Banners have been appearing on Moscow streets advertising office space for 4,500 rubles per square meter per year. Prices have been falling, of course, but $139 is likely a new record.
Konsalt Group, which owns the offices being advertised, says 4,500 rubles is a rock-bottom price. With taxes and communal services, the rate works out to about $200. They are offering other offices for $250 per square meter per year, while a building with a private entrance is going for $500 per square meter.
Before the crisis, the minimum rate in these complexes was $500, the company's manager said, but prices have fallen 60 percent.
Demand on the office rental market in the first quarter fell about 80 percent year on year, according to data from Jones Lang LaSalle. But movement into offices grew 80 percent -- 720,000 square meters came onto the market in the first quarter of 2009, compared with 400,000 in the same period last year, according to data from Cushman & Wakefield Stiles and Riabokobylko.
The biggest lessors of Class B offices are Horus Capital, ALM-Development, KR Properties, Promsvyaznedvizhimost, MR Group, Central Properties, AFI Development and Moscow Business Incubator, according to a Vedomosti survey of consultants.
Those who could be reached by telephone were surprised by the rates. Class B office space is now going for $450 to $700 per square meter per year (all expenses included), AFI Development marketing director Natalya Shmurin said. "It's probably a marketing pitch," Central Properties commercial director Dmitry Kiritopulo said. "Today, Class B office rental rates are no lower than $350 to $450 per square meter, including furnishing, but without value-added tax and operational expenses."
But MR Group commercial director Irina Dzyuba said prices in industrial areas, where Konsalt Group is located, are usually lower.
Office rental rates fell 25 percent to 30 percent in the first quarter, and Class B+ offices cost $550 to $850 per square meter per month, while Class B- go for $300 to $500, according to Colliers International.
"If the office is only starting to fill up with renters, then they might have to give significant discounts to attract a big anchor," said Maxim Gasiyev, executive director of Colliers.
Prices at $200 are a singular event, said Lada Belaichuk, a research analyst at Cushman & Wakefield Stiles and Riabokobylko. "It's possible that these premises aren't of the highest quality," she said.
The correction in rental rates for Class A and B office space in the last eight months stood at 30 percent to 40 percent, but it is unlikely that a bottom has been reached, Knight Frank said in its May report.
According to Jones Lang LaSalle, prices fell nearly 30 percent in the first quarter. Belaichuk said summer might see a correction of another 10 percent to 15 percent.
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