Market Indicators Return to Pre-Crisis Levels

Market Indicators Return to Pre-Crisis Levels

According to Knight Frank, a consulting company, the development and sales of new warehousing and industrial properties in Q3 2012 are near to reach the levels of 2007.

Demand and Supply

Market analysis gives sufficient reason for optimism and positive forecast for logistics and entire economy. Quality warehousing development grows. Developers are more motivated and results are already noticeable. Analysts expect the annual growth in A and B classe warehouses to reach 735 K m2, double the increase of 2011. The market sees custom objects (built-to-suit) appearing, built specially for sale.

Demand also breaks records: about 500 K m2 of quality warehousing were built and sold in Moscow region in Q3. “To compare – it is almost 50% of the Russian sales in the preceding year”. The absolute sales exceeded the level of the last year by 10%. These indicators could have been even higher if the supply had been sufficient. Vacancy rate remains very low (1-2%), the growing development volumes cannot satisfy market needs yet.

There is good news as well. Companies get accustomed to current economic conditions and become more comfortable with the volatility of global markets. “Average transaction value grows” (by 50% versus 2011). As the quality warehousing market is not saturated yet, the rent continues to grow. It added 3% y.o.y: a year ago, an average ask rent ($130-$140 per square meter) provided some space for discount, but “it is an average closing rent now”.

Logistics slightly increased its share as a buyer industry, but in general it stayed the same as in previous years – 17-18%. This fact can be regarded as evidence of continued trust to the service of logistics operators.

Tomorrow

The situation in the current year allows forecasting the near future. Knight Frank experts believe that “development in 2013 will exceed the level of 2007, which is a positive signal: the last year’s record investment into was made into the real estate construction that will be completed in 2012-2013”.

Demand will also rise to pre-crisis levels: “warehousing sales in Moscow region will reach about 1.2 M m2, i.e. 20% higher than the last year. In this way, the indicator will reach the level of 2007 by the end of 2012, and if no serious macroeconomic shocks occur, the demand will stay strong in 2012-2013”.

That is to say, even record-high development will not cut high demand for warehousing premises and logistics services. Zoya Li, General Director of “20A” logistics agency, says “Positive dynamics in the warehousing real estate is not just a ground for our optimism, but also a reminder about strong competition in logistics industry. Quality of services and individualized, innovative approach, attention to customer needs remain the key to success in the growing market”.