Analytics

General Market Dynamic

In 2011 the overall situation on the market of corporate residential rent in St-Petersburg could be characterized as a «spring thaw» after a long severe winter – global economic crisis of 2008-2009 which caused stagnation of national economies, sharp decrease in activities on the local markets, shrinking demand on corporate residential rental market, lower rent rates, etc. Gradual stabilization in market indexes which began in 2010 formed a positive trend of market revival and restoration to the pre-crisis level. Starting from the middle of January 2011 a high and stable activity (demand) was dominating on the corporate residential rental market and remained high until the end of autumn, reaching its peak in September-October by amount of transactions. Interestingly enough, even summer months (July, June) saw rather high activity comparable to traditionally successful autumn months with a slight decrease only in August (a period of seasonal holidays). Starting from the beginning of November 2011 a gradual decrease in market activity was taking place until the middle of December. Second half of December is traditionally a low activity period due to the Christmas and New Year holidays when many expat employees are leaving Russia for their home countries. Generally the price fluctuations reached a point of 5-10% caused by seasonal change in demand, decreasing during the low activity period and increasing at times of high market activity.

Rental rates

1-room apartments total area 40-60m2, rent 1000 - 1700 euro/month 2-room apartments total area 50-100m2, rent 1500 - 2500 euro/month 3-room apartments total area 70-120m2, rent 2300 - 3500 euro/month 4-room apartments total area 110-160m2, rent 3000 - 5000 euro/month 5-room apartments total area 160-250m2, rent 4000 - 7000 euro/month 6 and more rooms total area 220-350m2, rent 5000 - 10000 euro/month By the end of October the market showed signs of indecision which was caused by rather unstable economic situation in Europe. It is known that the overhang of debt in Greece and economic problems in Italy, Spain and some other European countries produce a lot of impact on economic situation in Russia. Many international companies operating both in Europe and Russia chose a careful approach to their economic expansion plans. In the wake of deteriorating economic crisis in Europe such companies prefer to operate on a cost-saving basis optimizing their expenses on personnel which in its turn will directly affect the market of corporate residential rent in Saint-Petersburg. Stability of economy growth in Russia obviously depends on the external markets’ performance, however some experts believe that in this situation Russia could become a safe harbour with growing flaw of foreign investments. There is a high probability that Russian companies with more stable stance than their European counterparts will prevail in the structure of demand on corporate rental market in Saint-Petersburg compared to the requests from international and transnational companies.

Demand and Supply Structure

The most demanded area in the city is still a historical centre with its famous so called Golden Triangle restricted by Neva River, Fontanka River Embankment and Nevsky prospekt; Bolshaya and Malaya Morskaya Streets, St Isaac Square. Streets across Tavrichesky garden also enjoyed a high interest. Apartments with high marketability are those located in the newly built residential complexes of business and elite class in Petrogradsky and Central districts. As for properties in the old buildings - despite their proximity to numerous architectural and historical monuments – they are demanded only when they meet the following requirements: well-maintained staircases and entrances, sufficient security measures and functional lay-outs. A problem of “aging” of the residential buildings in the city centre creates a high differentiation in rent pricing and terms of apartments’ exposition. Shortage of newly build highly functional properties forms a very pin-point demand. For instance a new development Paradny Kvartal situated in walking distance to prestigious Tavrichesky Garden enjoys a very high interest from the clients. Krestovsky and Kamenny islands with its premium development are extremely popular which coupled with the lack of supply in this area classifies this location as the highest rent rates segment. One of the most significant features of the corporate rental residential market became an expansion of Gazprom Neft company and its subsidiaries to Saint-Petersburg market. Gazprom has already started a relocation of its headquarters to Saint-Petersburg; the new HQ will occupy an entire business centre of A+ class Quattro Corti at Pochtamtskaya Street near St. Isaac’s Square. The flow of relocated personnel has formed a new localized demand - newly arrived Gazprom employees were mostly interested in 2-3 room apartments situated in walking distance to St. Isaac’s Square (Pochtamtskaya Street, Bolshaya and Malaya Morskaya Streets, Moika River Embankment, Griboedov Channel, etc.)

Main Market Trends in 2011

- after a 3 year crisis period and stabilization year of 2010 the market for the first time showed a stable positive development during the entire 2011; - a share of Russian companies in the structure of demand has significantly increased; - a demand for apartments is clearly shifting from the old historical buildings in the Central and Petrograd districts to the new modern residential complexes with developed infrastructure, security control system and homogenous tenants’ groups. This trend set new requirements to the houses in the city centre where the condition of staircases, entrances, and security measures is far behind; - if the corporate residential market was a distinct “market of tenant”, in 2011 the demand and supply reached an adequate equilibrium; - throughout 2011 rental rates for elite apartments remained rather firm with slight seasonal fluctuations of 5-10%.

Forecast for 2012

- 2012 corporate rental residential market will remain a positive dynamic. Rental rates will grow by 5-10% throughout 2012 and thus will almost reach pre-crisis level; - due to the economic instability in Europe a share of Russian companies in the overall structure of demand will increase; - the fact that Russia is not a member of euro zone might produce a positive impact. In case the economic situation in Europe is stabilizing at a slow pace many western companies will consider Russia as a safer ground for implementing their projects, which in its turn will positively effect the corporate rental residential market.