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executIve summaRy• Thetotalvalueofcommercialrealestatepurchasesin2010wasabout$4.4billion.
• In2010,unlikein2009,theprincipalobjectiveofmostcommercialpropertytransactionswasinvestment.
• ThecommercialpropertywasmostlyindemandamongstRussiancompanies,whiletheinterestfromforeigninvestorsremainedatlowlevels.
• Bankshavesteppedupamountsofrealestatelending,buthaveincreasedtheshareoflendingtoresidentialdevelopmentsinordertodiversifytheirrisk.
• TheshiftofinvestorinterestfromMoscowmarkettoqualitycommercialpropertyinothercitiesisexpected.Anincreasinginterestofinvestorstohigh-qualityprojects,whicharestillunderconstruction,isalsoexpected.
oveRvIew
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Financing
TherewasaprogresstowardsrecoveryoftheRussianbankingsystemin2010,largelythankstothegovernment’sactionsin2009tosupportthefinancialsectorandduetothepoliciesbytheBankofRussia.Asignificantgrowthofdepositsinthebankingsystem(bymorethan30%in2010)enabledthesteadyincreaseoflendingtotheRussianeconomyfromthesecondhalfof2010.Theloanratesareincreasinglyaffordable:accordingtotheBankofRussia,rubleinterestratestonon-financialorganisationshavedecreasedfrom13.8%inJanuaryto9.2%inDecember2010.Thegrowthofoverdueloansasapercentageoftotalloansalsosloweddown,andtheshareofoverduedebtstartedtodeclineinthesecondhalfoftheyear,partlyduetoanincreaseofoverallbanklending.
Anincreaseofbanklendingtothecommercialpropertysegmenthashelpedanumberofdeveloperstopartiallyorfullyresolvetheiroverduedebtproblems.Thedevelopersthenmovedontotakinganadvantageofawidening
gapbetweensupplyanddemandforthecommercialpropertybyresumingconstructionworkatanumberofprojects,whichhadbeensuspendedduringthecrisis.However,thetrendamongbankswastowardsanincreaseoffinancingforresidentialconstruction,asawayofdiversifyingtheirrisk.Thispolicyalsomakessenseforbanksbecausetheycanstimulateresidentialdemandbyissuingofmortgageloans.
Despitethepositivetrend,ashortageoffinancingremains.Banksaredemandingahigherriskpremiumcomparedwiththepre-crisisperiod,eitherbymoreconservativevaluationofpropertycollateralorbysettinghighratesofinterest.Theircautiousbehaviourisunderstandable,sincetheyaccumulatedlargeamountsofexpensiveliabilities(depositsathighratesofinterest)duringthemostacuteperiodofthecrisis,whichconsiderablyreducedtheirprofitability,andthefinancialproblemsthattheythecompaniesexperiencedduringthecrisismadethebankstakeoveralargenumberofnon-coreassets,whichrespectivelyledtotheirneedtoincreasethereservesattheBankofRussia.Moneytiedupinreservesissubtractedfromamountsthatareavailableforinvestmentstorealorfinancialsectors,whichinturnhassloweddownagrowthoflendingandhadanegativeimpactonprofitabilityofbanks.MostlytheloanstodevelopershavebeenprovidedbythebiggestRussianbanks,SberbankandBankVTB.
Westernbanks,whichstoppedgivingcreditinRussiawhenthecrisisbegan,arealsograduallyrestartingtheirlendingprogrammes.NordeaBankhashelpedtorefinancetheup-and-runningshoppingcentresofIMMOFINANZGroup,andanAustriandeveloperAvielenA.G.hasobtainedaloanfromtheconsortiumofPolishbanksforconstructionoftheAirport-CitybusinesscomplexneartoPulkovo(SaintPetersburg).
InflationaryrisksintheRussianeconomyin2011mayencouragetheBankofRussiatoraisetherefinancingrate,whichmayhaveanegativeimpactonfinancingoftherealsector.
Relativestabilityonthestockmarketin2010hasrevivedtheinterestofmanycompaniesinraisingcapitalbypublicshareplacements.Therewasasignificantincreaseinthenumberoffinancingtransactionsthroughsharesaleonstockmarketsduring2010incomparisonwith2009.ThefirstRussiandevelopertotakethispathsincethecrisiswasLSRGroup,whichraisedabout$400millionfromanSPOinApril2010.ThesumwasonlyahalfofwhatLSRhadoriginallyhopedtoraise,butstockmarketsdoappeartobeoneofthemostpromisingfundingoptionsatpresent,andotherdevelopersmayfollowLSR’sexampleinthefuture.
Evgeny SemenovDirectorofCapitalMarkets
“Against the backdrop of economic recovery an increase in demand for commercial real estate in 2010 is being observed. Just as in 2009, in 2010 there were many acquisitions of commercial property by end-users. However, an increasing activity by investors led to a situation where most transactions in 2010, unlike in 2009, were of an investment nature. At the current stage of the market, the majority of transactions were implemented by Russian companies. They seek to minimize the risks of volatility of rent levels (in cases of acquisition by end-users). On the other hand, attractive level of prices, which is currently observed on the growing market, also increases the demand for commercial real estate.”
Real estate Investment maRket
* Taken as a percentage of all loans issued by Russian banks
Source: Bank of Russia, 2011
Since the second half of 2010 an increase of credit volumes in the Russian banking system was accompanied by a reduction of overdue loans*bln rub.
Total loans
Share of loans overdue
22,500
22,000
21,500
21,000
20,500
20,000
19,500
19,000
18,500
18,00001 02 03 04 05 06 07 08 09 10 11 12
2009
%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
2010
01 02 03 04 05 06 07 08 09 10 11 12
1.5
2.0
2.5
3.0
3.5
4.0
0
5000
10000
15000
20000
25000
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Financing / Refinancing deals for projects on the real estate market
Lender Borrower Purpose Basic Conditions
SberbankAFIDevelopment
CompletionofphaseIIIofamulti-usecomplexonOzerkovskayaEmbinMoscow.TotalareaofphaseIIIis75,500sqm,includingclassАofficesandapartments
$74millionfor5yearsat13%
DSDevelopmentCompletionofa152,000sqmmulti-usecomplexonOruzheinylaneinMoscow
5-6billionrubles
North-CaucasianBankofSberbank AFIDevelopment
AgreementonjointimplementationofprojectsinthecityofKislovodsk,includingconstructionandreconstructionofsanatoria(ParkPlaza,StaroyeOzero,andVersailles)
$286million
North-WestBankofSberbank
StroykorporatsiyaEllis5-yearcreditlineforconstructionoftheOzerkiStyleTowerresidentialcomplexinStPetersburg(morethan90,000sqm)
2.2billionrublesfor5years
RBICreditlineforconstructionofamulti-usecomplexon23NovgorodskayaStinStPetersburg
1.23billionrubles
VTBBankSistemaHals
Loanforcompletionofanofficecomplexat39LeningradskyAve,Moscow
5.37billionrubles(limit)for4years
SistemaHalsLoanforphaseIofapremiumout-of-townresidentialdevelopmentnearMoscowonRubelvo-UspenskoyeHwy(neartoGorky-8)
3.2billionrubles(limit)for5years
SistemaHalsLoanforconstructionoftheSolntseresidentialcomplex(58,400sqm)andotherprojectsinKuntsevoareainMoscow.Repaymentin2014
2.3billionrublesfor4years
SistemaHals Creditline $80millionat9.5%
Don-StroyInvest LoantorefinancedebttoAlfa-Bank4.3billionrubles(limit)for6years
Alfa-BankForumProperties
Restructuringofaloan,securedontheHermitagePlazabusinesscentre
$150millionfor6yearsat11%
LenSpetsSMU
Import-exportfinancingofaresidentialapartmentdevelopmentinStPetersburg,withparticipationofGermanbanks,IKBDeutscheIndustriebankAGandLandesbankBerlinAG,andaPolishconstructioncompany,Budostal-3Export.ThisisthefirsttransactionofitskindinRussia
Creditlinefor4yearswithtotalvalueof39million
NordeaBankIMMOFINANZGroup
Loantorefinancetwoshoppingcentres,GoldenBabylon-1andGoldenBabylon-2,inMoscow
$100million
ConsortiumofthreePolishbanks:BankGospodarstwaKrajowego,BREBankandRaiffeisenBankPolska
AvielenA.G.(ownedbyAustrianWarimpex,CAImmoandUBM)
CompletionoftheAirport-CitybusinesszoneinPulkovoarea(StPetersburg).AvielenA.G.hashadtousetheunfinishedprojectwithexpertvaluationof€70millionascollateralfortheloan
€60million
EuropeanInvestmentBank
TechnopolisConstructionoftheTechnopolis-PulkovotechnologyparkonPulkovohighway(StPetersburg)
€32million
SevernayaStolitsa(branchofRaiffeisenbank)
LenSpetsSMU Borrowingforcorporateneeds $20million
InternationalFinanceCorporationandBlackSeaTradeandDevelopmentBank
EsproCompletionofphaseIofKulon-Yugros,aclassAofficeandwarehousecomplexwithabout27,200sqminthecityofMineralniyeVody
€9.8million
Source:KnightFrankResearch,2011(fromopensources)
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Demand
Weestimatetotalvalueofcommercialrealestatesalesatabout$4.4billionin2010,whichhasincreasedsubstantiallyfrom$2.2billionin2009.Mostlythepurchasesin2010wereintheofficesegment(about$3.4billion).
ThetransactionsweredominatedbythecompletedofficepropertiesinMoscow.Accordingtoourestimations,thepurchasesofoperatingofficeobjectsintheRussiancapitalhadatotalvalueofabout$3.2billionin2010(i.e.70-75%ofallpurchasesofRussiancommercialproperty).55-60%oftherepresentedinvestmentdealsandtheotherdealswerepurchasesbycompaniesofofficespacefortheirownneeds.Themoststrikingchangeonthemarketin2010comparedwith2009wasintermsofgrowthinthenumberandsizeofinvestmentpurchases,whilepurchasesofofficebuildingsforthebuyer’sownneedsgrewtoalesserextent.
HighlevelsofdemandforofficepremiseshavebeendrivenmainlybyRussiancompanies,bothfromthefinancialsector(buyingmainlyforinvestment)andtherealsector.ThisreflectstheimprovementsintheRussianeconomy,thankstowhichmanydomesticcompanieshavegeneratedasparecapitalhavingsoughtforthesuitableassets,inwhichtoinvestit.
Thepositivetrendsintheeconomyhavehelpedtomakecommercialrealestatemoreappealingasaninvestmentasvacancyratesdeclinedandrentsroseinnearlyallsegments,increasingcashflowgeneratedbyup-and-runningcommercialprojects.Capitalizationratesareabovepre-crisislevelsandaboveEuropeanlevels,thoughonadownwardtrend,andrentlevelsarerising,soRussiancommercialpropertylookshighlyattractiveatpresent.
TheneedsofcompaniesaspotentialusersofcommercialrealestatearehighlycorrelatedwiththeirownbusinessactivitywhichishardtopredictonRussia’sdevelopingmarketofferinghugepossibilities,butisalsosubjecttohighlevelsofvolatility.Thesupplyofqualityofficepremisesassuchhasonlyappearedinthemid-1990s,andthelocalconstructionindustryisstilltakingshape.Meanwhile,buildingsthatwereerectedearlierareincreasinglydepreciatingandout-of-date,makingthemliabletodeclassification.Therefore,thecurrentstateofaffairshasledtothewidespreaduseofshort-termlets,fortheperiodsof3-5years,ascomparedwith15-25yearsondevelopedEuropeanmarkets.Shortletstendtospeedupthemarketprocesses,sincetenantsreturntothemarketmorefrequentlythaninEurope,whichinfluencesthedemand.Inthesecircumstances,companieshaveanadditionalincentiveforbuyingofficecentresfortheirownuse,namely,toavoidanexposuretorapidlychangingrentlevelsinMoscow(ratefluctuationsonRussianregionalmarketsareevenmorepronounced).
Anincreaseddemandforthefinished,high-qualityofficepremiseshasledtotheshrinkageofsupplyinMoscow,andthisisoneofthereasonsforanupsurgeofinvestorinterestinunfinished,high-qualitypremises(thesameistrueinothermainRussiancities).
Theinterestfrominvestorswithforeigncapitalisstillquitelimited.Therisk-to-returnratioinRussiaisnotyetsufficientlyattractiveforforeigninvestorsandmostofthemarestillmonitoringthemarket.SomeforeignfundshaverecentlyquittheRussianmarket.Itwasreportedinsummer2010thattheGermaninvestmentfund,KanAm,haddecidedagainstthepurchaseoftheVivaldiPlazamulti-usecomplex.KanAmalreadywithdrewfromthepurchaseofanotherofficecentre,Citydel,in2009.Ontheotherhand,someplayerswithforeigncapitalhavebecomemoreactive:the
purchaseofBakhrushinHousebusinesscentrebyUFGRealEstateFundIIwasanimportanteventinQ22010.
ThecompaniesfromAsiadeserveaspecialmentionamongforeignbuyersofcommercialrealestate.RapiddevelopmentofmanyAsianeconomieshascreatedanexcessliquidity,whichcannotalwaysbeinvestedinthecountriesoforigin,duetothelimitationsintroducedbygovernmentsthere.Asianinvestorsarethereforekeentofindopportunitiesonforeignmarkets,andRussia’snumerouslinkswithcountriesinthatregionmakesitanaturalobjectofinterest.Forexample,towardstheendof2010aChinesestate-ownedcompanyChengtongboughtGreenwood–aninternationalexhibitionandofficecentre.Thecentrewasboughtforthecompany’sownuse.
Source: Knight Frank Research, 2011
Greater demand for high-quality assets has led to the further decline of cap rates in 2010, although the trend was less marked in Q4 2010%
Office
Retail
Industrial
15
14
13
12
11
10
9
8
7Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009 2010
6
9
12
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
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Buy / Sell deals for real estate property
Buyer Seller Assets Deal Total
OtkrytiyeFinancialCorporation
HorusCapital
5businesscentres:Avion(18,600sqm,47LeningradskyAve),Gamma(10,800sqm,5/15Gamsonovskylane),Krugozor(59,000sqm,30/1ObruchevaSt),LeFORT(62,000sqm,27ElektrozavodskayaSt),FabrikaStansilavskogo(32,000sqm,21StanislavskogoSt)
$800million*
Chengtong(Chinesestate-ownedcompany)
n/aGreenwoodexhibitionandofficecomplex,MKAD74km(betweenLeningradskoyeandVolokolamskoyehighways).
$350million*
Pharmstandard n/aNorthernTowerbusinesscentre,(135,000sqm,10TestovskayaSt,partofMoscowCity)
$260million*
RVMCapital(forRussianRailways)
InterrosTwobuildingsattheclassADomnikovbusinesscentre(22,000sqmand25,000sqmofrentablespace)on34MashaPoryvaevaSt,Moscow
$225million*
VTBCapital CapitalGroup ClassACapitalPlazabusinesscentreat4FourthLesnoylane,Moscow $180million*
EvrazGroup CenturionZapadniyeVorotabusinesspark(64,000sqmtotalspace)onintersectionofMKADandMozhaiskoyeHwyinsideMoscow)
$160million*
SOGAZInsuranceGroup EurasiaLogisticVolnabusinesscentre,classA(19,240sqmtotalspace)on10AkademikaSakharovaAve,Moscow
$140.7million
RusHydro Ferro-StroyPallau-MDbusinesscentre,classA(14,800sqmtotalspace)on7,9MalayaDmitrovkaSt,Moscow
$85-95million*
TashirGroup EurofinansMosnarbankDirizhablresidentialcomplex(nearly100,000sqm,about50%completed)onProfsoyuznayaStinMoscow
$90million*
ICTGroup(ownedbyAlexanderNesis)
AoriNouvelleBuildingbusinesscentre,classB(9,800sqmtotalspace)on11/7NovokuznetskayaSt,Moscow
$80-85million*
Otkrytiyefinancialcorporation
HorusCapitalOlimpiaParkbusinesscentre,classA(70,900sqmtotalspace,consistingof45,600sqmofofficespaceand1,600sqmofretailspace)on39LeningradskoyeHwy
$70million*
WenaasHolding NairayHoldingsLimitedHotelSheremetyevo-2(293rooms)onMezhdunarodnoyeHwyinKhimki,justoutsideMoscow
$65million*
TashirGroup DeutscheBankEuroParkshoppingandleisurecentre(94,000sqmtotalspaceat62RublevskoyeHwy,Moscow)
$60million*
SminexInvestmentCompany
KopernikGroupOfficebuildingson10PalikhaStand25SushevskyValStinMoscow(20,000sqmtotalspace)
$50-60million*
StroykreditBank AlfaBankHeadofficeofKopernikGroup(15,000sqmtotalspace)onKrasnayaPresnyaStinMoscow
$45million*
Sberbank RosEuroDevelopmentRosEuroPlazabusinesscentre,classA,inNovosibirskforSberbankSiberia,commissionedin2007(15-storeybuildingwith27,600sqmtotalspace,ofwhich21,200sqmrentable)
$44million*
CasebreHoldingsLimited RavenRussiaBaltiawarehousecomplex,classA(about28,000sqm)onNovorizhskoyeHwy,7kmfromMKAD.
$42million*
Sberbank IMMOFINANZGroupTomilinologisticspark(53,000sqminMoscowRegion,6kmfromMKADonRyazanskoyeHwy)
$39million
FormertopmanagersofIKEAandMikhailZaits
LevKhasis(CEOofX5RetailGroup)
Aviaparkcomplex510,000sqmtobebuiltonKhodynskoyePolyeinMoscow$25-50million*,$1-1.3billion**
UFGRealEstateFundII(UFGRealEstate)
AkronGroupBakhrushinHousebusinesscentre,classB(5,078sqmtotalspace)on32/1BakhrushinaSt,Moscow
$35million*
*Estimate
**Proposedinvestment
Source:KnightFrankResearch,2011
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Buy / Sell deals for real estate property
Buyer Seller Assets Deal Total
Finaminvestmentholding n/aBusinesscentre,classB+(about7,500sqmtotalspace)onBld2,7Nastasinskylane,Moscow
$30million*
ViHolding Moon-InvestFormatshoppingcentre(21,200sqmtotalspace,ofwhich18,000sqmrentable)inthetownofMytishi,MoscowRegion
$28million*
RenaissanceDevelopment Phoenix10RegentHallshoppingandofficecentre(11,700sqmtotalspace)on23VladimirskyAve,StPetersburg
$25-30million*
Rosenergobank DresdnerBankOfficecomplex,class,B+(4,278sqmtotalspace)on30Podsosenskylane,Moscow
$21-25million*
FederalGridCompany n/aAustrianBusinessCentre,classA(4,000sqmtotalspace)on9PirogovskayaEmb,StPetersburg
€23.0million*
WintaHoldingsMirLandDevelopmentCorporationplc(FishmanGroup)
50%stakeinthecompanyTekhagrokom-2,whichhasrightstobuildamultifunctionalcomplex(shoppingcentreandclassB+officecomplexof163,400sqmtotalarea)ona22-hectaresiteonKaluzhskoyeHwyinMoscowRegion.
$20million*
Fininvest BVTNeopalimovskybusinesscentre,classA(3,700totalspace)on10SecondNeopalimovskylane,Moscow
$18-20million*
NAIBecar HillarTederAProjectof3-starhotel(8,700sqmtotalspace)onMoskovskyAve,StPetersburg,scheduledcommissioningin2011.
$17million
Saint-PetersburgDevelopment(RoulaLevendi)
SaintPetersburgPropertyFund
Boutiquehotelproject(4,150sqmtotalspace)on25MoikaEmb,StPetersburg
$9.9million*
Otkrytiyefinancialgroup KopernikGroup ProjectofClassicBusinessCenter n/a
Mai n/a Officebuilding(6,000sqm)on7A,DmitriyaUlyanovaSt,Moscow n/a
UMACOGroupGroupofprivateinvestors
PlannedrenovationoftheKaterinaParkhotel(260rooms)11,KirovogradskayaSt,Moscow
n/a
*Estimate
**Proposedinvestment
Source:KnightFrankResearch,2011
Supply
AnImprovementofthesituationinthebankingsystemhasenabledmoredeveloperstoresolvetheirdebtproblems,repayingorrefinancingtheiroverdueliabilities.Thismeansthattheycanswitchtheirattentionfromthesearchforcapitaltodevelopmentofprojects,sothatprojects,whichweresuspendedduringthecrisis,canberesumed.However,inmanycasesdevelopershavechosentosimplifyprojectconcepts,whichlowerstheimplementationcosts.
Somenewprojectshavealsobeenannounced,buttheyarelimitedinnumber.
Somecompanies,whichwerepreviouslyfocusedoncommercialproperty,areexpandingtheirportfoliothroughinvolvementinresidentialprojects.Thisreflectsagrowinginterestofbanksinresidentialprojectfinancingwhichoffersapossibilityofexitingtheprojectsearlierthancommercialprojects,aswellasaquickerpaybackofinvestments.Tashirgroupoffersoneexampleofthisstrategy:thegrouphasrepurchasedthe
Prime yields*
Officerealestate 9-10%
Retailrealestate 10-11%
Warehouserealestate 11-13%
*Estimationofcapitalizationratesforhigh-
qualityobjectsinMoscow
Source:KnightFrankResearch,2011
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DirizhablresidentialprojectinMoscowfromEurofinans(Mosnarbank).However,Tashir’smainassetsareshoppingcentres.
Realestateassetsarestillbeingtakenoverbythebanksinlieuofdebtrepayment.Theownershipofrealestateisonerousforfinancialinstitutions(particularlyifitdoesnotgeneratecashflow),requiringextracostsandcreationofspecialreservesattheBankofRussia.However,banksfinditdifficulttoselltheirrealestateassets:itishardtosellrealestatequicklyatmarketprice,andevenhardertosellatapricethatwouldcompensatethebank’sexpensesassociatedwiththeloan,whichtheassetoriginallysecured.Also,theassetsreceivedbybanksincludemanyunfinishedprojects,whichareusuallyilliquid.
TheChairmanoftheBankofRussia,SergeiIgnatyev,hassaidthatreserverequirementsmaybetightenedwitheffectfromJuly2011.Newrulesmaystatethatreservesonanon-coreasset,whichhasbeenonbankbooksformorethanayear,mustbe10%ofthevalueoftheasset,risingto35%aftertwoyearsand75%afterthreeyears.Thismayexplainthestatementsbyheadsofseveralmajorbanks,whosaidthattheirinstitutionswouldtrytodisposeofthebulkofsuchassetsbefore2012.
Lowliquidity,possiblegrowthofrequiredreservesonnon-coreassets,andtheexpectationsbymarketplayersintermsofpricegrowthofcommercialpropertyispushingbanksintocreationoftheirowndevelopmentstructures.Forexample,VTBBankhaspartiallyacquiredthedevelopmentcompanySistema-HalsandSberbankhasplanstocreateanewsubsidiary,SberbankDevelopment,whichwillbringtogetherrealestate,landplots,andsharesinotherdevelopmentcompanies.AlsoOtkrytiyefinancialcorporationhasgreatlyexpandeditscommercialpropertyportfolio,apparentlywiththeintentionofpursuingdevelopmentbusiness.
Forecast
AgradualimprovementofmacroeconomicindicatorsgloballyandinRussiashouldleadtotheresumingofworksontheprojectsthatwerefrozenduringthecrisisandtoastrongernewprojectsflow.WemayalsoseeinvestorsturningmoreattentionfromtheMoscowmarket,wherethereisalimitedsupplyofprojectsofferingtheattractivereturns,tomarketsinotherbigcitiesandparticularlyinSaintPetersburg.Therewillbemoreinvestorinterestinqualityprojectsattheadvancedstagesofcompletion.
Therewasasignificantgrowthinthequantityofofficepropertypurchasesin2010andtheinvestoractivityislikelytoremainstrongin2011.ThisreflectsasustainedinterestofRussiancompaniesinbuyingofficepremises,bothtoavoidanegativeimpactofthevolatilerentalmarketandalsoduetothefactthat
theinvestmentinrealestateisviewedasagooduseofsurpluscash.Pricelevelsontheofficepropertymarketlookattractiveinviewofrelativelyhighcaprates(comparedwithpre-crisislevelsandlevelsinEurope)andourexpectationoffastergrowthofrentsinthemediumterm.Thisshouldensurethattheinvestmentpurchasevolumesintheofficesegmentremainstrongandevengrowstrongerin2011.
Themodernshoppingcentresensureasteadyandincreasingincomeflowtotheirownersonarisingmarket.ItisalsoimportanttonotethattheownersofshoppingcentresinRussiaareoftennotprofessionaldevelopers,andashoppingcentreisoftenthesoleassetofitsowner.Forthesereasons,thereareveryfewinvestmentopportunitiesinthissegment.Alsotheshoppingcentresareamongstthemosthighlypricedassetsonthecommercialpropertymarket,whichrepresentsaseriousobstacletothepotentialbuyersinthecurrentcontextduetoshortagesofownandborrowedcapital.ThetransactionswithfunctioningshoppingcentreassetsinMoscowandSaintPetersburgarethereforerare.Investorattentionhasshiftedtowardsshoppingcentreprojectsintheregionsandtowardstheunfinishedprojectsatanadvancedstateofcompletion.
Take-upofwarehousepremisesbytenantswassignificantlyhigherthancommissioningofnewspacein2010,largelyduetolackoffinancingforthenewprojectsinthecrisisperiod.ThistrendcouldleadtoasituationwherebythevacancyrateinMoscow(whereabout80%ofallRussianwarehousingisconcentrated)approaches0%bytheendof2011.Uptonowthepurchasesofwarehousepropertieshavemainlybeeneitherbyend-usersfortheirownuseorasaforcedsaleduetothedebtproblems,butthegrowthofdemandfromtenantshasnowencouraged
aninterestamongstinstitutionalinvestorsinacquiringwarehouseproperties.ThebuyerswithRussiancapitalareinthemajorityatpresent,buttheshareofwesternbuyersisexpectedtogrowinupcomingyears.Itislikelythatanumberofinvestmenttransactionswillbecompletedontheindustrialandwarehousemarketin2011,includingsomewithinvolvementofforeignbuyers.
TherehasbeenagradualrecoveryofinterestintheRussianhotelmarketfrombothRussianandforeigninvestors.ThehotelpropertymarketinMoscowrepresentsanattractiveinvestmentinviewoftheinadequatequalityhotelcapacityinthecityandrelativelyhighreturnsinthesegment(MoscowisinfifthplacebyrevenueperroomamongEuropeancities).Suchattractivenessofthismarketwasconfirmedbyanumberoftransactionsin2010.Thecrisishascontributedtothehigherprofessionalstandardsonthemarket,ascompanies,whicharenotspecializedinhotelbusiness,havewounduptheiroperations,andweexpectthistrendtocontinueduring2011.Overall,anincreaseofinvestmentactivityinthesegmentisexpected.TheplansannouncedbymajorhotelchainsforregionaldevelopmentwillmakeRussianprovincialcitiesantargetforinvestors,althoughtherelevantactionstodatehavebeenlimitedtomarketresearchandmonitoringofthecurrentsituationandfutureprospects.Thecitiesofmostinteresttopotentialinvestorsandhoteloperatorsarethosewherevariousspecialeventsaretobeheld.SuchcitiesincludeKazan(theUniversiadain2013),Vladivostok(theAPECsummitin2012),Sochi(theWinterOlympicsin2014)aswellasVolgograd,Krasnodar,Kaliningrad,Yaroslavlandsomeothers,whichwillhostmatchesaspartoftheFootballWorldCupFinalsin2018.
Page 8
oveRvIew
Americas & CanadaBermudaBrazilChileCaribbeanCanadaUnitedStates
EuropeBelgiumCzechRepublicFranceMonacoGermanyHungaryIrelandItalyNetherlandsPolandPortugalRomaniaRussiaSpainSwitzerlandUkraineUK
AfricaBotswanaKenyaMalawiNigeriaSouthAfricaTanzaniaUgandaZambiaZimbabwe
Asia PacificAustraliaCambodiaChinaIndiaIndonesiaMalaysiaNewZealandSingaporeSouthKoreaThailandVietnam
Middle EastBahrainUAE
Office Real EstateStanislav [email protected]
Warehouse Real EstateViacheslav Kholopov [email protected]
Retail Real EstateJulia [email protected]
Professional Consulting ServicesKonstantin [email protected]
Prime Residential Real EstateElena [email protected]
Financial Markets and InvestingEvgeniy [email protected]
Valuation ServicesHeiko Davids [email protected]
Saint PetersburgNikolai [email protected]
KyivMikhail [email protected]
Marketing, PR, and Market ResearchMaria [email protected]
EstablishedinLondonmorethanacenturyago,KnightFrankistherenownedleaderoftheinternationalrealestatemarket.Withofficeslocatedglobally,KnightFrankisabletoprovideafullrangeofservicesintherealestatemarketallovertheworld.
TogetherwithNewmarkCompany,KnightFrank’sstrategicpartner,thecompanyencompasses209officesin47countriesacrosssixcontinents.
KnightFrankhasbeenasymbolofprofessionalismfortensofthousandsofclientsallovertheworldfor115years.After13years,KnightFrankhasbecometheleadingcompanyinthecommercial,warehouse,retailandresidentialrealestatesegmentsoftheRussianrealestatemarket.Morethan500largeRussianandinternationalcompaniesinRussiahavealreadymadeuseofthecompany’sservices.
KnightFrank’semployeesareprofessionalconsultantsinvariousfieldsconnectedwithrealestate,suchasrentandsaleofproperties,selectionofproperties,attractionofinvestments,consulting,valuation,marketresearch,marketingandprojectpromotion,propertyandassetmanagement.
Weofferthefullrangeofconsultingservicesnotonlyfordevelopersandowners,butalsoforrealestateusers;bothlegalentitiesandindividuals.Now,thecompany’sstaffconsistsofmorethan330employees.
ThisandotherKnightFrankoverviewscanbefoundonthecompanywebsitewww.knightfrank.ru.
© Knight Frank 2011
Thisoverviewispublishedforgeneralinformationonly.Althoughhighstandardshavebeenusedinthepreparationoftheinformation,analysis,viewsandprojectionspresentedinthisreport,nolegalresponsibilitycanbeacceptedbyKnightFrankResearchorKnightFrankforanylossordamageresultantfromthecontentsofthisdocument.Asageneralreport,thismaterialdoesnotnecessarilyrepresenttheviewofKnightFrankinrelationtoparticularpropertiesorprojects.
ReproductionofthisreportinwholeorinpartisallowedwithproperreferencetoKnightFrank.
MOSCOW
Russia,119021,11Bld2TimuraFrunzeStr.Phone:+7(495)9810000Fax:+7(495)9810011
ST. PETERSBuRg
Russia,191025,3BMayakovskogoStr.Phone:+7(812)3632222Fax:+7(812)3632223
KYIV
Ukraine,04071,39-41HoryvaStr.Phone:+380(44)5456122Fax:+380(44)5456122
