• During the 3rd quarter there was no growth in average USD budgets. As of the end of the first three quarters of 2011 it amounted to USD 5 374 per apartment per month, which corresponds to levels recorded during the previous year.

• Dynamic demand on the part of potential tenants, which had been observed at the start of 2011, gave way to quieter conditions in the 3rd quarter. Therefore, during the last 9 months the average demand volume remained at the level of the previous year.

At that, more than half of all the clients’ requests are still concentrated within a budget of up to USD 4,000 per apartment.

• The high-budget rental market free supply volume continued to increase. However, as compared to the previous year, the number of properties supplied in the market is 10% less.

According to the estimates of IntermarkSavills, during the first nine months of 2011 the elite residential rental market tenant structure saw no significant changes. As before, the bulk ofdemand is dominated by foreign clients – their share amounts to 2/3 of the total amount. The share of clients from Russia and CIS is about 33% of the market. In 2011 the total demand structure remains dominated by married couples – they account for 58% of requests. Slightly more than 40% of families looking for an apartment are families with 1 and more children.The highest activity in the high-budget rental market during the first three quarters of 2011 was shown by potential tenants aged from 30 to 45 (they account for almost 40%, which corresponds to the figures recorded in the previous year).

More than 72% of potential tenants prefer furnished apartments, says Galina Tkach, Director of Leasing Department at IntermarkSavills. The presence of a permanent parking place is important for 50% of clients. About 40% of tenants are interested in apartments in a house with a concierge or guard.

During the first three quarters of 2010 the main demand volume was concentrated in such districts as Tverskaya-Kremlin (15%) – the interest in this district has increased by 3% as compared to the previous year; Arbat-Kropotkinskaya (14%) and

Leningradsky Prospect (12%). As a whole, the leading districts account for about 42% of the entire demand. The remaining demand was distributed between the following districts:

Lubyanka-Kitay-Gorod (10%) and Zamoskvorechye (8.5%). The interest in Patriarshie Prudy decreased by 2% as compared to the previous year and does not exceed 6% of the whole demand.

As before, the highest demand (33%) is for 3-room apartments.Almost equally popular among the potential tenants are 2- and 4-room apartments (24% each). As compared to the same period in 2010, the demand for large apartments (5 and more

rooms) decreased by 2.5% and does not exceed 15% vs. 18% in 2010. The minimum demand share falls on one-room apartments – 4.5%.

The demand budget structure underwent no significant changes.

As a year ago, the most popular were apartments within a budget of up to USD 4,000 per month; the demand for them amounted to 52%, which is 2% higher than the figures recorded in 2010.

The share of requests for the most expensive apartments with a cost of more than USD 10,000 per month remained at the level, which is close to the one recorded in the previous year and did not exceed 11%.

As of the end of the 3rd quarter, 2011, the elite residential rental market of Moscow remains quite stable. However, there is evidence to show a considerable disparity between rental rates and the average budgets of tenants. Thus, during the last 9 months rental rates and supply budgets have increased by 10% and 14% respectively and have already exceeded pre-crisis levels. At the same time, the average budgets of potential tenants have steadily decreased since the 2nd quarter of 2011. No doubt, such a disparity will result in a further increase in the deficit of realizable projects and the creation of an ‘owner’s market’.

Supply

According to aggregative estimates of IntermarkSavills, as of the end of September, 2011, the volume of high-budget housing

supply decreased by 10% as compared to September, 2010.

At the same time a stable reduction in free supply volume,that was observed over the last 2 years, slowed and, from May, 2011, the number of vacant apartments offered for rent demonstrated a slow, but stable growth. Therefore, quantitative

indices returned to the level recorded by analysts in the end of 2010.

The supply territorial structure at the end of the 3rd quarter of 2011 is still dominated by the Arbat-Kropotkinskaya district (20%). It is followed far behind by such districts as Leninsky

Prospect (11%), Tverskaya-Kremlin, Leningradsky prospect and Kutuzovsky Prospect (8% each), as well as Zamoskvorechye and Tsvetnoy Boulevard (7% each). Although these figures correspond to retrospective demand the number of high-quality

properties meeting the tenants’ requirements is considerably lower.

As of the end of the 3rd quarter of 2011, the current supply structure in terms of number of rooms is dominated by 3-room (38%) and 4-room apartments (28%). The share of large apartments (5 and more rooms) has not changed during the last

half-year and amounts to 15%. The smallest share in the total supply volume belongs to the most compact 1-room apartments and does not exceed 2.5%.

In the 3rd quarter of 2011 the floor area supply structure was dominated by properties with a floor area from 80 to 120 sq.m (32%). Apartments with a area of more than 150 sq.m account

for about 26% of the supply, which is 3% higher than figures recorded during the previous year.

At the end of the 3rd quarter the largest volume in the current supply of high-budget apartments fell within a price segment of up to USD 4,000 per month (about 31%). That is 7% lower

than figures recorded during the same period in 2010. This difference is caused by the growth in average supply budgets and by transfer of properties to adjoining budgets. At that, the

share of the most expensive apartments within a price range of more than USD 10,000 per apartment per month increased by 6% as compared to September, 2010 and amounted to 18% of

the whole supply.

Rental rates and budgets

As of the end of September the weighted average supply budget and specific rental rate in the elite residential segment was USD 7,257 per month and USD 667 per sq.m per year

respectively, which is 11% higher than figures recorded during the same period in 2010 (in the 3rd quarter of 2010 these figures amounted to USD 6,528 per month and USD 584 per sq.m per

year).

The growth of average budget and average market rate during the last 9 months was 14% and 10% respectively. Therefore, by the end of the 3rd quarter of 2011 the weighted average budget

exceeded the pre-crisis figure by 6% (USD 6,835 per month).

The largest growth in average budgets was seen for large room apartments (by 16% on average). At the same time the average budget of one-room apartments decreased by 6% as compared

to similar figures recorded in 2010.

Such districts as Arbat-Kropotkinskaya, Zamoskvorechye and Patriarshie Prudy are leading and retain the highest rental rates compared to the market average.

In 2011 the average rental budget of an apartment requested by a potential tenant showed less dynamic growth than supply budgets. In contrast, after slow growth in Q1, starting from Q2,

a stable decrease of price indices has been observed. According to the results of the last 9 months of 2011, the average demand budget amounted to USD 5,374 the average demand budget

amounted to USD 1% lower than the respective figure as of the end of September, 2010.

IntermarkSavills Research

www.intermarksavills.ru