SURVEYCOLLIERS INTERNATIONAL | MOSCOW 12/2018

191186 St. Petersburg, 3, Volynsky lane, BC Severnaya Stolitsa (Northern Capital)

+7 812 718 36 18

123112 Moscow, 10, Presnenskaya emb.BC Naberezhnaya Tower, Block C, floor 52

+7 495 258 51 51

New-generation staff increasingly prefer a flexible working schedule and multiple office options

SURVEYCOLLIERS INTERNATIONALMOSCOW / DECEMBER 2018

Throughout the last 10-15 years we have seen rapid expansion of agile workspaces, including coworking schemes that are widespread abroad as well as in this country – particularly in Moscow and St. Petersburg. As per the original concept, coworking offers desks and a good environment for building a community, ensuring interaction and communication between users who represent a particular professional environment for them to exchange knowledge, ideas and contacts.

At a time of explosive technological progress, businesses are on the lookout for new points of expansion and optimisation, which results in a drive for the transformation of existing goods and services as well as creating new ones. The emergence of agile spaces and coworking options on a global scale is caused by ongoing social changes generated by value-driven dynamics: those who belong to the latest generation increasingly choose creative professions to express themselves, giving preference to a flexible working schedule and they are looking for independence from a single office as a place of work.

Based on global practice, two types of coworking users can be distinguished. The first group is represented by entrepreneurs, the self-employed and small businesses.

The second group includes large international corporations using coworking options for temporary accommodation of their staff, and based on the size of office space and the term of its lease, they want to minimise their risks and the costs of a long-term commitment.

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+

Total agile office space in Moscow: 100 000 sq m

International companies that see a ready solution for their business in coworking spaces in terms of economic gain and convenience for their employees include high-profile firms such as IBM, Microsoft, HSBS, KPMG, Dell, Google, Toshiba and General Electric.

The evolution of the agile office space market and the advent of large prominent consumers has resulted in coworking becoming a significant part of the office market in cities, such as London, New York, Hong Kong, Beijing and Sydney. In London, coworking space totals 722,000 sq m, accounting for 2% of the office space supply in that city (36 million sq m).

The arrival of coworking operators was instrumental in boosting vibrant competition: as a rule, the coworking operator provides the client with a ready business solution so that the client has no need to contact the owner directly. In the future, provided a certain level of demand for agile spaces is reached, the availability of agile offices will be a must for any business centre, which in turn may motivate BC owners to create and manage coworking spaces on their own, thus avoiding engagement with the end-client via sublease, which is presently the case.

Walled office

82% 54% 62%18% 32% 34%

14% 4%

Less than 3 days From 3 to 5 days Over 5 days

Fixed (fixed)workplaceNon-fixed workspace

HOW MUCH TIME RESIDENTS SPEND IN COWORKING SPACE?

SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 20184 5

SUPPLY AND DEMAND IN THE MOSCOW AGILE SPACE MARKET

Structure of coworking outlets, by area, sq m

<100 100-500 500-1,000 1,000-3,000 >3,000

As of the end of H1 2018, the classical coworking space in Moscow already totaled 60,000 sq m, of which almost 70% was accommodated in Class A and B+/- premises. Thus, the share of coworking premises in the total office space supply in Moscow (around 18.2 million sq m) comes to 0.33%.

Large coworking areas (from 1,000 to 3,000 sq m) can mainly (67%) be found in Class A and B+/- business centres, whereas most (70%) small coworking outlets (below 100 sq m) are found in Class B- office centres, or those of lower classes as well as in other buildings, not office centres (residential buildings, shopping centres and others).

Coworking appeared in Moscow a few years ago, but there are already about 110 locations available. Compared to 2016, the number of operational coworking spaces has increased by 31%, which exceeds global growth rates (15-20%, on average).

Typically, at the early stage of the coworking market there was a high share of closed outlets: under stiff quality requirements and competition a large number of coworking outlets were forced to close.

TYPES OF COWORKING

67% 36%

24%

9% 18%

8%45

%

24%

46%

7% 2% 9% 5%

2016year

2017year

2018year

Specialised coworking space accounts for 26% of existing coworking outlets in Moscow, the rest being classical. Specialised coworking is the first step in developing the agile office space segment in Moscow. These premises have their target audience while their floor area normally does not exceed 50 sq m.

Among the most common types of specialised coworking areas are creative workshops and social coworking venues provided by the state on a complimentary basis. The share of specialised coworking venues is dwindling with each year due to the growth in classical coworking, which is evidence of the development of the quality agile space market in Moscow.

74% Classical

26% Specialized

SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 6 7

Average occupancy of coworking space ranges from 70% to 90%.

COWORKING BREAKDOWN BY CLASSES OF BUSINESS CENTRES

Coworking premises in Moscow are mainly located in districts of high business activity: half of them (48%) are confined within central Moscow and the MIBC Moscow City business district, where coworking venues of operators such as Workki, CEO Rooms and Union Place successfully operate.

The expanding geography of coworking venues was an important trend of 2017: for the first time new outlets were opened in New Moscow (Troitsk, Moskovsky settlement). The coworking operator START launched an entire coworking chain in Moscow’s near suburbs, such as Krasnogorsk, Odintsovo, Korolev, Reutov and Dubna. Overall, 14 coworking venues were opened beyond the Moscow Ring Road (MKAD) in 2017.

The average space of newly opened coworking venues had grown from 300 sq m in 2016 to 1,300 sq m in 2017, which can be explained by the fact that chain operators Workki, GrowUp, SOK and Deworkacy opened several coworking outlets with areas varying between 1,000 and 2,500 sq m. An increase in the floor area of coworking venues is accompanied by a transformation in their functional zoning, with open space areas shrinking, whereas the number of private offices and event venues has increased.

Changes in the inner structure of coworking reflect the needs of users: teams with an increased number of participants have started choosing a walled office that creates a comfortable working environment, ensuring an atmosphere of privacy. Other things aside, open space is the least profitable coworking zone, as compared to private offices and event venues (in the current market where demand is generated by sole entrepreneurs), which also stimulates coworking operators to make a choice not in favour of open space in coworking space zoning.

As of today, demand for coworking space from users is growing steadily. As estimated by coworking operators themselves, the average occupancy level is in the range of 70-90%.

Class А Class B+ Class B- Class С Other

16% 43% 12% 3% 26%(SCs, residential buildings)

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HOW MUCH DOES COWORKING COST?

Based on the results of H1 2018, the av-erage cost of a fixed workplace in a cowork-ing amounts to 14,837 RUB/month – during the first half-year this indicator demonstrated a 4% growth. Based on the results of 2017, the cost averaged 14,640 RUB/month, up 18% year-on-year.

The growth is caused by an escalation of the cost per workplace in coworking venues,

resulting from increasing demand for such premises as well as the higher cost of work-places in coworking offices that opened in 2017 and were positioned as higher quality space.

The upper limit of the cost range for a fixed workplace in a coworking office is shaped by premium coworking projects where the monthly charge can be as high as 40,000 RUB. Number

of co-working

Average price per fixed workplace (RUB/workplace/month)

MOST POPULAR RATES: > leasing a non-fixed workplace > leasing a fixed workplace > walled office lease

ADDITIONAL OPTIONS FOR RESIDENTS: > leasing a meeting room > leasing a conference hall

CAO

Mos

cow

regi

on

SVAO

UAO

SAO

VAO

Mos

cow

-Ci

ty

ZAO

UVAO

UZAO

SZAO

42 15 13 9 8 5 5 2 2 2 1

15

,116

9

,990

13,

040

14

,070

1

0,71

0

13,

000

29,

170

20,0

00

1

1,000

14

,000

8,0

00

RANGE OF RESIDENT EXPENSES ON COWORKING (RUB)Fixed workplace

< 5,000 > 20,000 10,000 - 15,000 15,000 - 20,000 5,000 - 10,000

Non-fixed workplace

40% 6% 22% 13% 19%

2% 18% 30% 35% 15%

SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 10 11

MOSCOW: DEVELOPING MARKET OF AGILE SPACES

BIGGEST COWORKING TRANSACTIONS IN MOSCOW BUSINESS CENTRES

Increasing the number and floor area of coworking outlets, the growing cost of workplace leases, transformations in coworking space zoning — all of these factors indicate that the agile space segment is undergoing rapid development in the Moscow office market.

According to plans announced by coworking operators, about 10 new locations will hit the market; converted into square metres, this will come to at least 30,000 sq m of office space. Mainly large-size coworking projects with floor areas of 2,000, 4,500 and even 6,000 sq m are scheduled for opening.

Looking at the global experience, coworking projects in Moscow are at initial development stages, the average coworking space in Moscow is way below the size in world capitals: e.g. in London the average coworking space is 1,800 sq m, whereas in Moscow it is 500 sq m.

The number of large coworking projects capable of hosting a major client is limited, which is a clear indication that the quality supply of premises in this format has not been formed yet.

As of today there are no cases of large companies leasing coworking premises for their employees in Moscow; nevertheless, major international companies are definitely interested in this option, which makes analysts optimistic about the prospects of agile office space market development in Moscow.

The upcoming opening of the biggest international coworking chain will be an important milestone in the development of the quality Moscow coworking market: WeWork has leased 5,900 sq m in BC White Square, 4,228 sq m in BC Savin (Red Rose business district) as well as 3,200 sq m in Yakimanka, 26 Gallery.

OF POLLEDUSERS HAVE RECOMMENDATIONS ON IMPROVING COWORKING OPERATIONS*

Round-the-clock operation Increasing the number of meeting rooms Soundproofing of premises Creation of recreational areas Workspace zoning with an eye

on differences between user activity patterns More sofas and armchairs

*As per the survey of Colliers International. Participating in the survey were 5 coworking chains in Moscow. As part of the survey, 180 users were polled.

Co-working Area, sq m Office building Class Address

SOK Arena Park 6,000 VTB Arena Park А 36, Leningradsky Ave.

SREDA 6,000 Federation. East B+ 12, Presnenskaya emb.

WeWork 5,900 BC White Square А 5, Lesnaya str.

Workki 4,500 BC Progress B- 17, Zubovsky blvd.

WeWork 4,228 BC Savin B+ 11, Timura Frunze str.

SOK Peking Gardens 3,200 BC Peking Gardens B+ 5 bld. 1, Bol. Sadovaya str.

RESIDENT ACTIVITY TYPES

Marketing / PR / Design

IT / Telecommunications / Media

Production

Retail

Development / Design / Construction

Services for business: legal advice, recruitment, consulting

Other: education, medicare, logistics

USERS’ WISHES

5%3%

5%

9%

12%

15%

24%

32%

Service and Management

Сost and quality of food / drinks

Clean rooms

Building engineering systems

Quality finish / furniture

IT problems

Price formation

27%

15%

14%

13%

13%

11%

7%

SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 2018 12 13

MAP OF CO-WORKING CENTRES IN MOSCOW*

PREFERABLE LOCATION IN CHOOSING NEW COWORKING SPACE

1. RULEX 2. #tceh on Myasnitskaya 3. Arma Coworking4. Cabinet Lounge5. CEO ROOMS "Imperia" 6. CEO ROOMS West Park 7. Deworkacy CorporateInovations Hub 8. Deworkacy "Izvestiya" 9. Deworkacy "Red October" 10. DI Telegraph11. Flexy Office12. GrowUp 13. GVA HUB14. Hydrocowork15. IQ COWORKING16. Lerner 17. MatrixOffice18. PO2RT19. SM Moscow-Cty20. SOK Arena Park 21. SOK Zemlyanoi Val 22. SREDA23. Start Hub Flacon 24. The Moon25. Union Place Place of Work 26. Union Place “In the Office on Smolenskaya" 27. Union Place “Moscow City" 28. Union Place "Taganskaya" 29. Workki City

30. Workki Neo Geo 31. Workki Komsomolskaya 32. Yellow Door33. “Time” business club34. Delovar35. Delovoy Alekseev Tower 36. Delovoy Arma 37. Delovoy Gostiny Dvor 38. Delovoy Omega Plaza 39. Derevo40. DomJour41. Caliber42. Klyuch Arma 43. Klyuch Danilovskaya 44. Klyuch Moscow Silk 45. Klyuch Patriarshiye 46. Klyuch Trekhgorka 47. Atmosfera48. Coworking in BC Preo849. Coworking on Rizhskaya50. Mir51. OAK52. Workstation ArtPlay 53. Workstation Plaza 54. Gorky Park Workstation 55. STROGINO technopark 56. Fiztechpark

WeWork

24

14

55

6

38 1516

1117

34

9

5032

37

19

20

29

30

53

31

21

12

33

18

49

40

23

25

54

46

48

56

51

41

45

2722

42

52

28

39

13

26

44

43

47

35

*chain projects -

35%

10%

13%

12%21%

Number of workplaces in coworking

<50 50-100 100-300 >300

9%

GardenRing

Moscow-City

Next to MCC

South-west

Other

Irrelevant

SURVEY COLLIERS INTERNATIONAL MOSCOW | DECEMBER 201814 15

OFFICE AGENCY AND CORPORATE CLIENT DEPARTMENTSVera Zimenkova Regional DirectorVera.Zimenkova@colliers.com

TENANT REPRESENTATION DEPARTMENTFrancois Nonnenmacher DirectorFrancois.Nonnenmacher@colliers.com

RESEARCH DEPARTMENTVeronika Lezhneva Director for RussiaVeronika.Lezhneva@colliers.com

MARKETING AND PR DEPARTMENTOlga Bakulina Regional DirectorOlga.Bakulina@colliers.com

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