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Cushman & Wakefield LLP43-45 Portman SquareLondon W1A 3BGwww.cushmanwakefield.com/knowledge

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OVERVIEWAlthough the Russian economy continues

to perform well compared to much of

Europe, growth has slowed from last year

and a sense of caution within the office

market has been maintained. Due to this,

prime rents have held in St Petersburg and suburban Moscow,

but have seen increases in the central area between the

downtown and the suburbs.

OCCUPIER FOCUSDemand for properties has remained relatively stable, with long

negotiation of deals further slowing the market, which meant that

take-up was slightly down on the previous quarter. However,

there is interest in the market, with site visits ongoing, implying a

pick up in activity around the corner. The interest in downtown

Moscow has continued to decrease, as tenants look for cheaper

options elsewhere within the city. This is what caused the

increase in rents in the central area.

This quarter has seen nearly 176,000 sq.m of new quality office

space delivered to the Moscow market, however, most of this is

Class B. Prime office space remains in limited supply. Of the

newly completed offices 40% of the space is still vacant and onthe market. There is approximately 3.2 million sq.m of space

currently under construction and only a fraction 6% of this has

secured a pre-let. A further 8 million sq.m exists as planned

projects that have yet broken ground.

INVESTMENT FOCUSThe third quarter saw office investment volumes of close to450

million, a relatively healthy amount, even if it is somewhat lower

than the800 million of the previous quarter. Even so, office

investment accounted for approximately half of all property asset

volumes, and the majority of buyers this quarter were domestic.

Largely the volumes this quarter were made up from three large

projects that were sold. Prime and secondary yields have seen

increases of 25 basis points this quarter in Moscow, reflecting in

part the reduced level of activity, but also the slowed economic

situation.

OUTLOOKThe economic outlook is for a slightly slowed rate of growth, but

that 2013 in general will outpace 2012. Therefore although

demand and rents are expected to remain stable in the short

term, over the course of next year, an improvement is expected.

With regards to the investment market, similar levels of activity

are anticipated for the last quarter of 2012, and prime yields are

not expected to move further.

MARKET OUTLOOK

Prime Rents: Prime rents are expected to hold.

Prime Yields: There is not expected to be significantmovements in yields in Q4.

Supply: A relatively large speculative pipeline is underconstruction.

Demand: Demand is good, with annual volumes for 2012expected to reach record levels.

PRIME OFFICE RENTS SEPTEMBER 2012

MARKET (SUBMARKET) US$ US$ GROWTH % CAGR

SQ.M/YR SQ.M/YR SQ.FT/YR 5YR 1YR

Moscow (Central) 810 630 75.3 -4.1 1.3

Moscow (Centre A+) 1,170 909 108.7 -3.5 -2.5

Moscow (OOT) 500 389 46.5 -6.5 -10.7

PRIME OFFICE YIELDS SEPTEMBER 2012

MARKET (SUBMARKET)

(FIGURES ARE GROSS, %)

CURRENT LAST LAST 10 YEAR

QUARTER QUARTER YEAR HIGH LOW

Moscow (Central) 8.75 8.50 9.00 16.00 7.25

Moscow (Centre A+)* 8.75 8.50 9.00 13.00 7.00

Moscow (OOT) 8.75 8.50 9.00 17.00 8.00NOTE: * 6 year record

With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas ofEurope and the changing nature of the market and the costs implicit in any transaction, such as financing, these are verymuch a guide only to indicate the approximate trend and direction of p rime initial yield levels and should not be usedas a comparable for any particular property or transaction without regard to the specifics of the property.

RECENT PERFORMANCE

Source: Cushman & Wakefield

-25.0%

-15.0%

-5.0%

5.0%

15.0%

25.0%

4.00%

6.50%

9.00%

11.50%

14.00%

Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12

AVERAGE PRIME YIELDS (left) RENTAL GROWTH (right)

RUSSIA

OFFICE SNAPSHOTMARKETBEAT

A Cushman & Wakefield Research PublicationQ3 2012