The Russian real estate market is developing and growing

Modern Russia explores trends in the Russian real estate market

World Property Channel cited data from a Cushman & Wakefield quarterly investment report discussing Russian real estate statistics for Q2 of 2012. The report highlighted the statistic that the total volume of investments in Russia’s commercial market equaled $2.8 billion, which is 15 percent higher than volumes achieved in Q2 2011. Since the beginning of 2012, the Russian real estate market achieved $4.18 billion of investment, which is 7 percent lower than in the first half of 2011. Alexander Zinkovski, Senior Analyst, Research Department at Cushman & Wakefield, explained that due to unstable currency and bond markets, investors show greater confidence in real estate to diversify risk. Furthermore, during the current economic slowdown, investors are varying their interest in retail objects from quality, prime centers to regional projects with higher yields.

The ratio of foreign and domestic investment was 50:50, and increasing interest in regional investments produced a 72:28 percent ratio between investment in Moscow and Russia’s regions. An additional Cushman & Wakefield report showed that in 2011 Moscow and St. Petersburg each claimed 13 percent of new space added, while in 2009 and 2010, Moscow accounted for 36 and 25 percent, respectively. The report explained that due to restrictions on construction, development activity in Moscow slowed, and only one new planned project was delivered in Q1 2012, the retail gallery within the Moskva hotel near Red Square. Furthermore, the real estate business shifted from the center of Moscow to the city’s outskirts. Russia’s regions have witnessed robust activity and recently two projects have been completed: the KomsoMall in Volgograd and the third phase of Krasnaya Ploschad in Krasnodar.

According to the publication:
•    The retail sector led investments in H1 2012, with total investment volumes of $2.05 billion, almost 50 percent of the total investment.
•    Furthermore, investors looked mostly to “quality retail” with investment volumes in Q2 accounting for $880 million.
•    The office segment saw 26 percent of total investment in that period, or $1.09 billion.
•    Investment demand for quality offices remained high despite the poor global economy, a trend that is common in times of economic trouble.
•    The industrial and hospitality segments grew more slowly in 2011 due to a lack of quality supply in these sectors.

A Moscow Times piece discussed analysts’ projections for the 2012 real-estate market and noted that while real estate buyers continue to purchase fancy offices, hotels and malls, commercial Russian real estate investment for the whole of 2012 will not reach 2011 highs, despite Q2 successes. Analyst estimates for total 2012 investments vary with some saying it could surpass $6 billion, and some arguing the number will be between four and five billion. The piece pointed to Cushman & Wakefield’s Zinkovsky as being the most optimistic, stating his firm expects investment volume to be $7 billion, since “There is demand, and there is supply.”

The piece pointed to several successful deals this year thus far, including the $1.1 billion sale of St. Petersburg's Galeria shopping complex and Russian real estate investor O1 Properties' purchase of Ducat Place III, the Class A office tower at 6 Ulitsa Gasheka from U.S. developer Hines for about $370 million. Austrian company Immofinanz Group also bought a 50 percent stake in Zolotoi Vavilon, or Golden Babylon, a 450-store shopping center in Moscow, for more than $500 million. In addition, Bin Group purchased the Summit office complex on Tverskaya Ulitsa and other properties for about $980 million.