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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, Oct. 30


Dental-Expo St. Petersburg 2014 concludes today at Lenexpo. Welcoming specialists from throughout the federation, the forum is an opportunity for dentists to share tricks of the trade and peruse the most recent innovations in technology and equipment, with over 100 companies hocking their wares at the event.



Friday, Oct. 31


Put your grammar and logical thinking to the test in a fun and friendly environment during the British Book Centers Board Game Evening starting at 5 p.m. today. The event is free and all are welcome to attend.



Saturday, Nov. 1


The men and women who dedicate their lives to fitness get their chance to compete for the title of best body in Russia at todays Grand Prix Fitness House PRO, the nations premier bodybuilding competition. Not only will men and women be competing for thousands of dollars in prizes and a trip to represent their nation at Mr. Olympia but sporting goods and nutritional supplements will also be available for sale. Learn more about the culture of the Indian subcontinent during Diwali, the annual festival of lights that will be celebrated in St. Petersburg this weekend at the Culture Palace on Tambovskaya Ul. For 100 rubles ($2.40), festival-goers listen to Indian music, try on traditional Indian outfits and sample dishes highlighting the culinary diversity of the billion-plus people in the South Asian superpower.



Sunday, Nov. 2


Check out the latest video and interactive games at the Gaming Festival at the Mayakovsky Library ending today. Meet with the developers of the popular and learn more about their work, or learn how to play one of their creations with the opportunity to ask the creators themselves about the exact rules.



Monday, Nov. 3


Non-athletes can get feed their need for competition without breaking a sweat at the Rock-Paper-Scissors tournament this evening at the Cube Bar at Lomonosova 1. Referees will judge the validity of each matchup award points to winners while the citys elite fight for the chance to be called the best of the best. Those hoping to play must arrange a team beforehand and pay 200 rubles ($4.80) to enter.



Tuesday, Nov. 4


Attend the premiere of Canadian director Xavier Dolans latest film Mommy at the Avrora theater this evening. The fifth picture from the 25-year-old, it is the story of an unruly teenager but the most alluring (or unappealing) aspect is the way the film was shot: in a 1:1 format that is more reminiscent of Instagram videos than cinematic art. Tickets cost 400 rubles ($9.60) and snacks and drinks will be available.



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