New opportunities for warehouse real estate sublease appear in Russia

The rules of the game in the warehouse real estate market are changing. According to Radius Group, in December 2022, in the warehouse real estate market, the volume of space offered for sublease may be about 450-500 thousand m2. Sublease will provide access to modern premises in a good location for a wide range of tenants - areas can be offered from 500-1000 m2 and for a short period. 

Alexandra Shakola, Deputy Director for Leasing and Marketing at Radius Group, notes that according to Knight Frank, about 150 m000 of high-quality warehouse space was offered for sublease in the first quarter. “The supply continues to grow due to a number of factors: first, the withdrawal of large players from the market (for example, such as Decathlon and Prisma), second, everyone who rented large amounts of space with the potential for further growth and development is now renting out the surplus and receiving additional income, - she notes - significant growth in the retail segment, development of logistics and, of course, e-commerce (growth - 2-30% year-on-year), which has been observed in the past few years, on the one hand, and the lack of high-quality free warehouse space, on the other (demand exceeded supply by 50-70%), pushed Russian and foreign companies to rent excess space. This solution would allow to realize the tasks and volumes of the enterprise for a period of 90-5 years and take into account future growth. However, the current situation for a number of players requires the opposite - optimization and reduction, which means that the need for warehouses is reduced or, at least, remains the same. 

Companies that have discovered "surpluses" under existing lease agreements cannot give these premises back to the owner, while having to bear the costs. Therefore, subleasing is a compromise solution for all parties - the responsible or key tenant maintains its stability, covers part of the costs and directs financing to more relevant areas, and the owner receives a guaranteed income, which often goes to service a developer loan. 

The premises are not idle, work is being done on them, the main thing is to correctly form an agreement that would take into account the interests of both the owner (for example, the term of the sublease agreement), and the tenant (the ability to reduce the financial burden at the expense of the partner), and the new company entering the warehouse as a subtenant (opportunity to get high-end warehouses). 

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A couple of years of intensive growth of the business of potential clients and a constant shortage of warehouses have changed the rules of the game in the market. They began to offer space in large cuts (at least 5-10 thousand m2), for a long term (from 5 years) and at a high price (last year alone, the rate increased by 40%, since the beginning of 2022 by an average of 14% and now stands at about 6000 rubles per m2). Of course, there are absolutely fair economic factors that formed the "seller's market", especially in the class "A" warehouse market, however, small and medium-sized customers, in fact, had nothing to do here, they were beyond their interests and opportunities. Now sublease will provide access to modern premises in a good location for a wide range of tenants. At the same time, the area can be from 500-1000 m2 and for a short period. As for the cost, it will depend on the economic policy of each tenant subletting space.”