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Russian Self-Storage: A Closer Look at How the Country’s Economics Are Affecting Demand

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Moscow’s Commercial Property Market

As with many large cities across the world, Moscow has been affected by the economic downturn. However, the rise in the supply of commercial property, and retail in particular, in the last decade demonstrates the confidence investors have had in the city over this period and the strength of consumption.

Moscow’s shopping-center stock amounted to 34 million square feet in 2011, five times its 2002 level. Total office stock in Moscow has increased by more than 450 percent since 2002, reaching a peak of more than 139 million square feet in the first quarter of 2012. Moscow’s warehouse stock reached 88 million square feet by the same time, almost six times more than in 2002.

This growth in supply has created more opportunities for investors and boosted overall activity in the real estate market. As the quality of construction has increased during this period, the supply of grade-A investor stock has also risen.

In 2011, Moscow’s total real estate investment volumes reached a record $5.8 billion—a considerable increase in volumes from seven years earlier, when volumes were at around $240 million.

Economic Effects on Moscow Self-Storage Demand

A high spending rate and increased consumer consumption, combined with restrictions on development of the central city and heavy traffic congestion, have had a physical effect on the population.

Russia-Self-Storage-Safebox-Shakko-Hen***These combined elements have placed significant pressure on storage within city apartments, housing and commercial property, which in turn has created a high demand for storage alternatives throughout the city.

Moscow has approximate 14 million inhabitants, and with St. Petersburg's 5 million inhabitants, it forms the largest potential market in Europe. The influx of 30 self-storage stores and 10 operators in three years proves the likelihood of a successful result.

However, for many of the current operators, these figures are frustrating and could have been doubled. The demand for self-storage space is very high, yet supply for suitable facilities remains low. The old infrastructure and lack of warehouse facilities in the city, along with unsettled property titles, are the main hurdle of the current operators and, at the moment, create the only competition of the industry—finding a suitable facility.

However, self-storage operators who are open for business are finding success, reaching 90 percent occupancy within a year of opening. Even though the industry is new and only 5 percent of customers are familiar with the concept of self-storage prior to renting, the fill-up rates can reach 4,500 square feet a month, and self-storage is popular with household and business customers.

The 95 percent who are not familiar with the services are really happy with what they get, especially after new, clean, heated self-storage facilities replace the old-style garages in the city of Rakushi.

The rise of self-storage facilities is just in time, as hundreds of thousands of these old-style garages have been removed and demolished by city authorities over the past two years and are now banned in the city.

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