MOSCOW-Vacancy rates in Moscow’s office sector dropped to 15% insecond quarter 2010 from 19.6% in the fourth quarter 2009, buoyedby demand for quality space, Jones Lang LaSalle reports.

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JLL board member Andrey Postnikov said he believes the declinecould signal a stronger market. “After 2010, we expect the supplypipeline to slow considerably, while absorption will continue togrow. We expect a slight correction with vacancy rates edgingtowards 15.5%-16% over the next two quarters, but after that thefigures will decrease,” he said.

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The frozen pipeline during the economic slowdown was expected toconstrict supply in 2011. But pressure on vacancy rates has alreadybegun, due to a sudden increase in demand from both state andprivate entities in Russia and abroad. Important second-quarterdeals included RusHydro’s purchase of an office building on MalayaDmitrovka Street.

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No new Class A or B projects were introduced in Q2, whiletake-up volumes accelerated to 4.4 million square feet, doublingthe first-half total to 7.6 million square feet. The first half2010 volume of completed space dropped by 69% to the lowest levelsince 2004. Falling vacancy rates have boosted base rents. ForClass A space, rents increased by 10-15% in 2Q10, with mostproperties leasing within the range of $500-$700 per square meter,while Class B+ rates were up 15-20% at $400-$500 per square meter.Prime rates were steady at around $800 square meter.

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Vacancies were mostly seen in newer projects that had not yetsigned leases, or in less competitive properties. Take-up volumesnearing pre-crisis levels and the slowdown in completions aredriving rents, especially in relatively scarce quality officeprojects.

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AllanSaunderson is a managing editor of Property InvestorEurope and a contributor to GlobeSt.com.

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