October 05, 2016

Russia real estate investment volume reaches USD1.4 billion in Q3 2016

Russia real estate investment volume reaches USD1.4 billion in Q3 2016

Russia’s real estate investments reached USD1.4 billion in Q3 2016, twice the volume of Q3 2015 (USD673 million), according to JLL calculations. This brought year-to-date volume to USD3 billion, up 71 percent Y-o-Y.

Vladimir Pantyushin, Head of Research, JLL, Russia & CIS, commented: “The stabilization in the broader economy, in real estate markets, and rouble appreciation reduced the uncertainty for investors. Property values remain attractive, and recent financial market stability provides much needed comfort to investors. As usual, the early period of investment recovery contains a large part of debt restructuring, asset swaps and other non-traditional transactions. Last quarter, such deals represented 60 percent of the total volume. We highlight the active presence of governmental agencies, which have accounted for 18 percent of the deals.”

The total investment volume is expected to approach USD4.0 billion this year (a 74 percent rise), although acknowledge some downside risks to this forecast.

Investors continued to focus on assets in Moscow, which accounted for 93 percent of all deals in Q3 2016 compared to 91 percent a year ago. The share of St. Petersburg investments increased to 4 percent in Q3 2016 from 1 percent in Q3 2015. In Q1-Q3 2016, Moscow accounted for 87 percent of the deal volume, St. Petersburg for 5 percent. Offices remained the most attractive asset class, accounting for 74 percent of all deals in Q3 2016 and for 65 percent in Q1-Q3 2016.

“As usual, Russian investors dominate in the down cycle; they have accounted for 95 percent of all deals in Q1-Q3 2016, which is the highest level for the Russian market. However, the uncertainty about the economic recovery, about the rental market and yields extend the negotiations period, with several projects in the works from last year on track to be closed in in the coming months. We expect the gradual investment market recovery to continue in the near term including a more active involvement of foreign investors,” commented Evgeniy Semenov, Regional Director, Head of Capital Markets, JLL, Russia & CIS, commented.

Market yields did not change in Q3 2016, with prime yields in Moscow at 10.5 percent for offices, 10.75 percent for shopping centres and 12.0 percent for warehouses; yields in St. Petersburg were an 11.5 percent, 11.25 percent and 13.5 percent respectively.

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