How do office rental rates in Tashkent vary: an overview

Consulting Firm CMWP Uzbekistan Provides an Overview of the Structure of Commercial Rental Rates in Tashkent

Rental rates consist of two types of components: fixed and variable. Fixed components include costs required to cover three categories of expenses:

• Taxes (VAT, corporate income tax, property tax, and other applicable taxes considered in rate calculation);
• Operating expenses (OPEX), such as maintenance, cleaning, security, etc.;
• Return on investment, which includes depreciation of initial expenses for construction, purchase, or fit-out of the property (this constitutes the largest portion of the fixed component).

Variable expenses represent the landlord’s margin. The negotiation range is determined during lease agreement discussions and depends on both the property itself and the terms of the negotiation.

The landlord’s profit from leasing a property can also vary. Typically, profit appears only after several years of operation, as the need to recoup the initial investment decreases over time.

In emerging markets, the advertised rate may differ significantly from the actual rate specified in the agreement. This significant negotiation range is often due to a lack of competition in certain real estate segments.

For new high-class properties in Tashkent, the cost per square meter ranges from $30 to $47, with a negotiation range of $17. Of this, approximately $22 accounts for the return on investment, while around $3 is allocated to OPEX.

For Class B or B+ properties less than five years old, the negotiation range is $21–33. Depreciation accounts for approximately $15, and operational expenses amount to $2.

For properties older than five years, rental rates range from $10 to $28 per square meter. In this case, the negotiation range (around $10) and profit (averaging $8 per square meter) may vary, while the fixed portion of the rate significantly decreases.

Two methods are commonly used to calculate rental rates in Uzbekistan’s commercial real estate market:

1. Triple Net: Used in Class A buildings, this method indicates only the base rate, excluding taxes and operating expenses.
2. All-In (Full Service Gross): This method includes taxes and operating costs in the rate, while utilities are paid separately. It is typically used in Class B buildings.

Source: Spot.uz