Tenants New building Moving
By Ekaterina Batynkova,
Director of the Elite Realty department of Est-a-Tet
The extremely hot summer has made its mark on the leasing side of the real estate market. Demand among tenants for class A apartments has recommenced with the autumn coming. Some new tendencies are being observed. Rents are rising, as are tenants’ requirements caused by the present climatic conditions. A shift of demand from the city centre to the new prestigious neighbourhoods, which are situated near the big business centres and business parks, is expected.
Rental costs have been fairly stable over the past few months. Large clients with sizeable budgets were active on the market at the beginning of the summer; around 40% of the most expensive flats have now been taken. The holidays also mean things calm down slightly, and the market has also been dampened by the unusual weather conditions. We expect the next surge of demand to be in September, and this will be accompanied with a rise in rentals for class A flats. Today, prices start from 120,000 roubles per month. The most popular buildings are modern apartments with areas from 120-180 square meters, and which cost from $5,000-$12,000 per month, with modern style renovation and a large amount of natural light. Such tenants value facilities such as professionally developed ventilation systems, mechanical and chemical water clearing systems to be extremely important, particularly after the recent ecological problems, the shock of which will be with us for some time.
In the past, the major tenants for class A apartments were foreign citizens. For some years now, there has been a stable correlation between Russian and foreign clients. The crisis has resulted in some staff being transferred to other countries, and the accommodation allowance for many ex-pats has been reduced. But during the second half of 2009 and first half of 2010, demand from ex-pats has picked up again, both in the number of ex-pats seeking flats and in the quality of the flats they sought, tipping the class A market towards a renters’ market again. However, such a situation is typical for the West, in particular the London market where it is always possible to talk about a deficit, because each client’s demands are so specific that even if the allowance is adequate, finding the right apartment, in the right area, with the right decoration and facilities, means searching for several months.
In Moscow, centrally-located neighbourhoods still remain the most asked‑for, because that is where most of the office complexes and leisure areas are located. But it is necessary to mention the rising demand for certain neighbourhoods beyond the Third Ring, such as Leninsky Prospect, Olympic village, Krylatsky and the University areas. A huge amount of new business-centres, large business parks, have been built in these areas, and alongside the main roads which pass through them, which is making these areas attractive for people who don’t want to spend all day in cars.
It’s worth mentioning that over 10% of those who rent residential real estate consider the possibility of buying a flat and then leasing it out. Today, real estate is considered by our investors to be one of the most stable types of investment. The profit from leasing apartments is actually not that big, in relation to their cost (particularly in the case of re-sale after a new building is commissioned), but if the goal of keeping an apartment as an asset is set, it is undoubtedly profitable to lease it. In average, the payback period of a class A apartment is from 7 to 15 years. Obviously the cost of the apartment is the most important factor, but renovation and furnishing quality, a competent approach for the lease rate generation are all equally important. Working with a professional realtor even at construction stage (if you are investing in a from-scratch project) is desirable. He, as a professional in this field, can provide a consultation of what is the most sought-after type of building on the lease market.