Expert opinion

There is an unusual situation in the office real estate market - with record low commissioning of new facilities, there was a record demand. However, experts have found an explanation for this. The main thing is the tendency for the segment to begin to grow rapidly in the coming years. According to the deputy mayor of Moscow on urban planning and construction, Marat Khusnullin, investors are increasingly seeking permission to build xommercial real estate. The number of new space for offices in the capital at the end of last year decreased by almost three times compared with 2017. Experts attribute the decline in investor interest in offices to the rising cost of construction, bank loans, and taxes. Exacerbates the situation and the lack of suitable construction sites in the capital. At the same time, experts noted, the demand for office real estate increased. For 2018, they rented and bought 2 million square meters of space, which also became a record figure. The reduction in vacant offices at the end of last year led to a 5–10% increase in rental rates. And, as analysts say, the growth in demand will continue. Investors quickly responded to growing demand. Therefore, a twofold increase in new construction is expected. It is scheduled to enter about 400 thousand square meters of space. However, developers are likely to try to speed up the work, knowing that there is a clear revival among tenants, and there is a shortage in some areas of the city. Therefore, the final digits of the input can still grow. The average rental rate is no longer a guideline. From 2013 to 2018, rates for offices in Moscow have not changed - a difference of 1%. But the difference between the rates of different objects is too great. For example, in Okhotny Ryad it amounted to 44 thousand rubles, and in Lianozovo - 20 times less, 2.2 thousand rubles. In addition, the size of rates in different locations is influenced by the development of transport infrastructure, the presence of large tenants. For example, rates rose markedly in Moscow-City (14%), in the area of ​​Technopark station (19%), where transport accessibility improved. As for MIBC, another factor also played its role. ILM managing partner Andrei Lukashev noted that, after large companies, state banks and ministries have moved there, the interest in this property in the Moscow City will only grow. Source: https://www.mperspektiva.ru/topics/predlozhenie-gotovitsya-k-sprosu/

MIPIM in Cannes was held for the 30th time, and this event remains the largest forum of the investment market. Every year, participants from Russia complain about a reduction in the representation of stands from our country, but every year they continue to go here and wait for the exhibition, which for many personifies the beginning of spring. The Russian delegation this year has shrunk compared to the past, but interest in the exhibition remains, it is still for many consulting and development companies to visit MIPIM is obligatory. There are really not many Russian projects on display, regional projects are not represented at all. But we note the qualitative growth of interaction with foreign colleagues and partners. For our compatriots, MIPIM ceases to be a meeting place with each other and becomes a platform for international cooperation and exchange of experience. This year we observed a great activity of Russian developers at the stands of such countries as Cyprus, where there are opportunities for obtaining EU citizenship. ILM has a project Zen Invest, which is responsible for the rental and sale of foreign real estate. We can say that traditionally this direction is interesting for private investment from individuals, however, the arrival of institutional investors can mean that the direction is moving to a fundamentally new level. At the same time, there are a number of segments that have always been considered exclusively by professional investors, for example, warehouse real estate. But the investments of private individuals, which have already become widespread in retail facilities, will sooner or later become relevant here. Thus, the general trends for the investment market are business diversification, on the one hand, and private investment, on the other. This year we took part in the Russian Breakfast, the theme of which was the readiness of the real estate market for technological breakthroughs and the need for transparency. These are very relevant topics now, and all this is also connected with new communication opportunities, new rules for doing business and new investment channels. What will remember the anniversary MIPIM? I will note a special prize received by the Zaryadie park. This is a big victory for all of us and, of course, for Sergey Kuznetsov! Congratulations to all involved in the project and wish us all more bright and bold urban planning solutions! Source - CRE https://cre.ru/expert/2076

ILM managing partners, Andrey Lukashev and Dmitry Myslin, visited the 30th anniversary exhibition on real estate in Europe - MIPIM 2019 (Cannes, France). Within the framework of MIPIM, the largest international forum is held, and seminars and conferences are organized on the subject of: investments, mortgages, ownership, organizational and legislative issues. MIPIM 2019 paid close attention to the development of the real estate sector in terms of environmental sustainability in the next 30 years. Andrei Lukashev took part in the discussion, which took place within the framework of the Russian Breakfast. Topic of discussion: “WTH? What’s the future? Investments in the future. Participants discussed the transparency and accessibility of information and blockchains, the globalization of investments, the changing format of real estate as a commodity, the change in financial products, the arrival of private investors in the commercial real estate market, and much more.

At the same time, the main demand will be formed by trading companies, express delivery, logistics and large retailers. According to Skladium (ILM), the volume of warehouse property inside the Moscow Ring Road at the beginning of 2019 is about 6 million square meters. Of these, about 515,000 "squares" can be attributed to the quality objects of classes "A" and "B +". The level of vacancy in 2018 amounted to 5.1%. “Today, a large number of transactions within the Moscow Ring Road are held within the framework of information fields and are carried out directly or through such platforms as CIAN and AVITO,” notes Alexander Perfilyev, Skladium (ILM) managing partner. - With the participation of brokers in 2018, transactions were made on a warehouse with a total area of ​​more than 164,000 square meters. For comparison: in total in the Moscow region about 1.6 million square meters were rented or bought. Such a ratio of conditions is not mandatory for demand. Source: http://logirus.ru/news/warehouses/sklady_-posledney_mili-_-_naraskhvat-_i_seychas-_i_blizhayshie_let_desyat.html

According to the results of 2018, developers, recognized as bankrupt, could not complete construction of a total of 3.6 million square meters in the Russian Federation. meters of housing, which corresponds to almost half of the volume of new buildings in Moscow, the largest market in the country, writes Kommersant. But this is not the limit, according to the Rating Agency of the Construction Complex (RASK), the portfolio of potential bankrupts reaches 7.8 million square meters. m. Mass care of small and medium-sized developers may begin in the summer, market participants say. RASK prepared a report for Kommersant, according to which in 2018 there were 150 developers at different stages of bankruptcy across the country, almost 2% more than in 2017. The total area of ​​objects of bankrupt developers amounted to 4.5 million square meters. m, in 2017 - 4.2 million square meters. The Agency took into account only those developers who sell housing in the framework of 214-FZ, which regulates shared construction. The most alarming situation among 111 developers, who in 2018 were declared insolvent: on their balance sheet 3.6 million square meters. m unfinished construction, or 77.8 thousand apartments. This is quite a serious volume: the figure is equivalent to the semi-annual volume of housing commissioning in Moscow or the average monthly figure throughout Russia. The operation of approximately 60% of the objects that in 2018 were on the balance of the bankrupts was supposed to start after 2020. The officials of the Ministry of Construction have already stated that facilities that are ready for less than 30% (and this includes housing, which is scheduled for commissioning in 2020 and later), have the greatest risk of bankruptcy. "This is the stage that requires the developer the highest costs, despite the fact that sales are still low," explains the director of RASK Nikolai Alekseenko. Other reasons for bankruptcies, he cites delays in the introduction of objects, cash gaps, poor-quality calculation of marketing models and initial errors in the business plan. According to "Kommersant", another 198 developers turned out to be under threat in 2018 - their creditors announced their intention to file for bankruptcy, stressed in the RASK. These companies are building 7.8 million square meters. meters of housing (861 objects, or 136 thousand apartments). According to the co-chairman of “Business Russia” Andrei Nazarov, by the end of 2019, the market may be short of up to 30% of small and medium developers. The reason will be the tightening of rules for working with interest holders: from July 1, 2019, the developer must transfer the attracted funds to the escrow accounts at authorized banks, they are unfrozen after the facility has been commissioned, while companies can build on shareholders' money and bank loans. This will increase the financial burden on developers, Mr. Nazarov is sure. Ruslan Arslanov, the sales director of the Granle Group, agrees that those whose financial situation does not allow them to receive bank loans are at risk of bankruptcy. He assumes that developers will also leave the market with projects in unclaimed locations and with poor transport accessibility. As a result, Egor Levchenko, director of the retail real estate department at ILM, is convinced that the new rules will lead to a consolidation of the market.

ILM Managing Partner Andrei Lukashev will take part in a discussion panel at the Russian Breakfast at the MIPIM exhibition on March 13 in Cannes. Date: March 13, 2019 Location: Cannes, France, Hotel Majestic, Croisette Salon Russian breakfast is a traditional meeting place for more than 200 leaders in the commercial real estate market. Here are going to: top management of development companies, owners of commercial real estate, business leaders, as well as experts in the field of management and consulting. This year, Russian Breakfast will be devoted to the theme “WTF: What’s the Future? Investments in 2050 ". Key issues: • How will the blockchain affect the commercial real estate market? • Brokers or artificial intelligence: who will make deals in the future? • New commercial real estate formats - profitable new investment products? • How will the commercial real estate market grow? Read more: http://www.imevents.ru/event/379

Following Louis Vuitton, the luxury French fashion house Christian Dior closes its only women's store in the Urals, located in the gallery on Sacco and Vanzetti 74 in Yekaterinburg. Christian Dior, owned by the LVMH holding, plans to develop a network of cosmetic stores in Russia. As the director of the retail real estate department of ILM, Egor Levchenko, noted, "the company decided to focus on the development of cosmetic retail, since cosmetics of even a high price segment in Russia now may be more in demand than luxury clothing." Read more: https://ru.fashionnetwork.com/news/Christian-Dior-ukhodit-iz-Yekaterinburga.1071197.html#.XHOK_egzaUk

Yandex.Market leased 3,900 sq. M. 600 workplaces at Workki co-working on Zubovsky Boulevard. According to the Amo.ru service, the rental price at Workki on Zubovsky Boulevard is 25,000 rubles. per workplace per month. The company rented large areas, for which it could receive a discount of about 20%, believes ILM managing partner Andrei Lukashev. Read more: https://www.vedomosti.ru/realty/articles/2019/02/10/793739-yandeksmarket-kovorking

The rising cost of construction, borrowing, increased tax burden and operating costs make offices less interesting for investors. At the end of 2018, their delivery in Moscow decreased to a record low level, while the activity of tenants, by contrast, increased. In such conditions, the vacancy rate of the premises decreased, their rental rates increased, and the amount of discounts offered fell three times. These trends will only strengthen this year, the consultants are confident. The total delivery of high-quality office space in Moscow following the results of the last year amounted to 125 thousand square meters - it is almost 3.3 times lower than the similar value of 2017 (408 thousand square meters) and at the same time the lowest figure since 2009. The sharp decline in office construction is due to a complex of reasons: "The cost of construction, land, bank loans, taxes, cadastral valuation have increased, and the cost of operating business centers has almost doubled since 2014." At the same time, developers are not sure that effective demand will grow. According to ILM managing partner Andrei Lukashev, in some projects, construction costs have increased by 1.5 times. “Another component of the reduction in office development is a shortage of suitable sites,” he adds, adding that within a kilometer radius around existing metro stations everything is built up with housing, and the new stations turn out to be unclaimed office locations. “Professional business center developers - Capital Group, Forum Properties - no longer build such facilities, reorienting to housing or investment in Europe,” says Mr. Lukashev. He is confident that the office market will not return to serious volumes of construction: “The volume of free space will be about 200 thousand square meters per year plus built to suit (construction for a specific customer. - “Kommersant”)  Source: https://www.kommersant.ru/doc/3859499

The Russian division of the Societe Generale group is negotiating the lease of offices in the Oko complex in Moscow-City for its banks. Annually renting space here will cost 400-500 million rubles. “Negotiations in the final stage, an agreement of intent was signed. The group is already holding tenders among designers and contractors for repair work in the office, ”says one of RBC's interlocutors, adding that the company plans to sign a long-term lease agreement for up to ten years. Managing partner of ILM consulting Andrei Lukashev notes that the contract for such a period in the building will cost approximately 5 billion rubles. including VAT and maintenance charges. It is cheaper than offices of the same area in the towers of the Moscow-City. More on RBC: https://www.rbc.ru/business/18/01/2019/5c406a819a7947da2e86706f?from=main

The owner of Christian Dior, LVMH holding, will launch perfumery and cosmetic monobrand stores of the famous brand in Russia. A monobrand bet is an opportunity to offer more additional products and options. “Indeed, Christian Dior plans to develop a chain of cosmetics stores,” says Yegor Levchenko, director of the retail real estate department at ILM. “The company decided to focus on the development of a cosmetic retail, since cosmetics of even a high price segment can now be more in demand in Russia than luxury clothing,” he explains. More on RBC: https://www.rbc.ru/business/24/12/2018/5c1d035f9a79477685ec8281

Rostelecom's subsidiary, Central Telegraph, PJSC, closed a deal to sell an office building of 12,000 square meters between Nikitsky and Gazetny Lane. The amount of the transaction amounted to 2 billion rubles. From the message of the Central Telegraph it is known that the complex was bought by LLC “First”. It belongs to the family of the founder of one of the largest Siberian retailers - Maria-Ra, Alexander Rakshin. How LLC "First" is going to use the building is still unknown. ILM Managing Partner Andrei Lukashev added that at the moment there is a certain shortage of office real estate in the center of the capital of the Russian Federation. The second option is the redevelopment of the building under the service apartments: given the location of the building in the very center of Moscow, this option will be more economical. Read more: http://www.amic.ru/news/430296/