The sharp fluctuations in the course currency adversely affected the cost of renting offices. Tenant companies whose rental rates were fixed in dollars in the lease agreement have significantly increased rental rates since the beginning of the year. It is quite obvious that in the current economic situation, the question of reducing the cost of renting offices is quite acute, so tenants are ready to enter into negotiations with the owners on the subject of transferring rental payments from dollars to Russian currency. Taking into account the growing level of vacant space and a record volume of commissioning of new construction in 2014 (for the nine months of 2014 a total of 966 thousand square meters were commissioned and by the end of the year another 600 thousand square meters were announced, which is a record for last 5 years), we see that today tenants have a choice - to stay in the current office and pay a high rent, or move to a higher-quality facility on favorable terms for the current market. Accordingly, the situation when demand is falling, supply is increasing and the rental price is growing, it is absolutely non-market, therefore the tenants' desire to reduce rental costs is quite logical. It is worth noting that the owners today are flexible and ready to make concessions to tenants, fixing rates in rubles, not being tied to the dollar rate, as well as fixing the boundaries of the currency corridor. ILM consultants are ready to assist you in optimizing your office rental costs. We understand that real estate decisions have a significant impact on your business plans and financial results. That is why we are ready to offer you possible scenarios for optimizing the operating costs of renting an office now. In the process of working together, we will work out in detail the tasks and goals that are achievable in negotiations with landlords, taking into account the needs of your company in the field of real estate. We have already helped to reduce rental costs to dozens of Russian and international companies (see examples) and are fully confident that we will achieve significant savings for your company by providing quality services that meet the highest international standards. As a rule, the result of our work is to reduce the cost of renting office space for our clients by 10 - 40%. If you are interested in the issue of reducing the cost of renting an office, call us: +7 (495) 287 06 00 . We will be happy to advise you at the meeting and discuss all the details.        

ILM has summed up the results of the 3rd quarter of 2014 in the Moscow office real estate market. 2014 will be a record year for new construction in the past 5 years, while the level of vacant space in class A business centers has reached its maximum, exceeding the crisis figures for 2008–2009. According to ILM analysts, in Q3, 2014, the total supply of quality office space in Moscow reached 16.5 million square meters. The largest supply of vacant premises is observed in class A facilities, where the indicator has reached 24.5%, which exceeds the level of crisis values ​​for 2008–2009. In Q3, 2014, 452 thousand sq. M. entered the Moscow office real estate market of office space. In the first nine months of 2014, a total of 966 thousand square meters were commissioned, which exceeds the volume of new construction for the same period of 2013 more than doubled. The largest new office facilities introduced in Q3 2014 are: Phase I of the ComCity business park (Alpha phase with an office area of ​​107,000 sq. M) and Lotos business center (with an area of ​​88,200 sq. M.) Located in Southwestern direction. This confirms the strengthening of the process of decentralization of new construction and its inherent in today's Moscow market. More distantly business districts continue to develop. It should be noted that by the end of 2014, more than 600 thousand sq. M. are stated to commissioning are scheduled such large objects as: “OKO” towers (116,280 sq. m, MIBC “Moscow-City”) and “Evolution” (80,500 sq. m., MIBC “Moscow-City”), business -centre "Vereiskaya Plaza III" (76,900 sq. m., Vereyskaya st., 39, p. 33). The second phase of the complex “Sirius Park” (62 500 sq. M, Kashirskoye shosse, 3), MFC Vodny (61 570 sq. M, Golovinskoe shosse, vl. 5) and others. According to analysts ILM, 2014 will be a record year for the volume of new construction over the past 5 years. The main share of new construction (about 70%) falls on areas outside the Third Transport Ring. As for the expected facilities in the Central Administrative District, 80% of the area falls on the Moscow-City MIBC. Thus, the cumulative volume of new proposal will exceed 1 million square meters. m, which will increase competition between business centers and allow potential tenants to choose high-quality office space for attractive conditions. In Q3, 2014, the highest value of net absorption, which shows the change in office space occupied by tenants, for a certain period, is still preserved in Class A facilities, where this figure is 278 thousand square meters. m, which is 52% of the total absorption. The value of net absorption in class B + objects also increased to 228 thousand square meters. m as of the end of September. All this testifies to the fact that high-quality premises continue to enjoy maximum demand. As the head of the research and analysis department at ILM, Ekaterina Volkova, said: “The interest in high-quality business centers in the current situation is primarily due to the opportunities that have opened up to tenants for agreeing on comfortable conditions for renting due to excessive supply. In conditions of high competition, more and more owners are ready to reduce the cost of rent and make concessions to tenants, thereby stimulating the relocation of companies. ” In Q3, 2014, we continue to observe an increase in the number of transactions in which the tenant remains in the occupied premises, but on more attractive terms. Against the background of instability, both in the Russian and in the global economy, many tenants prefer to extend the contracts in the current building, seeking to reduce the cost of rent and revise the commercial conditions. As noted by Andrey Lukashev, ILM Managing Partner: “Large companies are taking measures to optimize costs, including reducing the costs of the existing arena by reducing the rented area (compacting the working space); negotiating and lowering existing rates; moving to other office centers, with a significant difference in commercial conditions and improved operating conditions".  He also adds: “Speaking about the specificity of demand in the current situation, it is worth noting that the most attractive thing is, of course, the premises with finishing. For premises in the state of “under the finishing” the owner ready to perform the finishing, a certain bonus for the tenant, which stimulates the relocation of companies. If we talk about small transactions, we see that the lease terms have decreased to three years”. “Today we also see a desire on the part of some companies to catch the“ bottom of the market ”. That is, the companies decided to take advantage of the current market situation and are ready to purchase an office for their own placement on favorable terms for themselves”,  says Dmitry Myslin, Managing Partner at ILM. The excess of the volume of new construction over the net absorption more than one and a half times affected the dynamics of the vacancy rate. For three months, the vacancy rate on average in the market shows an increase from 14.0% to 14.7%. As a result of the growth of developer activity and the introduction of a large amount of new space, the largest increase in the share of vacant space in Q1, Q4, 2014 is observed in class A facilities, where the increase was 4.5% and the overall rate reached 24.5% . In class B +, growth was only 1.4%, the total figure is 16.4%. At the same time, in objects of class B, the indicator slightly decreased, from 8% to 7.5%. The decline in the requested rental rates, which began in 2013, continues in the third quarter of 2014. “As a result of the increase in the volume of new construction, competition between the objects has intensified, and many owners are adjusting the rental price. The downward dynamics of the requested rates are affected by the change in the structure of the offer, a large proportion of the entered areas are outside the CAO with cheaper offers. On the other hand, the real estate market is influenced by economic instability, currency fluctuations also did not contribute to the growth of the average requested rental rates in dollar terms, ”comments the head of the research and analysis department of the ILM company, Ekaterina Volkova. In class B + objects, by the end of September, the average requested base rental rate in three quaters in dollar equivalent decreased by 3%, from $ 525 to $ 510 per square meter. m per year. The average requested base rental rate for class B premises in dollar equivalent for the 3rd quarter of 2014 is at $ 400 per sq. M. m per year. Compared with the previous quarter, the rate decreased by 9%. If we analyze the dynamics of the average rate for nine months, the figure dropped by 12%. Most owners of objects of class B- declare commercial terms in rubles, therefore, in terms of Russian currency, the increase in the average cost of rent, compared with objects of other classes, was insignificant, namely 6%. Thus, at the end of September, the average requested rental rate for this class was 15,700 rubles. per square meter per year. “Despite the fact that dollar rates have fallen, rates in terms of rubles have increased significantly. Today we see that owners who want to attract tenants are ready to nominate rates in rubles, or to fix the currency corridor”,  specifies Andrey Lukashev, ILM Managing Partner. The index of price expectations of owners (REI ILM), which reflects the expectations of owners regarding the growth of rental rates in the current period compared to the previous period remains quite low. This trend began in October last year, the index never crossed the border of 50 points, which is critical. In Q2, in class A objects, the majority of landlords continue to adhere to the position on lowering rental rates, and the index drops to 42%. In class B +, the situation is reversed; by July 2014, the index shows growth, most owners raise interest rates due to an increase in property tax, which is now calculated on the basis of the cadastral value of the property. And finally, in the 3rd quarter of 2014. The index of rental expectations for class A and B + shows a similar trend. Owners begin to adjust rates to decline, and the index shows a sharp decline, reaching minimum values, 35 points for class A, and 28 points for class B +. "The Rental Rate Expectations Index (REI ILM) caught the beginning of a decline in rental rates as early as September 2013, and now has reached the maximum in the entire observation history", says ILM Partner Dmitry Myslin. Source: ILM  

The leading seven consultants of the commercial real estate market adopted the International Standards for the quality of brokerage and consulting services (REABS - Real Estate and Brokerage Standards). Andrei Lukashev, Managing Partner of ILM, member of the RICS Council (Russia and CIS), MRICS, CCIM, SIOR, told in an interview with the editorial board of the Administrative Director magazine about how these standards will work in practice. - Which REABS rule, in your opinion, can be most critically perceived by Russian brokers and consultants? - Of course, one that concerns a conflict of interest. When your company holds a tender among real estate consultants, how do you know that a potential winner will protect only your interests, will not take out confidential information beyond the scope of the project, will not directly or indirectly cause damage to your company? Legal and financial consultants are simple: they don’t even consider participating in projects where there is even the slightest hint of intersection of interests with their current or former clients. The majority of Russian real estate consultants are free in their actions, in contrast not only from their business colleagues in general, but also from their foreign counterparts in the real estate segment. For example, in Singapore, the work of consultants is monitored at the state level: unethical actions against the client are severely punished. In our country, the simultaneous work of one department per client, and another department per building owner, is quite common for many companies. - How rigidly do the RICS standards regulate such relationships? - On the RICS side, there are no ultimatum that the consultant should represent only one side. But upon the occurrence of such a case, RICS insists on signing a document stating that all parties have been informed of the presence of a conflict of interest and agreed on how to resolve it. - Another ethical rule that passes practically through the standards of REABS is to provide the client with transparent and reliable information. Are Russian consultants ready to comply with such requirements? - A year and a half ago, in the framework of the forum of the Ministry of Economic Development of the Russian Federation, the heads of the research departments of the big four companies working in the field of commercial real estate were asked: vacant and rented space, why are they different?". The answer was the following: "It is not profitable for us to operate with the same data." The task of RICS is precisely to tell the Russian market about a special platform that is able to unite its representatives based on common standards, while allowing it to compete with each other without fear for the quality of the product offered to customers. Yes, the implementation of REABS standards in Russia will not happen in one day, but it is supported by the majority of professional companies and has all the chances to positively influence our market. - Can you tell a concrete example about what a consultant’s job is? - For example, there are two offices: one is cheaper, the other is more expensive. However, a detailed comparison reveals that the cost of the first object does not take into account important parameters: insurance, indexation, parking, flexibility in relation to the client’s business development plans, etc. But it is these parameters that can seriously change the final cost of the office. Therefore, before the client finally chooses the office, the consultant must insist on an estimate of the total cost of ownership for the entire rental period, and even better, the cost of the workplace. - What do you mean by the cost of the workplace? - In different offices, but with the sameoffice space, due to certain architectural or other features, it is possible to organize a different number of workplaces to solve the company's task. For example, in one - 52, and in the other - 62. Accordingly, the cost of the second office, the most efficient from the point of view of the organization of workplaces, will be noticeably lower and more comfortable for the tenant, provided that the technical capacity in the room is sufficient. Therefore, before making a decision on choosing an office, the consultant should recommend the client to make a draft of a planning decision. This approach to the assessment of the premises is important even if the company plans to grow and increase the number of employees in the future. - What else should a responsible consultant pay attention to? - Today, more than ever, the issue of transport accessibility of the office is relevant. The consultant can help the customer to deal with this problem. One of the easiest options to avoid staff turnover, which the client will certainly have if the office is located in an inaccessible place, is to determine the segment of the city where the largest number of employees and the most valuable people live, and relate to this data when choosing an office. Also, another factor that is new to our market has recently intervened in the process of choosing a new office - the introduction of paid parking inside the Garden Ring. Now tenants are especially careful in considering offices that are located not only in this area. Information about the availability of free parking is requested from our consultants and offices located inside the Third Transport Ring, because the Moscow government plans to further develop the paid parking zone. - Do Russian companies often turn to companies like yours when choosing a new office? - Russian companies are gradually coming to understand that they need the services of professional real estate consultants. Firstly, it saves time, and secondly, it allows reducing project risks and finding the best financial and quality solution due to analytics and the structured approach of the consultant. The cost of an error during the project is quite high, for example, the penalty for exiting the lease is up to a year of rent, which can even crush a financially stable company, so it is important that the consultant acts not only professionally, but also strictly in the interests of the client. He is obliged to study everything related to the selected office, to know the reputation of the developer and the prospects of the object and environment. Unfortunately, not all companies are able to think for several years ahead, so you should not neglect the services of professionals who will help to avoid such risks. Of course, there are no risk-free solutions, but experts help to foresee all possible problems of the project and find solutions. Today, it has become much easier to choose truly experienced and honest consultants thanks to the appearance of the Royal Institute of Certified Experts in Russia. And I do not see another organization that could unite professional players of the Russian real estate market and make it as transparent as possible. - And the advice of consultants - members of RICS are much more expensive than usual? - No not always. An expert who is a member of RICS is an additional guarantee for a customer of a quality service. Customers in Russia are still only looking at REABS standards, and we hope that in the near future they will demand that their consultants comply with them. Inviting an experienced certified consultant to select an office is more typical for Western companies, but also in the Russian structures today there are more and more highly educated professional employees who value their time, have great experience and help the company to achieve the best solution. Of course, this is not cheap — the consultant’s remuneration is about a month's rent. - The introduction of standards REABS certainly somehow equalizes the chances of the parties fighting for the client in the tender. Is it difficult for RICS members to compete with each other? - Let me just say about myself: the professionalism of our team, the desire to promote a high-quality, unique service give me the right not to doubt our success. We work with clients not only during the tender and the project, but also help after the end of our contract.  Often they ask what the rental rates will be tomorrow, is it worth making a decision today or should we wait? And we have proposed a solution: our analysts have developed and are calculating the Rental Expectations Index (ILM REI - Rent Expectation Index), which reflects how the owners of high-quality office real estate objects in Moscow perceive the changes taking place in the market. This index is based on a monthly survey of more than 400 owners of office property. Based on its performance, participants in the rental market can make more balanced decisions: rent now or wait for a more favorable situation. The index shows what will happen with rental rates in the short term. To the owners index indicators give an idea of ​​what the price expectations of other landlords at the moment. It allows you to predict the level of rental rates for the next 3-6 months, since such period is on average necessary to search, select an object and sign a lease agreement.  The index also reflects the speed and direction of the change in rental rates associated with these expectations, and may vary between 0 and 100%. If REI is above 50%, then there is a high probability that average rental rates will increase in the coming months. The magnitude of the deviation from the equilibrium value of 50% shows the strength of the downward / uptrend. A REI of 50% indicates that no changes occurred during the period analyzed. A value of less than 50% reflects the expectations of owners to reduce rental rates. The fracture of the index change graph allows you to predict a change in price trend. Thus, REI allows you to predict market behavior and is fundamental in making decisions in the short term. - And what is the Rental Expectations Index now? - In class “A” it is at a low level - 42%, and everyone is waiting for rental rates to drop. And in the class "B +" - 49%, which indicates a stabilization of the rental rate. - So you think that all participants in the commercial real estate market do not have compelling reasons to refuse to work according to the REABS standards? - Objective - no, but I think we all have to wait for a long time for the moment when the majority will join these standards. Try to ask your consultant for a confirmation letter that they will not earn from both sides. If customers do not require honesty and professionalism from their consultant, everyone will continue this practice. - So you want to say that any real estate specialist who has adopted RICS standards will sign such a letter? - And you ask! - Well, I'm asking: will you sign? - Yes, immediately.   Interview for the magazine "Administrative Director". The author - Victoria Toth