BFM.RU: Growth ailments: "Moscow-City" is expanding faster than the market can absorb

Due to the introduction of new properties, the vacancy rate has already reached 42%.

MMDC "Moscow City" is one of the most ambitious projects in Moscow in recent years. Thanks to it, the city finally got modern skyscrapers - one of the essential attributes of any respectable metropolis. However, the start of this business cluster was not successful: scandals around the main tower, problems with transportation accessibility and logistics, and the prospect of working in the midst of construction initially deterred tenants. But as the planned properties were completed, the situation with access and parking improved, and three metro stations were opened, things seemed to be getting better. The demand for offices in MMDC began to grow, and vacancies began to decrease as developers announced new properties.

However, the crisis in the first half of 2015, the results of which became a make-or-break moment for all segments of the real estate market, revealed that the vacancy rate in Moscow City is one of the highest in the city, reaching almost 45%.

However, there has been no mass exodus of tenants from this business cluster: moving out is too costly for many companies.

As a result, the average rental cost here is currently 450-650 dollars per square meter per year. The total office space volume is equal to 856 thousand square meters, of which approximately 738 thousand square meters belong to Class A. According to experts' forecasts, Moscow-City will account for about 25% of the new office supply in the capital this year, and the amount of space here by the end of 2015 will reach close to 1 million square meters, which will undoubtedly increase the vacancy rate.

In this situation, developers who have already invested in new projects can only hope that before the massive influx of new spaces, expected in 2016 and 2018, the market will be able to absorb a large portion of the vacant offices. However, it is difficult to predict the likelihood of such a development in the current economic situation.

In the meantime, Moscow-City can only rely on its competitive advantages, trying to attract tenants with the rare opportunity to rent premises with an area of more than 30 thousand square meters, prestigious Class A objects with panoramic views, and improved transportation accessibility.

But, as we know, in addition to commercial real estate, there is also residential real estate in Moscow-City, represented by the "apartments" format. Several years ago, when such offerings were just starting to be available for sale, developers, taking advantage of the uniqueness of the project, boldly classified them as premium or even elite segment. Prices and areas corresponded accordingly: from 10 to 30 thousand dollars per square meter with an average lot size of 150-180 square meters. Now, when clients are no longer inclined to throw away money, developers had to face the reality and lower the class. Currently, apartments in Moscow International Business Center, with rare exceptions, are designed for a business budget. And this means that their area starts from 60 square meters, and the average cost per square meter has dropped dramatically.

As of today, around 260 thousand square meters of housing in under construction and completed buildings, or 1,500 apartments, have been introduced to the market in Moscow-City. Buyers can choose from 350 properties on the primary market and there are more than 100 listings on the secondary market. The average budget for these offerings is 1.5 million dollars. On one hand, there aren't that many vacant spaces yet, and on the other hand, the results for the first half of the year were quite sluggish: only 40 apartments were sold in six months.

Now, the housing here is positioned as "premium panoramic view apartments in an area with developed infrastructure." At the same time, developers in new projects try to incorporate green areas into the construction, hoping to attract new clients. However, some potential buyers are currently wary of the abundance of glass, concrete, and high traffic density.