Hoff Furniture Chain Signs One of the Largest Warehouse Leases of the Year

Hoff Hypermarkets rented 50,000 square meters in the Severnoe Domodedovo Warehouse Complex, as reported to Vedomosti News by Eriskhan Kurazov, the General Director of MLP management company (which manages the facilities in the Safmar group).

Mikhael Kuchment, Hoff's Vice President, confirmed this information. In his words, the new warehouse was needed to expand the chain’s business. In the next two weeks, the company is opening two new branches: in the Krasnaya Ploschad (Red Square) retail center in Krasnodar, and in Gorky Park in Kazan. Hoff estimates the cost of opening a new hypermarket at 120 million rubles. Including these two new stores, there are 21 hypermarkets in the Hoff chain.

“By the end of the year we plan on opening two more Hoff Home stores in Moscow,” Kuchment added.

Rental rates were not disclosed, but according to the participants, the rental agreement is for five years. The possibility for Hoff to increase the area they lease is included in the agreement, added Kurazov.

Given the significant size of the transaction, rental rates for this facility may be 6,000 rubles for one square meter per year, including taxes and operating costs, estimated ILM Russia’s Director of Warehouse and Industrial Real Estate Department Alexander Perfiliev. Knight Frank’s Director of Warehouse Real Estate, Maksim Zagoruyko, also arrived at this sum. Thus, Hoff will be paying 300 million rubles a year in rent, but per the rental agreement, the Severnoe Domodedovo Complex Owner, Safmar Group, should be earning 1.5 billion rubles. Perfiliev admits that based on the size of the transaction, the renter could have received an additional discount.

According to consultants, the transaction with Hoff will likely be counted as one of the three biggest transactions on the warehouse real estate rental market for 2016. According to Knight Frank’s data, the retailer OKay rented almost 60,000 square meters in the Logopark Sever-2 complex this year. The other transactions are slightly smaller. Castorama signed a deal to rent 42,445 square meters in PNK Chekhov-3, and BMW rented 34,345 square meters in PNK-Bekasovo.

The average size of deals in the Moscow region is gradually decreasing, says JLL’s Director of Warehouse and Industrial Facilities Viacheslav Kholopov. He estimates that this year, the average size will be around 10,000 square meters, as compared to 15,000 square meters for 2015. According to data from Cushman & Wakefield, this indicator is even lower: in the first nine months of 2016, the average size of transactions was 8,500 square meters, which is 40% lower than in 2015.

Kholopov estimates that around one million square meters in warehouse facilities will be sold or rented this year in the Moscow region. Approximately a third of these transactions (around 330,000 square meters) will be concluded for facilities managed by MLP, Kurazov added.

Safmar Group is one of the largest warehouse real estate owners in the Moscow region. Currently, 1.8 million square meters of logistical space is managed by MLP. Other than

Severnoe Domodedovo, which is the Moscow region’s largest logistics park (planned at around one million square meters), the company’s portfolio includes facilities in Chekhov (337,000 square meters), Podolsk (206,000 square meters), and other complexes.