The growth of the dollar against the ruble may have a strong impact on the rental rates of commercial real estate, experts say, stressing that in the event of a further weakening of the ruble is possible to adjust the rates down.
MOSCOW, 13 Jan. The beginning of the year marked a new record the jump of the American currency against the ruble – the value of the dollar on the Moscow exchange on 12 December exceeded 77 rubles. The exchange rate has a strong influence on the rental rates of commercial real estate, and although the experts interviewed noted that the reaction segment on the oscillations will be slow, they do not exclude that in case of further weakening of the ruble is possible to adjust the rates down.
The Russian currency tumbled early in the year, after oil, analyst VTB 24 Alexei Mikheyev. The dollar on the Moscow exchange on 12 December exceeded 77 rubles, which was a record value since the “black Tuesday”, December 16, 2014, when the U.S. dollar exchange rate reached 79 rubles. Today the dollar is worth 76 rubles, but, according to the Deputy chief of analytical Department of the IR “Okay Broker” Chandler, a warm up course to the level of 77-79 rubles per dollar.
While economists make predictions on the prospects of the Russian currency to the dollar, the experts of the commercial real estate market note that the previous jumps of dollar became the reason of decrease in rental rates in both dollar and ruble equivalent. The tendency was observed from the end of December 2014, and last year the decline amounted to about 10-15%, says the Director of Department of strategic analysis and planning at CBRE Olesya Dzyuba.
“The weakening of the ruble puts pressure on all sectors of the commercial real estate market, where historically a significant proportion of debt financing was dollar-denominated, and as a result rental rates nominated in foreign currency”, — says the head of research at JLL Tom Mundy. He explains that before the property owners had the opportunity to set the rules of the game, but today, when demand falls, the GDP growth forecast continues to be revised to the downside, tenants have an opportunity to shift currency risk to the landlord and discuss the possibility of signing contracts in rubles.
According to managing partner of Knight Frank Sergey Gipsh, a weak ruble leads to higher costs to the tenants of offices and warehouses that were contracted in dollars. For example, previously it was impossible to remove class A space for rubles, such offers simply did not exist. Average rental rates in business centers of class a three years ago was $ 830 dollars per square meter. At the current exchange rate is about 63 thousand rubles per square meter, while the average rate for class A is 25.9 thousand rubles. The difference is more than two times, experts say.
The film suggests that in the event of a further weakening of the possible additional correction rates down. According to her, it is unknown when this might happen, since it depends on the class of property.
But there are other possible scenarios. “If the economy can overcome the current difficulties would be so anticipated stabilization of the market balance, in 2016 the dynamics of rental rates may be stable, and in the second half of 2016 possible increase in interest rates to the inflation rate of about 5-10% in rubles”, — said the Agency interlocutor.
The growth of the dollar leads to growth of cost of quality real estate, where foreign exchange component of construction remains high due to the engineering systems, materials, finishes, reaching 30-40% and even above. This business centers of class A, large shopping centers, hotels, high level, says Director of research Department at Colliers International, Veronika Lezhneva.
The situation is further worsened sanctions against Turkish companies in this market held a significant share – up to 15-20% of the total volume of new construction of business centers in the European part of the Russian Federation, analysts say “Okay Broker.”
Now it turns out that in addition to falling demand from tenants due to lower corporate profits because of the crisis, the situation will aggravate mass unfinished, which will continue to be accrued Bank interest on loans, and this can lead to mass bankruptcies of landlords, added to the company.
“The situation could change any major public or semi-public contractor, but on the horizon is not observed”, — experts of “Okay Broker.”
Experts at Knight Frank believe that currency fluctuations threaten the investment transaction. “First the parties agree on the commercial terms of the deal and then for quite a long time, for months, agreed its legal aspects. If during this period the market is changing, and the estimated profitability of the project changes significantly, the participants are forced to start over, to redefine underlying conditions,” says Gipsh.
According to Dziuba, the result of past jumps of the course was that rents at 80% passed the ruble area. “Change of terms of commercial contracts in favor of ruble-denominated rates have led to a situation where dollar-denominated rental streams from many owners, of course, was reduced”, — said the Director of research at Colliers International, Veronika Lezhneva. She claims that in several cases sank and the ruble flows, especially in less successful projects, which are more complicated during the crisis to attract tenants to the commercial proprietor.
The changes by segments
Rental rates in the warehouse segment has undergone significant changes, primarily from the point of view of the use of foreign currency being nominated in rental rates. The warehouse market over the past year was mainly ruble – dollar bets offer single players, says Lezhneva, adding that part of the offices also are exposed in roubles.
The most vulnerable segment, according to Gipsh, retail. The last year retailers have optimized stores, reviewed the terms of the lease. Contracts that were denominated in currency, today revised. But the trouble creeps on the other hand continues to lower the purchasing power of the population. People are forced to abandon all of new groups of products, quality shoes, clothes, food in cafes and restaurants,” says the source.
As for offices, in which about 90-95% of all offers – correspondent. Only a few BC owners hold stakes in the currency, he added.
To say that one or the other segment benefited from the transition to rubles according to Lineboy, it is difficult, because even within one segment, the situation can change from project to project and from owner to owner.
“It is better to speak clearly about not winning players or segments, and about the least loser. The least losers are those who have ruble loans, or their capital, which was cheaper – the ones who are least tied to foreign capital. On the other hand, winning can be called those who reacted most quickly to changing conditions – just to offer discounts to tenants, attracted new customers to ruble contracts,” says Lezhneva.