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  • Date of publication: 31 August 2020
  • 2028
  • Russian investors have lost interest in commercial real estate


    They prefer to invest in a residential segment that is growing more rapidly.

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Dollars are not money

Over the three quarters of this year, offices, shopping malls, warehouses and hotels received a total of 732 million euros from investors, according to a Cushman & Wakefield report. Analysts, by habit, calculate investments in the Russian economy in foreign currency (formerly in dollars, now in euros), although counterparties in the field of commercial real estate have long since switched to calculations in the national currency, it records rental rates and transaction prices. The outflow of foreign investment this year amounted to 9 million euros - as opposed to 800 million a year earlier. According to Denis Sokolov, the head of analysts at Cushman & Wakefield, this means that the exit of foreign investors from the Russian market is actually complete.

The population followed investors: in September alone, individuals withdrew $ 900 million from Sberbank deposit accounts, outflow of dollars from VTB amounted to approximately $ 43 million (according to banks). And this is despite the assurances of Finance Minister Anton Siluanov that the state does not plan to convert citizens' dollar savings into rubles. However, in October, he announced on the TV channel Russia 24 that the Russian government plans to transfer state-owned companies to settlements in rubles by prescriptive methods. Indeed, in November, a new round of sanctions against Russia is expected, which will actually deprive state banks of the ability to conduct operations in the US in dollars and freeze their assets. “The banking system will be forced to adapt and operate exclusively with rubles or other currencies,” Nataliya Orlova, chief economist at Alfa Bank, commented to Vedomosti in August.

Problems in years

As Tim Millard, regional director of JLL, joked in an interview with Investment Guide magazine, the umbrellas from the festive closing ceremony of the Moscow Football World Cup did not have time to dry up, as negative news reappeared on the pages of newspapers. The radical decline in commissioning in all segments of commercial real estate, Vladimir Pinaev, CEO of CBRE, observed in 2018, calls the deterioration of the macroeconomic situation, the increase in the cost of financing and the high volatility of the ruble, which began in 2014. The development cycle, on average, is about three years; the construction of facilities that enter the market in 2018 should have started in 2015–2016. As a result, 2018 shows anti-records: not a single major shopping or business center. The forecast is plus 200,000 sq. M. m high-quality offices and approximately 90,000 square meters.

Investors nevertheless, without losing hope, are waiting for the market to start recovering, consultants say. “We need to invest now, when the market offers unique - in terms of price and quality - conditions”, - their appeals sound like a refrain. “There is interest in foreign money, but we are not seeing strong growth here,” said Konstantin Timofeev, head of Moskomstroyinvest, at the XII Moscow forum of real estate market leaders, organized by the Vedomosti newspaper. According to him, Moscow should raise "its investors."

Housing in favor

“Their” investors still consider the most attractive segment of residential real estate - they are buying it. In 2017, according to the Rosreestr, only in Moscow a little more than 54,000 housing units were concluded (plus 52% of the 2016 indicator), which accounted for more than 13% of the national figure. For the first three quarters of 2018, 53,861 contracts were registered in the capital, in September, a bar of 7,000 registrations per month was broken - before that, the monthly figures in the primary market of Moscow were in the range of 5000-6000 DDU. According to Timofeev, Moscow issued permits for 48 million square meters. m of new real estate: "These meters are now either at the design stage or already at the implementation stage." Only in the incomplete year of 2018, developers received permits for the construction of 8 million square meters. m. But the official said: “If over the previous three years we have seen a reduction in investments in offices and shopping centers, then in 2018 we again saw that investors began to return to their construction.” “The office real estate segment is currently experiencing a shortage of quality supply and is becoming interesting,” confirms Oleg Mamaev, president of Leader Invest.

Residential developers are thinking about the need to balance portfolios. According to representatives of developers surveyed by Vedomosti (Leader Invest, Kortros), the construction of large-scale residential complexes should be linked to the construction of commercial infrastructure, they should complement each other.

The fact that investors continue to invest in housing and are thinking about investing in commercial real estate is a positive signal for the market. Residential real estate is seen as one of the growing investment segments not only in Russia, but also in the UK, Romania and several other European countries, told Edu Mitsostergi, director of the European commercial real estate research department at Savills, at the Exporeal-2018 exhibition.

A survey conducted by the organizers of the exhibition Exporeal-2018 among German companies showed: 88.5% of respondents believe that housing - especially municipal houses, as well as houses built with subsidies - will develop at a faster pace in the coming years. Several major cities (Paris, Barcelona, ​​New York, Strasbourg, Montevideo, Amsterdam and Madrid) signed a joint declaration this year that “housing should be primarily considered as a right for every person, and not as a matter of bargaining”. This implies the strengthening of the role of city authorities and the implementation of an appropriate urban planning policy.

Moscow, although not signed such a statement, but began a large-scale program of renovation of the housing stock. In Russia, by 2024, according to the instructions of the president, housing conditions should improve for 5 million Russians per year. Already announced about the allocation of subsidies for apartments or houses to certain categories of civil servants: judges, employees of the Investigative Committee.