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Highlights• As a result of the global economic crisis, demand for office space in Moscow

has greatly reduced and rental levels have fallen. In light of this, it is

increasingly common for existing tenants to seek to renegotiate lease terms.

• Office rents have more than halved since the middle of 2008. The average

class A rent (excluding VAT and operating expenses) has fallen to $600 per

sq m per annum, while the average class B rent currently stands at $400 per

sq m per annum.

• Large volumes of new space have continued to come to the market, with

approximately 950,000 sq m of new high quality offices, including 250,000 sq m

of class A premises, being released during H1 2009. This has, though, created an

imbalance between supply and demand, and vacancy rates have risen sharply,

reaching 19% for class A offices and 20.5% for class B space.

H1 2009

MOSCOWOffice market report

2

H1 2009MOSCOWOffice market report

Moscow City – developments

Site Development Total size (sq m) Office component (sq m) Status Completion- Expocenter 85,000 - partially complete 2009

0 Tower 2000 61,067 50,000 complete 2002

1 Parking 170,101 - under construction 2010

2 Public Square and Moscow City Museum 19,000 - under construction 2010

3 City Palace Tower 169,000 80,000 under construction 2010

4 Imperia Tower 287,724 98,247 under construction 2010

6 Central Core Parking & Metro Terminal (Underground) 278,000 - under construction 2010

6 Central Core Public Complex 22,000 - under construction 2010

7-8b Mall of Russia 179,930 - under construction 2009

8a Multifunctional Recreation Complex 50,190 - under design n/a

9 Capital City Complex 288,680 72,315 partially complete 2009

10 Naberezhnaya Tower 254,000 150,000 complete 2007

11 Transport Terminal 228,000 122,450 suspended

12 Eurasia Tower 203,104 82,817 under construction 2010

13 Federation Complex 423,000 181,800 partially complete 2010

14 Mercury Office Tower 158,528 86,000 under construction 2010

15 Moscow Government Administrative Complex 636,330 n/a suspended

16a Multifunctional Office-Administrative Complex 249,600 122,500 suspended

16b Parking 180,000 - under design 2011

17-18 Russia Tower 565,000 140,000 suspended

19 Northern Tower 136,580 78,000 complete 2008

20 Multifunctional Business-Expo Complex 180,000 70,936 suspended

21 Yuri Dolgoruky n/a n/a under design 2011

Source: Knight Frank

Moscow River

Krasnopresnenskaya naberezhnaya

1st Krasnogvardeysky proezd

4 32

0

Expocenter678a 8b

910

11

12 13

16a 16b

17

18

18

19

19

1

14 1520 21

Complete

PartiallyComplete

2009

2010

Under design

Suspended

Moscow City(Moscow International Business Center)

6.1

6.2

9.3

9.2

9.1

8.2

8.1

7.1

7.3

7.2

7.4

K

utuzovsky Avenue

Novy Arbat Str

Leningradsky Avenue Tverskaya Str

1

2

6

7

3

4

5

8

10

11

12

13

9

Komoso

molsky Avenue

Fourth Transport Ring

Dmitr

ovsk

oye H

ighw

ay

Leninsk

y Ave

nue

Mira

Ave

nue

Krasnoprudnaya Str

Rusa

ko

vskaya Str

Entuziastov Highway

Nizhegorodskaya Str Volgogradsky Avenue

14

15

17

16

Garden Ring

Third Transport Ring

Mytnaya Str

Novo

slob

odsk

aya S

tr

Pros

pekt

Mira

Capital City, phase II(52,700 sq m)

WTC, phase III(70,000 sq m)

Nordstar Tower(148,000 sq m)

Monarch(192,800 sq m)

White Square(74,000 sq m)

Diamond Hall(61,500 sq m)

Legion III, stage II(46,000 sq m)

Greenwood(130,500 sq m)

Nagatino i-Land(216,900 sq m)

MirLand(75,000 sq m) Dvintsev

(58,000 sq m)

Barkli Plaza(24,600 sq m)

Class A

Key projects 2009

completed underconstruction

Class B+

Knight Frank isproject consultant

Vivaldi Plaza(100,500 sq m)

Domnikov(132,000 sq m)

1. Central Business Districts2. GR South3. GR West4. GR North5. GR East

Borders of business districtsBorders of subdistricts

6. TTR South6.1 Leninsky6.2 Tulsky

7. TTR West7.1 Presnensky7.2 City7.3 Kievsky7.4 Khamovniki

8. TTR North8.1 Tverskoy-Novoslobodsky8.2 Prospekt Mira

9. TTR East9.1 Basmanny9.2 Tagansky9.3 Volgogradsky

10. FTR North11. FTR South12. FTR West13. FTR East14. MKAD North15. MKAD South16. MKAD West17. MKAD EastGR = Garden RingTTR = Third Transport RingFTR = Fourth Transport Ring

3

www.KnightFrank.com www.KnightFrank.ru

Moscow

Table 1

Moscow submarket data

Transport Direction Sub Max prime Average Average Transport ring Stock Vacancy Transportring district rent ($ per class A rent class B+ rent average rent (class A and rate ring vacancy

sq m pa) ($ per sq m pa) ($ per sq m pa) ($ per sq m pa) B+) (sq m) rate

1 Boulevard Ring Centre CBD 1,100 850 700 800 590,400 19.3% 19.3%

2 Garden Ring South GRS 1,050 800 500 650 764,000 14.4% 12.1%

3 West GRW 850 750 700 533,300 5.8%

4 North GRN 850 700 650 609,000 10.3%

5 East GRE 850 700 550 217,400 24.7%

6.1 Third Transport Ring South LEN 800 700 600 600 132,200 12.9% 22.7%

6.2 South TUL 700 650 450 523,100 20.9%

7.1 West PRES 750 700 450 186,400 29.1%

7.2 West CITY 1,100 850 800 424,600 15.4%

7.3 West KIEV 820 650 550 196,200 40.2%

7.4 West KHAM 750 750 650 179,200 21.7%

8.1 North TV-NOV 1,000 750 550 609,700 26.9%

8.2 North PRM 650 600 550 289,600 6.3%

9.1 East BASM 650 - 400 401,300 21.0%

9.2 East TAG 900 750 550 248,000 13.7%

9.3 East VOLG 500 - 400 176.100 56.3%

10 Fourth Transport Ring North FTRN 500 500 400 450 464,300 27.7% 20.8%

11 South FTRS 550 500 425 685,700 20.8%

12 West FTRW 550 500 450 408,700 11.7%

13 East FTRE 550 - 425 363,400 29.6%

14 MKAD North MKADN 500 500 300 350 377,100 27.7% 26.5%

15 South MKADS 400 - 350 545,200 26.1%

16 West MKADW 500 400 350 703,800 17.1%

17 East MKADE 325 - 250 171,900 63.2%

Total 550 9,800,600 20.3%Source: Knight Frank

Table 2

Key occupier transactions, H1 2009

Company Acquired space (sq m) Address Property Class QuarterLeaseGazpromTsentrRemont* 8,550 27, Obrucheva St. Gas Field B+ Q2

Holding MRSK 8,087 26, Ulansky ln. Office building B+ Q2

ABBYY 7,380 2-B, Otradnaya St. Otradny BC B+ Q2

KES Holding 5,296 7 km from MKAD, Novorijskoye Hw. Riga Land B+ Q2

Alcatel-Lucent 4,560 27, Elektrozavodskaya St. Le Fort B+ Q2

Russian Telephone Company 3,300 3/1, Begovaya St. NordStar Tower A Q2

First Insurance Company* 2,900 62/13, Sharikopodshipnikovskaya St. Novoostapovskiy B+ Q1

Diageo 1,850 7/1, Gasheka St. Ducat Place II A Q1

Purchase (owner occupation) Sberbank 55,000 12A, Yuzhnoportoviy 2nd Passage South Port B+ Q1

Inter RAO UES 30,000 27, Bolshaya Pirogovskaya St. Lootch B+ Q2

*Knight Frank acted as a consultant on the deal Source: Knight Frank

4

5

H1 2009MOSCOWOffice market report

Nagatino i-Land

400

600

800

1,000

1,200

1,400

H1H2H1H2H1H2H1H2H1H2H12004 2005 2006 2007 2008 2009

Figure 1

Average Class A rentsUS$ per sq m per annum


0

5

10

15

20

H1H2H1H2H1H2H1H2H1H2H12004 2005 2006 2007 2008 2009

Figure 3

Class A vacancy rate%


0

200

400

600

800

1,000

1,200

H1H2H1H2H1H2H1H2H12005 2006 2007 2008 2009

Take-up Construction completions

Figure 2

Take-up vs Construction completionssq m (000s)


0

200

400

600

800

1,000

MKADFTRTTR*Moscow-City

GRBR

Figure 4

Class A rents by submarketUS$ per sq m per annum

Source: Knight Frank* Excluding Moscow-City

0

1,000

2,000

3,000


GRBR

Figure 5

Distribution of total office stocksq m (000s)

Source: Knight Frank* Excluding Moscow-City

0

5

10

15

20

25

30


GRBR

Figure 6

Vacancy rates by submarket**%

Source: Knight Frank* Excluding Moscow-City ** Based on Class A and Class B properties

6

9

12

15

H1H2H1H2H1H2H1H2H12005 2006 2007 2008 2009

Figure 7

Prime office yields%


Vivaldi Plaza

AmericasUSABermudaBrazilCaribbeanChile

AustralasiaAustraliaNew Zealand

EuropeUKBelgiumCzech RepublicFranceGermanyHungaryIrelandItalyMonacoPolandPortugalRomaniaRussiaSpainThe NetherlandsUkrai ne

AfricaBotswanaKenyaMalawiNigeriaSouth AfricaTanzaniaUgandaZambiaZimbabwe

AsiaCambodiaChinaHong KongIndiaIndonesiaMacauMalaysiaSingaporeThailandVietnam

The GulfBahrain

Moscow

Kyrill StarodoubtsevDirector – Office Head+7 (495) 981 [email protected]

Maria KotovaExecutive Director+7 (495) 981 [email protected]

Natalia SazonovaHead of Research+7 (495) 981 [email protected]

London

Chris Bell Managing Director, Europe+44 (0)20 7629 [email protected]

Joe SimpsonPartner, International Research+44 (0)20 7629 [email protected]

Matthew ColbourneSenior Analyst+44 (0)20 7629 8171 [email protected]

© Knight Frank LLP 2009

This report is published for general information only. Although high standards have been used in thepreparation of the information, analysis, views and projections presented in this report, no legal responsibilitycan be accepted by Knight Frank Research or Knight Frank LLP for any loss or damage resultant from thecontents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Research.

Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.

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