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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

Wednesday, Sept. 17


AmCham’s Investment and Legal Committee Meeting convenes this morning in their office in the New St. Isaac Office Center at 9 a.m.


Learn more about the science of teaching English at today’s EFL Seminar hosted by the British Book Center. Revolving around the topic of learning styles, the workshop will help attendees better understand the different effective learning methods that can be implemented to learn English more effectively.



Thursday, Sept. 18


Get your nerd on at Boomfest, St. Petersburg’s answer to the United States’ popular ComicCon. Starting today, this international festival of comics will take over venues throughout the city center and includes exhibitions of comics and illustrations, film screenings, competitions and the chance to meet the genre’s authors, artists and experts.



Friday, Sept. 19


SPIBA’s newest addition to their Cultural Discoveries events is “Handmade in Germany,” an exhibition featuring unique handmade objects of a significantly higher quality than mass-produced items. The work of over 100 German manufacturers will be displayed during the event, which opens today in the Lutheran Church of Saint Peter and Paul on Nevsky Prospekt and runs through Sept. 28.



Saturday, Sept. 20


Starting on Sept. 18 and ending tomorrow is the Extreme Fantasy Wakeboarding Festival in Sunpark by Sredny Suzdalskoye lake in the Ozerki region of the city.


Those after something more laid back can instead head to Jazz and Wine night at TerraVino with legendary jazz guitarist Ildar Kazahanov. 12/14 Admiralteyskaya Emb.



Sunday, Sept. 21


Learn more about African culture and get some exercise during today’s “Djembe and Vuvuzela,” a bike ride starting in Palace Square that includes several stops where riders can listen to the music of Africa or watch short films about the continent. The riders plan to set off at 4 p.m. and all you need to join is a set of wheels.



Monday, Sept. 22


Do you love puppetry? If so, then be sure to go to BTK-Fest, a five-day festival that starts on Sept. 19 celebrating the art. Contemporaries from France, Belgium, the U.K. and other countries will join Russian artists to put on theatrical performances involving a variety of themes, materials and eras. Workshops and meetings are also scheduled for a chance to discuss the artistic medium in further depth.



Tuesday, Sept. 23


Marina Suhih, Director of the External Communications Department at Rostelecom North-West, and Yana Donskaya, HR Director for Northern Capital Gateway are just some of the confirmed participants of today’s round table discussion on “Interaction with Trade Unions” being hosted by SPIBA. Confirm your attendance with SPIBA by Sept. 22.


Kino Expo 2014, an international film industry convention, will be at LenExpo from today until Sept. 26. The third largest exhibition of film equipment in the world, the expo focuses on not only Russia but former Soviet republics as well.



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