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Russian Real Estate Investment Down 60%

Published: July 8, 2014 (Issue # 1818)



  • Investment in Russian real estate fell nearly 60 percent in the first half of this year amid looming economic stagnation
    Photo: Yevgeni Stetsko / Vedomosti

Investment in Russian real estate fell nearly 60 percent in the first half of this year amid looming economic stagnation, volatility in the ruble exchange rate and uncertainty emanating from the crisis in Ukraine, according to a report by consultancy Jones Lang LaSalle.

"Investors remain cautious, which is driving down investment volumes relative to 2013," said Tom Mundy, head of research at JLL for Russia and the CIS.

Investment plummeted at the start of the year but has recovered slightly, rising from $545 million in the first quarter — a 73 percent decrease from 2013 — to $842 million in the second, a drop of 36 percent.

JLL earlier slashed their forecast on commercial real estate investment in Russia to $3.4 billion, down from a forecast of $7 billion at the beginning of the year.

This figure is not expected to improve, particularly in light of investors' concerns over the potential impact of further international sanctions against Russia, Mundy said.

Following Russia's annexation of Crimea in late March, the U.S. and European Union struck back with sanctions targeting a series of Russian officials, businessmen and companies with close ties to the Kremlin.

The international crisis hit the ruble as hard as it hit investor confidence: by the time President Vladimir Putin signed the annexation document, the ruble had weakened more than 10 percent against the dollar since the beginning of the year, spooking many investors in Russia's import-heavy retail sector.

Their nerves have had no chance to recover, as the U.S. and EU continue to reiterate threats of expanding the sanctions to sector-wide measures if peace efforts fail in eastern Ukraine, where the West accuses Russia of fomenting unrest.

But while real estate investment may be crushed this year by the menace of sanctions and economic growth forecasts that wobble around 0.5 percent, the market is likely to rebound in 2015.

"The Russian commercial real estate market is generally in pretty good health, having restructured well following the 2008 crisis and benefiting from a fundamental undersupply of quality stock. So after the disappointment of 2014, 2015 may prove a very strong year," Mundy said.

The hotel and office segments are leading for investment this year, with 37 percent and 24 percent of the total volume respectively. A single deal, however — the sale of an 84 percent stake of Hotel Company — significantly inflated hotels' share in the market, the study said.

Moscow dominated the market as usual, attracting 85 percent of all investments in the first half of the year. St. Petersburg increased its share slightly — from 5 to 8 percent — leaving Russia's vast regions with a 7 percent share.





 


ALL ABOUT TOWN

Thursday, July 31


Develop your leadership abilities during a lecture by famous Russian author and coach Radislav Gandapas. The event starts at 9 a.m. at 5 Lodeinopolskaya Ulitsa. The price for entry is 20,500 rubles ($570).


Relax and enjoy a Parisian atmosphere with some romantic and laidback jazz tunes during the Night of French Music at Lenny Jam Cafe, 63 Ligovsky Prospekt. The entrance fee is 250 rubles ($7).


The Women’s Business Club is hosting a Beauty Brunch where participants are invited to discuss the latest news in the beauty industry and listen to lectures by professional stylists in the business.



Friday, Aug. 1


Bikers from all around the world will gather to take part in a parade, extreme shows and rock concerts during the International Biker Festival that revs its engines today and runs through Aug. 3 near Olgino Hotel, 4/2 Primorskogo Shosse.


The Peter and Paul Fortress will be turned into an open-air cinema today and tomorrow as part of the 5th International Short and Animation Film Festival. A huge screen across the fortress walls will air short films non-stop with board games, photo sessions and other activities also on offer for visitors. For more information, visit www.opencinemafest.ru



Saturday, Aug. 2


Gatchina Palace Park Museum will host its second annual Night of Light, an impressive audio-visual show across the night sky. Tickets are 600 rubles ($16).


If graphic design is more your thing then check out Illustration Day, where you will be able to visit an exhibition, attend lectures by professionals and even show experts some of your own work. The event starts at noon at Zona Deystvia, 73 Ligovsky Prospekt. The entrance fee is 350 rubles ($10).



Sunday, Aug. 3


History lovers shouldn’t miss the chance to see reenactments of World War I battles in Pushkin at noon. Besides exciting war scenes, visitors can enjoy live music, historical costumes, an equestrian show and a fancy-dress parade starting from the Moscow gates.


Garage Sale, the popular and growing flea market where nothing is priced over 500 rubles ($14.11), starts today at noon in Loft-Project Etagi, 74 Ligovsky Prospekt. Be sure to get in early to score a bargain. Entry costs 50 rubles ($1.40)



Monday, Aug. 4


Continue the working week with a calm and steady mind with a free yoga lesson at 7 p.m. in the Bukvoyed store at 23A Vladimirsky Prospekt.



Tuesday, Aug. 5


Visit The Romanov Dynasty doll exhibition today, where more than fifty porcelain dolls depicting Russian rulers, and made by Olina Ventzel, will be on show. The exhibition continues through Aug. 31 in Sheremetyev Palace, 34 Fontanka Naberezhnaya.



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