BRICS effect? Office rent in Kazan has risen in price by 25-30%

Before and after the BRICS: how offices break through the “ceiling”

Office real estate in Kazan seems to be entering a cycle of increasing rental rates. For the first time in the last two years of stagnation, the weighted average cost of renting real estate in the city centre peaked at 20,000-25,000 per square metre per year, depending on the class of real estate, Konstantin Ivanov, an expert in commercial real estate, member of the Chamber of Commerce and Industry of the Republic of Tatarstan, told Realnoe Vremya. Most of the business centres in the centre of Kazan began to operate in this price range, it follows from the statistics of rental offers published on the portal of the Russian real estate showcase restate.ru.

Back in the spring, before the start of the BRICS summit, rental rates ranged from 1,211 to 1,837 per square metre per month, depending on the class of the area. At the same time, Kazan for the first time entered the top three million–plus cities with the highest cost of renting office space, CORE.XP consulting company reported. But even after the large-scale October event, the rates went up again. So, the office after renovation in the business centre on Volkova Street has been rented since November at a price of 412,000 rubles per month, or 24,000 per square metre per year, and the office on Levo-Bulachnaya Street with an area of 250 square metres. The apartment is for long-term rent for 500,000 rubles per month.

For Roscongress team, the offices were “packed” by 100%

The most expensive offer in the centre of Kazan turned out to be from the Master class A business centre on Galiasgara Kamala str., 41. An entire floor with an area of 1,050 square metre is for rent for 3 million rubles per month, it follows from the announcement. The weighted average rental cost is almost 25,000 rubles per square metre per year. The management company explained the high rates by that the building has been renovated for the work of the organisers of the BRICS summit.

“Before that, a large team of the Roscongress Foundation (the organiser of the BRICS summit in Kazan) worked here. From here, they were preparing for the BRICS. For them, the offices were “packed” 100%, up to the microwave and dishes," the business centre told the publication.

The business centre also added that the owner had to invest significant funds in repairing and equipping offices, so bargaining is impossible. “A large parking lot has become an important role in Roscongress' choice of office," the management company noted. “In addition, we have carried out thorough preparation of the offices, carried out design repairs in the offices. The engineering infrastructure has been updated so that all the building's life support systems are duplicated. This provided a guarantee of reliable operation in the 24 by 7 format.

Roscongress specialists were provided with the necessary configuration and service according to their highest standard. Currently, 20 offices of different sizes are rented here at a rate from 17,500 to 36,000 rubles per square metre per year.

Suvar Plaza asks up to 4,000 rubles per square metre, and in Lazurnye Nebesa — 12 million rubles per month

Suvar Plaza raised the rates even higher — up to 48,000 per square metre per year in a Class A area. “Currently, we rent office space for 4,000 rubles per 1 square metre. These are the highest rates in Kazan," Anna Lozhkina, the manager of the business centre, told Realnoe Vremya. She did not specify whether they hosted the Roscongress Foundation team. It is possible that part of the office skyscraper near Kaban Lake was also used to accommodate the organisers of the forum, since a delegation of almost 6,000 foundation employees, including service personnel, came to Kazan to prepare for the summit.

The new owner of the business centre, who is close to the son of the head of the Ak Bars HC, Ivan Egorov, carried out a complete reconstruction of the building, turning it from a shopping mall into an office building. Suvar Plaza with a rental area of up to 70,000 square metres plays a crucial role in the formation of rental rates in the Kazan market.

The range of rates in the city centre varies between 24-26 thousand per square metre per year (or slightly above 2,000 rubles per square metre per month). The absolute cost record was set by the owner of the office on the 30th floor of the Azurnye Nebesa residential complex. Two weeks ago, he posted an announcement about renting out premises for 12 million rubles per month, or 1.44 million rubles per square metre a year. We are talking about 100 square metres. “The windows in all the offices are panoramic, which opens up gorgeous views of the city, and beautiful sunsets on our side every evening. The office area is 80 square metres + common areas: a waiting area, a bathroom, an equipped kitchen," says the offer published on Cian.

“Such an abnormal phenomenon has been observed only this year”

With a noticeable difference in price, a room is for rent on 42 Bauman Street. The owner requests 1,646 million rubles per month for the rent of 1,372 thousand square metres. The office at 26 Shchapova Street turned out to be the third most expensive. The owner offers 820 square metres for 1.2 million rubles per month. The modest price is explained that the premises are under renovation, and the number of vacant places in the city centre has been reduced to 55, while 451 offers with an approximate placement volume of about 100,000 square metres have been placed throughout the city.

Thus, after the end of the BRICS summit, rental rates in the centre of Kazan approached the Moscow level. By the end of the third quarter of 2024, the average requested rental rate for offices in Moscow was 25,200 rubles per square metre per year (not incl. VAT and operating expenses), the CORE.XP press service reported on November 5. Unlike Kazan, where the rates vary from quarter to quarter, in the capital they are fixed at the same level. “The average office rental rate in Moscow remains stable against the background of rising prices in some areas and cheaper prices in others," the study says.

The adjustment of rates also affected business centres located in locations adjacent to the centre. According to Konstantin Ivanov, rent in the Novo-Savinovsky district has risen by more than 20% — from 19,200 to 21,600 rubles per square metre per year. “They often call and ask: What's going on with office rentals? We look at the rates in Kazan and do not understand anything — is it like in Moscow? Some swear obscenities," Konstantin Ivanov, a member of the Chamber of Commerce and Industry of the Republic of Tatarstan, a representative of the DI Group agency, tells about the mixed feelings of tenants.

According to him, tenants are at a loss from the large run-up in rental rates. “Such an abnormal phenomenon has been observed only this year. This is a shock for tenants, they say they will find it cheaper themselves. But the days of affordable and comfortable offices are gone," he said in a conversation with Realnoe Vremya. As the speaker noted, the cost of rent decreased only two years ago during the announcement of partial mobilisation, and now the cost of real estate in Kazan is entering a new cycle of increase.

How long this cycle will last depends on the demand from tenants, added Vladimir Shaikhiev, CEO of A-Development.

Why are the rates going up, or the BRICS has nothing to do with it?

Office real estate entered 2024 with “old sores” — a shortage of supply, low vacancy, but this was supplemented by an increase in tax rates to a maximum level of 2% for real estate over 1,000 square metres. “The most scarce product of the Kazan rental market in 2023 were small office blocks of class B and B+ (20-35 sq. m.), as well as small office blocks of class A (100-150 sq. m.). Previously, demand for the latter was low, large blocks from 500 sq. m were more popular," says the analytical review of commercial real estate by UD Group.

The volume of the office real estate market in Kazan is estimated at 712,000 square metres. Of these, 541,000 square metres account for the usable area. By the beginning of the year, the rental rate in class A was 1,747 rubles square metres, in class B+ — 1,277 rubles/sq. m., in class B — 880 rubles/sq. m. The average rental rate in business centres was 1,015 rubles/sq. m (including VAT, including operating costs).

“BRICS has nothing to do with it," the deputy director of the Regional Projects division, the CORE.XP Corporate Client Services department Ivan Kozis agrees. “The rates are really at the level of 2,500 rubles per 1 square metre per month with VAT and ОрЕх and even higher. They are growing for the second year in a row and will continue to grow, since nothing new has been built or introduced. The only business centre that is expected to be commissioned, and even then not in the very centre, is the UNO Business Centre in March 2025.

“Five applications from 1,000 to 2,000 square metres, but there is nowhere to put”

An acute shortage of available space led to a sharp increase in rates this year, Anna Lozhkina, the manager of Urban PLC, is sure. “Unlike Moscow, we have the opposite situation. Demand in Kazan exceeds supply. Kazan can easily swallow another 20,000 square metres of space," she is sure. Along with UNO (as part of the MFK), commercial areas of the ART Centre multifunctional complex on N. Ershova Street will soon appear on Sibgat Khakim Street. In total, an additional 20,000 square meters will enter the market. But at what rental rates will the new facilities operate?

“The increase in rates was most likely influenced by the deficit. But I have five applications from 1000 to 2000 square metres, but there is nowhere to put. Against this background, many landlords are raising rental rates, Konstantin Ivanov is sure.

Indeed, back in the summer, representatives of the new federal banks complained that they could not find a suitable premises in Kazan. “It's very expensive," Ramil Kashapov, the vice president of the Bank St. Petersburg, admitted at the time in a conversation with Realnoe Vremya. Morskoy Bank did not immediately find a suitable office. At the same time, in the spring, some owners began to prematurely terminate contracts with tenants for repairs. The increase in rates and the increase in the tax burden spurred on.

“The first growth factor is the introduction of a maximum property tax rate of 2 percent for real estate over 1,000 square metres. Then I predicted an increase in rent by 20-30 percent," Vladimir Shaikhiev recalled, “Secondly, the facilities themselves have become more expensive. If earlier developers could buy a room at the rate of 60,000 rubles per square metre, now at least 150,000 rubles per square metres. Operation has become more expensive — utility costs, wages. But I don't see any connection with BRICS.

The third growth factor is the redevelopment of premises, a new popular trend. “By buying 'wearied' square metres or old buildings at a low price — 80,000-140,000 per square metre, investors make a candy out of commerce, increasing the prestige and class of premises. After that, the rental price in them increases from 900 rubles to 2,000-3,000 rubles per square metre," Konstantin Ivanov noted. According to him, other market players automatically follow the rates that appear on real estate aggregators and, without going into details, raise the rent to this level. The expert is convinced that rental rates in Kazan are overstated by an average of 10%, which is why the closing time of applications has increased to two to three months.