet Village Phase 1, 16, 584 sq m, Moscow, Diona

2013UNDER CONSTRUCTION: Fashion House Outlet-Mall, 28,760 sq m, Moscow, Fashion House Development

2013

Total GLA - 14.7 mn sq m in 506 retail stores


MARKETBEATQ1 2013

Moscow24.0%

St. Petersburg

14%

Krasnodar4.3%

Ekaterinburg4%

Samara3.5%

Moscow region

3%

Nizhnyi Novgorod

3.0%

Omsk2.6%

Kazan2.6%

Rostov-On-Don

2.5%

Other36.4%

SHOPPING CENTERS, RUSSIAConstruction of shopping centers in Russia is booming

* Outlets are included, retail warehouses are excluded

QUALITY RETAIL STOCK SQ PER ‘000 INHABITANTS, EOY 2012

QUALITY SHOPPING CENTERS BY REGIONS, EOY 2012 (BY SQ M)

0 200 400 600 800

MoscowSt. Petersburg

NovosibirskEkaterinburg

Nizhny NovgorodSamaraOmskKazan'

ChelyabinskRostov-on-Don

UfaVolgograd

PermKrasnoyarsk

VoronezhSaratov

KrasnodarTolyattiBarnaul

UlyanovskIzhevsk

VladivostokYaroslavl

IrkutskTyumen

KhabarovskOrenburg

NovokuznetskKemerovo

Ryazan Astrakhan'

PenzaNaberegnie Chelni

LipetskTula “Millionic” Cities Cities 500,000 +


MARKETBEATQ1 2013

SHOPPING CENTERS, RUSSIAExpansion

QUALITY RETIAL SPACE ‘000 SQ M, RUSSIA (including Moscow)

• 5 shopping malls have been delivered in Q1 in Volgograd, Belgorod, Murmansk, Orel, St. Petersburg.

•85 other are to be delivered in 49 Russian cities by the end of 2013.

NEW SHOPPING CENTERS, 2013

* Moscow projects are on the next slideAquarel’, Volgograd Kontinent, St Petersburgc MegaGrinn, Belgorod

1,8281,620

1,895

1,561 1,6351,426

1,872

229

1,600

2,873

2006 2007 2008 2009 2010 2011 2012 2013

Announced developers plans CW Forecast New construction UTD

LOCATION PROPERTY NAMERETAIL

GLA, SQ MDELIVERY

THE LARGEST PROJECTS IN RUSSIA, GLA 30,000+

Volgograd Aquarel' 92,140 Q1 2013

Belgorod Megagreen 53,000 Q1 2013

Murmansk Volna 10,030 Q1 2013

Orel MegaGrinn (2 phase retail) 17,500 Q1 2013

St. Petersburg Kontinent 56,000 Q1 2013

Ufa Planeta 90,000 Q3 2013

Perm SC on Speshilova 75,000 Q4 2013

Ekaterinburg Evropeyskiy (former Prizma) 70,397 Q2 2013

Nizhnyi Novgorod Nebo 69,650 Q4 2013

Bryansk Sayani Park 68,000 Q4 2013

Novokuznetsk City Mall 63,000 Q4 2013

Yaroslavl Aura 62,550 Q4 2013

Irkutsk KomsoMall (former Kontinental)

57,700 Q4 2013

Ufa M7 Mall 53,355 Q4 2013

St. Petersburg Londom mall (Felicita-Kollontay (phase 2,3))

47,000 Q4 2013

Krasnoyarsk Ogni 45,000 Q2 2013

St. Petersburg Baltiyskaya zhemchuzhina 45,100 Q2 2013

Ekaterinburg Magnit 44,321 Q3 2013

Sterlitamak Fabri (2 phase) 42,000 Q4 2013

Saratov June 40,600 Q4 2013

Nizhnyi Novgorod Indigo 39,750 Q2 2013

St. Petersburg Mandarin 38,250 Q2 2013

Pavlovsky Posad Bella Vita power center 36,000 Q4 2013

Taganrog Eurasia (Grand city) 35,543 Q3 2013

Kostroma RIO 35,000 Q2 2013

Mytischi Krasny Kit (2 phase) 35,000 Q4 2013

Ufa UfaPlaza / exhibition center Bashkortostan (1 phase)

31,000 Q4 2013

Novi Urengoi Solnechniy 31,000 Q4 2013

Syktyvkar June (Phase 1) 30,000 Q2 2013

St. Petersburg Monpasie (Industia Group projects)

30,000 Q4 2013

TOTAL GLA OF SHOPPING CENTERS > 30,000 SQ M1,1.927,216


MARKETBEATQ1 2013

SHOPPING CENTERS – MOSCOWStructural changes

QUALITY RETAIL, ‘000 SQ M, MOSCOW NEW SHOPPING CENTERS, 2013

•In Q1 there were no new shopping malls

•The most valuable retail space delivered in Moscow in Q1 2013 is the supporting retail area (GLA 2,700 sq m) of White Gardens office complex.

LOCATION PROPERTY NAMERETAIL

GLA, SQ MDELIVERY

MOSCOW Projects GLA 10,000 + sq m

RIO (Leninskiy) 57,000 Q3 2013

Shaiba 35,000 Q4 2013

Fashion House Outlet-Mall 28,760 Q2 2013

Otrada (phase 2) 22,020 Q2 2013

Favorit 21,900 Q4 2013

Moskvorechye 19,780 Q2 2013

Raikin Park (Raikin centre of

17,000 Q2 2013

Vnukovo Outlet Village ( h 1)

16,584 Q2 2013

VDNKh SC 15,000 Q2 2013

Brateevo Mall 15,000 Q2 2013

Vostochiy veter 14,000 Q4 2013

295,915

MOSCOW REGION Projects GLA 10,000 + sq m

Reutov Family Mall (Reutov Park) 36,375 Q3 2013

Pavlovsky Posad Bella Vita power center 36,000 Q4 2013

Mytischi Krasny Kit (2 phase) 35,000 Q4 2013

Korolev Gelios 22,500 Q2 2013

Odintsovo Dubki 20,000 Q2 2013

Krasnogorsk Komsomolec 19,160 Q4 2013

Solnechnogorsk Solnechniy 14,200 Q2 2013

Scherbinka Aquarel 11,250 Q2 2013

Lyubertsy Orbita 10,000 Q2 2013

204,485Total GLA

Total GLA

180

360

337

219

379

567

400

197152

2006 2007 2008 2009 2010 2011 2012 2013

New construction UTD Announced developers plans CW Forecast


MARKETBEATQ1 2013

FOOTFALL, Q1 2010=100%

MOSCOW SHOPPING CENTERSQuarterly monitoring

VACANCY RATE, %

* Cushman&Wakefield Research quarterly monitoring of 9 quality shopping centers (total GLA - 0.5 mn sq m).

These shopping centers have been opened more than one year ago and have the established catchment area.

•In Q1 footfall* of Moscow shopping malls decreased. Although this is in accordance with seasonal trends (Q1 footfall is always lower than in Q4) the decrease was more than expected (by about 10%).

•The shopper conversion rate is close to the average level (which is around 40% for monitored shopping centers) and in Q1 it was 46.9%.

•The vacancy rate for quality shopping centers* in Moscow remains low as in Q1 was 1.2%. The increase in vacancy rate (from 0.4% in Q4 2012 to 1.2 in Q1 2013) is because of typical for the beginning of the year tenants rotation.

“SUCCESSFUL SHOPPERS”, %

60%

70%

80%

90%

100%

110%

120%

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012 2013

40.3% 39.0%38.2%37.1%44.3%

40.3%39.3%38.5%34.8%

28.1%

41.2%44.0%40.9%

36.9%

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012 2013

1.7% 3.0% 1.6% 0.8% 1.0% 1.0% 1.0% 1.0% 0.4% 0.7% 0.8% 0.4% 0.4% 1.2%

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012 2013


MARKETBEATQ1 2013

MOSCOW SHOPPING CENTERS : RENTAL RATESRental rates are stable

Q1 20132 prime retail indicator** is 3,800 USD

QUALITY SHOPPING CENTERS RETAIL GALLERY RENTAL RATES*

ANCHORS

<100 100 - 300 300 - 1,200 1,200 - 3,500 3,500-7,000

Food court $1,800-$2,000

Kiosks $5,000-$8,000

Restaurant $600-$1000 $700

Clothing $1,600 $1,200 $700 $400

Shoes $2,200 $1,700 $1,200 $800

White and Brown $500

Supermarket $500-$600

Hypermarket $250-$450

Cinema $250-$320

GLA, SQ MBUSINESS

RETAIL GALLERY MINI ANCHORS

* US$ per sq m per annum, triple net** Prime retail indicator—base asking rental rate for the 100-200 sq m gallery unit at the ground floor of the prime shopping centers, US$ per sq m per annum, triple net


MARKETBEATQ1 2013

MOSCOW HIGH STREETS : RENTAL RATESHigh streets are becoming more important

HIGH STREET USD / sq m / annum 2013 TREND

1st Tverskaya Yamskaya $1,500 - $3,000 up

Arbat $2,000 - $4,000 up

Garden Ring $1,500 - $3,000 up

Kutuzovsky Prospekt $1,500 - $3,500 up

Kuznetsky Most $2,000 - $4,000 up

Leningradsky Prospekt $1,200 - $2,200 up

Leninsky prospect $1,500 - $2,500 up

Prospect Mira $1,200 - $2,500 up

Novy Arbat $1,200 - $3,000 up

Petrovka $2,500 - $4,500 up

Pyatnitskaya $1,200 - $2,800 up

Tverskaya $3,000 - $6,000 up

Stoleshnikov per. $4,000 - $6,000 up

•In Q1 footfall* of Moscow shopping malls decreased. Although this is in accordance with seasonal trends (Q1 footfall is always lower than in Q4) the decrease was more than expected (by about 10%).

•The shopper conversion rate is close to the average level (which is around 40% for monitored shopping centers) and in Q1 it was 46.9%.

•The vacancy rate for quality shopping centers* in Moscow remains low as in Q1 was 1.2%. The increase in vacancy rate (from 0.4% in Q4 2012 to 1.2 in Q1 2013) is because of typical for the beginning of the year tenants rotation.


MARKETBEATQ1 2013

LEASE TERMSBehind the rent

ITEM COMMENTLease Terms Standard lease terms for gallery tenants are between 3-5 years, break options are rare. For anchor

tenants (including fashion anchors) lease terms are up to 20 -25 years and break option is becoming popular.

Rental Payment Rents are typically payable monthly in advance. Turnover / percentage rents are increasingly seen in shopping centres. Rental rates are generally calculated in USD, Euro or commercial units are used. In less quality shopping centres rental rates are calculated in RUR.

Rent Deposit The rent deposit required in quality shopping centres is typically between 1 – 3 months rent equitant.

Indexation Annual indexation is typical between 3-10% or at a level of USD / EU CPI. The practice of premium / key money payments is seldom seen in Russia. Rent reviews are rare on the market.

Service Charges Service charge is payable by tenants at either an “open book” basis or more common as a fixed cost. Utilities payments are charged on consumption. Building insurance is normally charged back to tenant via service charge.

Other costs VAT 18%

Local property taxes are not payed separately, they are generally included in the service charges.


MARKETBEATQ1 2013

QUALITY RETAIL STOCK IN RUSSIA

http://marketbeat.ru/simplecms/index.php?id=infographics-retail-in-regions


MARKETBEATQ1 2013

OFFICE MARKET

2013 MOSCOW FORECAST

NEW CONSTRUCTION 700,000 sq m

TAKE-UP 1,900,000 sq m

VACANCY RATE 15.4%

CLASS A AVERAGE RENTAL RATE 820 USD per sq m per year, triple net

FORECAST CHANGED: NEW CONSTRUCTION INCREASED from 500,000 sq m to 700,000 sq m


MARKETBEATQ1 2013

TAKE-UP (’000 sq m)

DEMANDHigh turnover

•In total, office take up levels were positive in Q1 with over 450,833 sq m transacted.

•Demand is steady as tenants look to consolidate or renegotiate leases.

•Tenant demand is concentrated in recently finished offices. In Q1 the proportion of pre-leases stood at 1% of gross take up (the same situation was observed in 2012 when pre-leases were less than 5% from all deals).

80%83% 75% 86% 86% 79% 80%

92%

50%

60%

70%

80%

90%

100%

0

500

1,000

1,500

2,000

2,500

2006 2007 2008 2009 2010 2011 2012 F2013 F2014 F2015Class A Class B (B+and B-)Forecast Class A Forecast Class B (B+ and B-)Share of lease deals


MARKETBEATQ1 2013

TAKE-UP (mn sq m) AND NUMBER OF DEALS

DEMANDHigh turnover, decreasing net absorption

• The share of big deals (with the rentable area more than 2,000 sq m) was around 50% in the last 6 years.

• But the total number of deals is increasing. More and more small tenants (demanding for less than 500 sq m office) are closing deals in quality office building.

• Overall, in Q1 there were 797 transactions conducted in 340 quality office buildings.

47% 59% 66% 50% 51% 59% 47% 37%

1.14

1.501.74

0.73

1.28

1.941.99

0.44

1,0751,092

1,137

751

1,336

1,731 2,573

797

0

500

1,000

1,500

2,000

2,500

3,000

0

0.5

1

1.5

2

2.5

2006 2007 2008 2009 2010 2011 2012 Q1 2013

Take-up < 2,000 sq m (%) Take-up > 2,000 sq m (%)Number of transactions


MARKETBEATQ1 2013

ABSORPTION vs. NEW CONSTRUCTION (mn sq m)

DEMANDAbsorption

• Absorption is in line with new construction.

* Net absorption—represents the change in the occupied stock within a market during the period.Calculation: X – Y = Net Absorption.X = Current stock – current vacancy Y = Previous stock (same quarter, previous year) – previous vacancy (same quarter, previous year)

1.49

2.17

1.39

0.88

0.65 0.55

0.23

1.35

1.81

0.63 0.74 0.76

0.430.25

2007 2008 2009 2010 2011 2012 Q1 2013

New construction Absorption


MARKETBEATQ1 2013

OFFICE STOCKNew construction

• In total, 14 office buildings were delivered in Q1 with a total rentable area of 259,544 sq m. 84 % of this new office space is currently available for lease.

• Most new constructions of class A are concentrated in the Central Business District, with most class B in Other Trading Areas (OTA).

• We increased the volume of new construction forecast for 2013 from to 700,000 sq m from 520,000 sq m expected earlier. Our estimates remain relatively conservative.

NEW CONSTRUCTION (’000 SQ M) (%) NEW CONSTRUCTION 1Q 2013 BY SUBAREAS

0 50 100 150 200 250 300 350

Q1 2013

Downtown Class A Downtown Class B Central Class B OTA Class B0

500

1000

1500

2000

2006 2007 2008 2009 2010 2011 2012 F2013 F2014 F2015

New construction, A New construction, B (B+ and B-)

Forecast Class A Forecast Class B (B+ and B-)


MARKETBEATQ1 2013

AVAILABILITY

VACANCY RATE

• During Q1 2013, the average vacancy rate in existing quality office buildings in Moscow was stable at average level of 12.14%. Class A availability was stable and was 16.4% (16.6% in Q4 2012), while Сlass B vacancy rate was 11.13% (11.4% in Q4 2012).

• At present, vacant space exists throughout a third of Moscow’s quality office buildings (in 552 buildings out of 1,780).

4% 4%

12%

22%21%

16%

14%

18% 18% 17%

3% 4%6%

11% 11%9% 10%

13%14% 15%

Q1: 16.6%

Q1: 11.6%

2006 2007 2008 2009 2010 2011 2012 F2013 F2014 F2015

Vacancy rate A Vacancy rate B


MARKETBEATQ1 2013

AVERAGE RENTAL RATE BY SUBAREAS 1Q 2013

RENTAL RATE

711

935

1088

731

645734

796

820

840900

529646

807

509414 444 466 470 500 540

Q1:$850

Q1: $520

2006 2007 2008 2009 2010 2011 2012 F2013 F2014 F2015Class A Class B (B+and B-)

RENTAL RATE

755

477

432

579

498

350

Class B fitted out

Class B shell & core

1104

854

1166

839

570

Downtown

Central

OTA

Class A fitted out

Class A shell & core

• After a stable 2012, positive dynamics were observed in average rental rates in the 1st quarter.

• In Q1, Class A average rent has grown to $850 per sq m (triple net) per annum (from average $790 in 2012 and $820 in Q4 2012).

• Asking rents of more than $1,500 are increasing in occurrence for Class A buildings with internal modifications.

• In Q1 2013 the average Class B rental rate also increased from $490 to $520 per sq m.

• Prime rents remain at US $1,200 per sq m (triple net) per annum for the best office “trophy” premises in the Moscow market.

* Base asking rental rates, USD per sq m per annum, weitghted average for deals closed within the period, triple net


MARKETBEATQ1 2013

RENTAL RATES BY OFFICE SUBMARKETS

Flash player is required for interactive content

MOSCOW OFFICE MARKET NET ABSORPTION

http://marketbeat.ru/simplecms/index.php?id=infographics-netabsorption


MARKETBEATQ1 2013

WAREHOUSE & INDUSTRIAL

2013 FORECAST

NEW CONSTRUCTION IN MOSCOW 1.2 mn sq m

FORECAST UNCHANGED


MARKETBEATQ1 2013

MOSCOW SUPPLYNew construction of quality warehouses (Classes A and B)

Q1 2013

–New construction 138,000 sq m

2013

–Total pipeline 1,200,000 sq m

• The vacancy rate in class A remains stable at 1% since Q3 2011

• Vacancy rates in quality W&I properties will remain stable in the short-term outlook.

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2006 2007 2008 2009 2010 2011 2012 2013F


MARKETBEATQ1 2013

RENTAL RATESRental rates and lease terms

CLASS A CLASS B CLASS CCOLD

STORAGES

Net Rent Rates,$/sq m/year

130 -140 120-130** 170** 251

Operating Expenses,$/sq m/year

30-40 20-30 - -

Utility Charges, $/sq m/year

10-15 10 - -

Yearly rent indexation CPI-3% 8-10% n/d n/d

Minimum Lease Term, years

5-10 1-5 - -

Contract security, months

3-6 1-3 - -

Advance Payment, months

1-3 1-3 1 -

Contract currency USD/EUR RUB RUB RUB

Minimal lease area,sq m

3 500 - -

$132

$130

$140

$105

$110

$135

$135

$135

$80

$90

$100

$110

$120

$130

$140

$150

2006 2007 2008 2009 2010 2011 2012 2013F


MARKETBEATQ1 2013

SUPPLY MAPDistribution of W&I space in the Moscow Region

EXISTING 2013 PIPELINE

0

200

400

600

800

1 000

1 200

Dmitrovskoeshosse (A104)

Yaroslavskoeshosse (M8)

Shelkovskoeshosse (A103)

Gorkovskoeshosse (M7)

Novoryazanskoeshosse (M5)

Kashirskoeshosse (M4)

Simferopolskoeshosse (M2)

Kaluzhskoeshosse (A101)

Kievskoeshosse (MЗ)

Minskoeshosse (M1)

Novorizhskoeshosse (M9)

Leningradskoeshosse (M10)

30+ km 10-30 km 0-10 km Moscow

0

50

100

150

200

250

Dmitrovskoeshosse (A104)

Yaroslavskoeshosse (M8)

Shelkovskoeshosse (A103)

Gorkovskoeshosse (M7)

Novoryazanskoeshosse (M5)

Kashirskoeshosse (M4)

Simferopolskoeshosse (M2)

Kaluzhskoeshosse (A101)

Kievskoeshosse (MЗ)

Minskoeshosse (M1)

Novorizhskoeshosse (M9)

Leningradskoeshosse (M10)

30+ km 10-30 km 0-10 km Moscow


MARKETBEATQ1 2013

DEMAND STRUCTUREMoscow region

DEMAND STRUCTURE, MOSCOW REGION

Q2 2012 - Q1 2013

• The majority of transactions in W&I segment are carried out by retail companies, which are also the market leaders in terms of leased sq m.

TYPES OF TRANSACTIONS BY SIZE, MOSCOW REGION, ‘000 sq m

0

5

10

15

20

25

Distributor Logistic Other Producer Retailer

Distributor27%

Logistic16%

Other1%

Producer15%

Retailer41%


MARKETBEATQ1 2013

DEMANDTake-up

The amount of leased and purchasedwarehouse space in the Moscow regionin Q1 2013 amounted to 145,000 sq m,volume of transactions in regions amountedto 51,000 sq m.

The volume of transactions in Q1 2013 waslower than in 2012, but almost equal to theaverage figures of 2008-2012.

According to our forecast the volume oftransactions in Moscow region in 2013 willbe about 1 mn sq m in Moscow region.

The expected volume of regionaltransactions is 250,000 - 300,000 sq m.

0,00

200,00

400,00

600,00

800,00

1 000,00

1 200,00

1 400,00

2008 2009 2010 2011 2012 2013F

Moscow Regions Forecast


MARKETBEATQ1 2013

REGIONSRegional rental rates, USD per sq m per annum, triple net

$0

$20

$40

$60

$80

$100

$120

$140

2008 2009 2010 2011 2012 2013

St. Petersburg Ekaterinburg Rostov-On-Don

CITYAvg base rental

rates, USD / annum

Avg leased area, sq m

Moscow 130-140 10,000-15,000

St. Petersburg 125-135 2,000-10,000

Ekaterinburg 110-115 5,000-10,000

Nizhnyi Novgorod 115-120 3,000-5,000

Samara 110-115 3,000-5,000

Kazan 90-100 3,000-5,000

Rostov-On-Don 115-120 3,000-5,000

Krasnodar 110-120 3,000-5,000

Novosibirsk 110-115 2,000-5,000

Ufa 90-100 3,000-5,000


MARKETBEATQ1 2013

LAND MARKET


MARKETBEATQ1 2013

MOSCOW REGIONStable, growing market

MOSCOW REGION AVERAGE INDUSTRIAL LAND PRICE, mn USD/ha

PRICE FOR INDUSTRIAL LAND IN MOSCOW REGION by direction

PRICE, mn USD / ha

Dmitrovskoe shosse A104 0.5-1.5Yaroslavskoe shosse M8 0.5 - 1.5Gorkovskoe shosse M7 0.5 - 1.2

Novoryazanskoe shosse M5 0.5-1.2Kashirskoe shosse M4 0.6 - 1.5

Simferopolskoe shosse M2 0.8 - 1

Kaluzhskoeshosse shosse A101 1-1.5Kievskoe shosse M3 1-2

Minskoe shosse M1 1-1.5Novorizhskoe shosse M9 2-4Leningradskoe shosse M10 1.5-2.5

ROAD1,87

1,07

1,38

1,4

1,4

1,5

2008 2009 2010 2011 2012 2013F


MARKETBEATQ1 2013

MOSCOW REGIONLand prices

DISTANCE FROM MKADPRICE, mn USD /

ha

MKAD 2.5 - 3

5 km 1 – 1.5

15 km 0.6 - 0.8

30 km 0.4 - 0.6

50 km 0.3 - 0.5


MARKETBEATQ1 2013

CAPITAL MARKETS

2013 FORECAST

TOTAL VOLUME OF INVESTMENTS US$ 8 bn

FORECAST UNCHANGED


MARKETBEATQ1 2013

RUSSIAN INVESTMENT MARKET

2013 HAS STARTED POLITIVELY FOR THE ENTIRE PROPERTY MARKET AND FOR INVESTMENT MARKET AS WELL

THE AVERAGE VOLUME OF INVESTMETNS PER QUARTER HAS ALMOST DOUBLED SINCE 2007

THE OFFICE AND RETAIL SHARE ACCOUNTS FOR ~40% EACH

MOSCOW OFFICE AND RETAIL CAPITALIZATION RATES SHOWED SMALL DOWNWARDS CORRECTION:

OFFICE 8.50%

RETAIL 9.25%

W&I 11.5%

INVESTMENTS VOLUMES YoY % CHANGE

6%

8%

10%

12%

14%

16%

18%

2004

2005

2006

2007

2008

2009

2010

2011

2012

Q1

'13

CBR refinancing rate Office primeShopping center prime W&I Prime

CAPITALIZATION RATES

-40%

-20%

0%

20%

40%

60%

80%

100%

-200%

-100%

0%

100%

200%

300%

400%

500%

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

YoY % change Office % of total Retail % of total


MARKETBEATQ1 2013

RECORD VOLUME OF INVESTMENT IN Q1 2013 (3.4 BILLION USD) WAS REACHED PRIMARILY DUE TO TWO LARGE DEALS NEGOTIATED IN 2012.

OUR FORECAST FOR 2013 IS

8 BN US$

THE MARCH CRISIS IN CYPRUS WILL DEPRESS INVESTMENT ACTIVITY FOR 1-2 MONTHS.

WE LEAVE OUR 2013 FORECAST UNALTERED

RUSSIAN INVESTMENT MARKETRussian Investments split

http://marketbeat.ru/simplecms/index.php?id=infographics-investment-volumes

www.cushmanwakefield.com

RESEARCH [email protected]