MARKET REPORT Knightfrank /research MOSCOW REGION

Total take-up amountedto 1.86 million sq mWAREHOUSEMARKET REPORTMOSCOW REGIONQ3 2021knightfrank.com/researchBy the end of 9 monthsof 2021 some 764,000 sq mwere commissioned inthe Moscow region

WA R E H O U S E P RO P E RT Y M A R K E T. M O S COW R E G I O NSupplyKonstantin FomichenkoRegional Director, Industrial & WarehousesKnight Frank“The third quarter became a record in thehistory of the market for the absorptionof warehouse space, and this gives usevery reason to believe that by the end of2021 we will set a new benchmark for thevolume of demand for warehouse spacein the Moscow region at the level of 2.4-By the end of 9 months of 2021,764,000 sq m of quality warehouse realestate premises were commissioned inthe Moscow region, which is 28% higherthan the same indicator of 2020. Thetotal warehouse stock in Moscow regionamounted to 16,8 million sq m.According to the results of nine monthsof 2021, the new supply was dominatedby built to suit projects accounting for52% of completions, which in absoluteterms is 396,000 sq m. The largest objectwas the logistics center for the onlineretailer Ozon, which includes a sortingcenter and an order fulfilment factory inthe Orientir Zapad warehouse complexwith an area of 154,000 sq m.About 33% of the new completions or252,000 sq m were speculative projects.It is worth noting the commissioningof a new building in the warehousecomplex «Atlant-Park» with an area of50,000 sq m, as well as the commissioningof a new building in the «South Gate»industrial park with a total area of43,000 sq m.According to the results of 9 months of2021, the share of facilities for end use inthe total volume of the new supply was15%. The largest object was the fourthphase of the distribution center of theonline retailer Wildberries with a totalarea of 54,000 sq m.2.6 million sq. m. A consequence of thehigh demand was the minimum level ofvacancy, which resulted in a sharp increaseKey indicatorsin rental rates“.Keyconclusions By the end of 9 months of 2021 some764,000 sq m were commissioned in theMoscow region The vacancy rate reached 0.6% Total take-up amounted to 1.86 millionsq m Weighted average asking rental rate in theMoscow region reached RUB 4,900 / sqm / year triple net.Q3 2020Q3 7121,00052,50,66Weighted average asking rental rate inclass A for BTS projects, RUB/sq m/year *4,0504,800 –5,3005Weighted average asking rental rate inclass A for finished premises,RUB/sq m/year*4,0004,90051,000 005Total supply volume of quality warehousespace, thousand sq mNew delivery,thousand sq mLease and purchase transactionvolume, thousand sq mincluding:Lease and purchase in deliveredfacilitiesconstruction of new facilitiesShare of vacant space,%Operating payment range,RUB/sq m/year, excluding VAT **Range of the asking price of the sale ofa ready-made dry warehouse of class A,RUB/sq m excluding VAT***Hereinafter, asking rent rate for a standard Class A dry warehouse with no VAT,operating expenses, and utility charges.Hereinafter, operating expenses range for a standard Class A dry warehouse.Source: Knight Frank Research, 20212

WA R E H O U S E P RO P E RT Y M A R K E T. M O S COW R E G I O NDynamics of new delivery and transaction volumeNew delivery volumethousand sq m2,500Transaction 0152016201720182019Q1–Q3202120202021FSource: Knight Frank Research, 2021The vacancy rate in the Moscow regionwarehouse market declined to 0.6% bythe end of Q3 2021, becoming the lowestsince the first half of 2008, when thevacancy rate was 0.4%. In absolute terms,101,000 sq m remained vacant by theend of Q3 2021. The decrease in vacantspace is facilitated by the consistentlyhigh demand, which subsequently leadsto the situation when the speculativeprojects are almost fully leased beforethe commissioning, another reason is thegeneral lack of speculative projects.Distribution of completedwarehouse buildings by type ofconstructions, Q1–Q3 2021Built-to-suitSpeculativeThe lowest volume of vacant warehousespace in is observed in the north-east ofthe Moscow region: there are practicallyno free spaces in this direction.The largest change in the share ofvacant space occurred in the westerndirection, where the share of vacantspace decreased by 6.5 p.p. compared tothe final indicator in 2020. The decreasein the share of vacant space is due amongother things to the withdrawal of vacantwarehouse blocks from the market in theKholmogory industrial park and in thePushkino LP.NORTH0.5%For end useNORTHWESTNORTHEAST0%1.4%15%Compared to the final indicator of 2020,the vacancy rate in the Moscow regiondecreased by 1.7 p.p. In absolute terms,the decrease in the share of vacantspace in 9 months of 2021 amounted to262,000 sq m.The largest volume of vacant space wasobserved in the north-west - more than28,000 sq m, or 27% of the total vacantspace volume.Distribution of the share of vacantspace by areas based on theresults of 9 months of ce: Knight Frank Research, 2021EAST0.1%0.5%SOUTH0.1%Source: Knight Frank Research, 2021Vacancy urce: Knight Frank Research, 202132017201820192.3%20200.6%Q32021

WA R E H O U S E P RO P E RT Y M A R K E T. M O S COW R E G I O NLargest objects commissioned in 9 months of 2021 in the warehouse real estate market of Moscow regionObjectDeveloper / OwnerTotal area, sq mOrientir154,029PNK Group92,374Wildberries Distribution CenterWB Development53,500PSK "Atlant-Park", building 33PSK "Atlant-Park"50,468Radius Group43,562Ozon Distribution Center"VseInstrumenti.ru" Warehouse Complex"South Gate" IPSource: Knight Frank Research, 2021A slight increase in the share of vacantspace was noted only in the south-west 0.3 p.p. compared to the final indicatorof 2020.DemandBy the end of 9 months of 2021 the totaltake-up in the Moscow region amountedto 1.86 million sq m, which is almost 75%higher than the result of 9M 2020, whenthe volume of transactions amounted to1.07 million sq m.The largest volume of transactions wasconcluded in the south and north-eastof the Moscow region. The southerndirection accounted for 35% of the totaltake-up volume, which in absolute termsis 650,000 sq m. The largest deal inthe south was the purchase of the Efesindustrial and warehouse complex withan area of 70,000 sq. m. by Ixcellerate toaccommodate a data center.The north-east accounted for 28% ofthe total volume of transactions, or519,000 sq m in absolute terms.The largest deal was the lease of270,000 sq. m. in «PNK ParkPushkino-2» by Ozon.By the end of 9 months of 2021, 50%of the take-up volume were transactedon the secondary market. The declineof vacant secondary spaces wasprimarily contributed by online-retailers.It is worth noting such majortransactions as the lease of 55,000 sq mby Aliexpress in the PLT-Chekhovwarehouse complex, as well as the lease of51,000 sq. m in the “Istra” logistics parkby the online retailer Ozon.Take-up volume by direction, 9M 2021North – 157,154 sq mNorth-East – 519,043 sq mNorth-West – 108,653 sq mEast – 69,849 sq mWest – 60,360 sq mSouth-West – 79,582 sq mSouth-East – 218,006 sq mSouth – 650,216 sq mSource: Knight Frank Research, 2021Distribution of the transactions bytype, 9M 2021Distribution of transactions bytenant/buyer, 9M 2021LeaseOnline-retailBTS for leaseRetailTransport and logisticsSaleDistributionBTS for urce: Knight Frank Research, 20214Source: Knight Frank Research, 2021

WA R E H O U S E P RO P E RT Y M A R K E T. M O S COW R E G I O NLargest transactions concluded in the warehouse real estate market of Moscow region for 9 months 2021Tenant / buyerType of companyOzonOnline-retailProperty / location Total area, sq mTransaction typePNK Park Pushkino-2269,698BTS leaseDNSRetailLP Kholmogory88,079BTS leaseLPPRetailPNK Park Zhukovsky79,947BTS leaseIxcellerateOtherPSK Efes70,534SalePLT Chekhov55,000LeaseAliexpressOnline-retailSource: Knight Frank Research, 2021Among the built-to-suit deals, the mainvolume consists of transactions withsubsequent lease. According to the resultsof 9 months 2021, such deals accountedfor 39% of the total take-up volume inthe Moscow region. The increase in theshare of built-to-suit transactions withsubsequent lease has been observed since2019.The online-retailers remained themain demand drivers accounting for34% of the 9M 2021 take-up volume,which in absolute terms is more than640,000 sq m.Traditional retailers accounted for 26%of the total transactions volume, or458,000 sq m in absolute terms. It isworth noting the signing of a built-tosuit lease agreement by the omni-channelretailer DNS in the Kholmogory logisticspark (88,000 sq. m).Warehouse complex «Nikolo-Khovansky»5CommercialtermsThe weighted average rental rateamounted to 4,900 RUB/sq m/yeartriple net by the end of the firstnine months of 2021 which is 21%higher compared to the final indicatorof 2020, when the weighted averagerental rate was 4,050 RUB/sq m/yeartriple net.

WA R E H O U S E P RO P E RT Y M A R K E T. M O S COW R E G I O NOn the back of extremely low vacancyrate, as well as the shortage of newspeculative supply, the weighted averagerental rates are derived based on futureprojects.Dynamics of average asking Class A rental rates, RUB/sq m/year triple net4,9004,700The highest level of rental rates isobserved in the south-western andwestern directions – 5,000 RUB/sq m/year triple net.4,5004,3004,0003,700The lowest level of rental rates is observedin the east and south-east of the Moscowregion – 4,400 RUB/sq m/year triplenet.2013201420152016201820192020Q3 2021Source: Knight Frank Research, 2021However, the asking rental rates arehigher near MKAD. For example,in the 0-5km from MKAD zone therental rate is in the range of 5,500–6,500 RUB/sq m/year triple net.Average weighted asking rental rates in directions of the Moscow region,RUB/sq m/year triple net7A10skoy.5,0005,000RUB/sq m/yearhw.eoy.oye hwRUB/sq m/year.hw5,500RUB/sq m/year6,000RUB/sq m/yearRUB/sq m/yearkonsye.hw4,800RUB/sq m/year4,400zaskzhyaluKaor5,200RUB/sq m/yearRUB/sq m/yearovw.eh4,600RUB/sq m/year6,500NMys koRUB/sq m/yearRUB/sq m/year7,000Mozhaysko yevKiew.ye hinskoМОСКВА9,0005,000skGorkov7,000RUB/sq m/yearRUB/sq m/year5,000RUB/sq m/year7,000RUB/sq m/yearBy the end of 2021 we expect a recordbreaking level of take up at the range of2.4-2.6 million sq m.RUB/sq m/yearRUB/sq m/yeare hwVarshavskoye hw.orizh4,700RUB/sq m/year6,0007,500ehw.4,800RUB/sq m/year07RUB/sq m/yearoyAccording to forecasts of Knight Frankanalysts, the vacancy rate will remain lowand by the end of 2021 it will be at thelevel of 0.3-0.5%A15,0005,000RUB/sq m/yearNovsk4,800RUB/sq m/yearlavw.e hk oydsВолоколамBy the end of 2021, the totalannualскоеvolume of new supply in Moscow regionш.will amount to 1,0–1,2 million sq m.4,800RUB/sq m/yearosagrForecastYarnniLeitrovskoye hw.DmThe asking rental rate for qualitywarehouses within the city is about8,000–10,000 RUB/sq m/year triple net.The weighted average asking rental ratewill continue to grow throughout 2021:according to Knight Frank forecasts, bythe end of the year it will amount toRUB 5,100-5,300 / sq m / year triplenet. The growth in rental rates is duenot only to the consistently high demandfor warehouse facilities, but also to thegrowth in construction costs, whichforces developers to raise rental rates.3,60020174,0003,9004,800RUB/sq m/year4,500RUB/sq m/yearA107Source: Knight Frank Research, 2021ескоанНоворяз.шLargest properties scheduled for delivery in 2021Developerш.ВаршавскоеX5 Retail Group Distribution CenterBosch Siemens warehouse in LP SofyinoSource: Knight Frank Research, 20216Total area, sq mш.WB DevelopmentWildberries Distribution Center in ElektrostalКаширскоеObject100,000Smart development group89,384AT "Real Estate"58,790