Dmitry Khlebnikov, Head of Real Estate Markets Department at Accent Capital, spoke at the online conference "Office Coup: In the Horizons of New Reality".
The event was another web meeting organized by CRE-events during the self-isolation regime. The participants of the event noted that although the current situation will not pass for the office market without a trace, it is not critical, telling why this sector of commercial real estate most likely does not expect a serious decline. Accent Capital was a partner of the conference.
Rent payments in the office sector do not depend on tenants' turnover. Early withdrawal from lease agreements is hindered by the penalties prescribed in them. Nevertheless, financial problems of residents force the owners to make concessions, reducing their own operating income. Other problems in the sector are the predicted decline in new demand and the reduction of space occupied by tenants due to the transfer of some staff to remote work.
Knight Frank assumes that up to 20-30% of employees may not return to their offices, which will force companies to rent less. However, this will happen gradually and will not lead to a sharp collapse of the market. In contrast to the previous crises, now the office market can hardly be called overheated. At present the vacancy rate is 8.6% in class A and 6.6% in class B. In the most popular Moscow districts it reaches 2-5%.
In 2019-2020 the demand significantly exceeded the new supply, and developers have just started to think about the increase in commissioning volumes. During the first quarter about 56 thousand square meters of new offices were commissioned - 15.4 thousand square meters in class A and 40.4 thousand square meters in class B. Net absorption exceeded 187 thousand square meters.
In 2020 only 522,000 square meters of new offices were announced for commissioning, of which about 190-200,000 square meters can be postponed. In the previous crises, on the contrary, maximum commissioning rates were recorded - over 1 million square meters per year.
These figures, as well as the fact that the office market is inert with respect to external factors, indicate that one should not expect a sharp increase in vacancy and a sharp fall in rental rates.
Knight Frank estimates the maximum possible growth in the share of vacant space at 15%, but only if the government supports developers and the share of postponed projects does not grow much.
During conference the thesis that at the general preservation of rates at pre-crisis level owners of some objects will reduce tariffs to provide higher occupancy has sounded. At first glance, this situation plays into the hands of investors, giving an opportunity to acquire stressful assets at a significant discount.
Dmitry Khlebnikov, Head of Real Estate Markets at Accent Capital, said in the opposite vein: "We thought about this five years ago and 10 years ago. We are not interested in those objects for which a big discount is given. And high-quality and successful in terms of filling objects with discounts are not sold and will not be sold".
Dmitry Khlebnikov Director, Real estate markets
The reduction of foreign participation in Russian offices, which took place in 2015, is also a significant factor. The Russian investment market has been in self-isolation for five years, leaving the most resilient system investors.
Despite the fact that the reduction in foreign participation, Dmitry Khlebnikov believes that overall interest from foreign players remains. This is due to the fact that the yield of Russian objects is higher than in Europe, where supply is excessive or close to excess. However, the active interaction with foreign investors is hindered by foreign policy risks. The expert believes that the second problem is the lack of quality objects on the open market.
Dmitry Khlebnikov Director, Real estate markets
Dmitry Khlebnikov considers the departure of investors in other segments - retail and warehouse real estate as a forced measure, as the most attractive office segment provides very few options, and "money should work.
The conference "Office Coup: In the Horizons of New Reality" featured experts from Knight Frank, O1 Properties, AVIKA Management Company and others, who expressed the general opinion that the current crisis is the least dangerous for the office segment of commercial real estate.
Dmitry Khlebnikov has been in charge of commercial real estate for over 15 years. Before joining Accent Capital, he managed the development of logistics complexes of the international alliance STROYFASA GIFFELS, with a total area of more than 500,000 square meters. At Accent Capital, Mr. Khlebnikov is responsible for the overall management of the group's commercial real estate assets - shopping, office and logistics centers - which include investment strategy development, business plan preparation, investment valuation and other (Fund management), development of key asset management principles, asset acquisition/sale, asset management plan development, financial reporting, organization of commercial real estate management and other (Asset management), overall control over commercial real estate assets. Dmitry is a graduate of the Gubkin State Academy of Management. Dmitry is a graduate of the Sergo Ordzhonikidze State Academy of Management.