Real estate firm Cushman and Wakefield are predicting a slight fall in commercial real estate investment in Russia this year. The firm is predicting a year-end total of $7.2 billion invested in Russian real estate this year, down 5% from last year.
According to the report hunger for retail property is greatest in Russia, with investment in the sector heading for 45% of the total volume, with only offices coming close at 30%. The hospitality and industrial sectors stepped down in halves at 15% and 7% respectively.
The report shows that investors are still no keener to leave the comfort zone of established markets, which are in Russia's case the capital Moscow and 2nd biggest city St Petersburg.
Thanks to this Moscow remains the 3rd largest investment market in Europe according to Real Capital Analytics, behind London and Paris. Cushman and Wakefield are predicting that Moscow real estate investment will total $6 billion by the end of the year, almost 85% of the Russian total. The C&W report shows that Moscow is completely dominant across the office and warehousing sectors, while St Petersburg is at least beginning to mount a challenge in the retail and hospitality sectors.
The purchase of the Galleria shopping centre in St Petersburg by a US investment firm for $1.1 billion earlier this year gave the retail transaction volume a bump for the city. Indeed it was the largest transaction in the market so far, making it unique to have come from St Petersburg. As a result RCA ranked St Petersburg 14th among the top European property markets this year. According to the C&W report desire is high to invest in St Petersburg, but it lacks supply of the quality that investors are looking for.
"We see a return of some normalcy to the investment market with both large Russian and foreign investors playing important roles. In 2012, retail was probably the most sought after asset class given its proximity to the consumer while office remained strong and industrial was also attracting attention. Banks were lending to good owner/operators and developers were also able to tap funding. Barring any systemic events, as the global economy continues its recovery we will see growing interest in the Russian real estate market where yields are healthy and opportunities abound. Our expectation is that growth in total investment volumes will push 2013 results to exceed those we expect this year", commented Tom Cashel, Partner, Head of Capital Markets at Cushman & Wakefield Moscow.
- Tuesday 11 December 2012