Russia's Commercial Real Estate Market Reviving Slowly

Without citing specific figures, the Voice of Russia states the commercial real estate market in the country is slowly reviving but has a long way to go.  Office space, especially, is in demand but supply is low.

CBRE Russia predicts the market should begin recovery by the end of this year following a sharp economic downturn in the country.

Knight Frank forecasts office rents will begin to rise by the end of this year due to limited delivery of new space.

The Voice of Russia notes the commercial real estate market was among those hit particularly hard by the 2008 world financial crisis,

Growth prospects in Russia  are "significantly impeded by uncertainty surrounding the European debt crisis worries, with investors clearly focusing on prime property and risk avoidance," the Voice of Russia reports.

"Along with this trend, the volume of transactions on the commercial real estate market in the UK and Germany this year far exceeds that of other European states."

The Voice of Russia concedes  "the country's office space segment can hardly be called a 'safe haven' due to its ever-present cloud of volatility. At times of economic instability, foreign companies strive to shed all non-core operations, making it unrealistic to expect any sizable expansion of their presence in the country."

The Voice of Russia cites CBRE data that show in 2012 only 20% of investments in Russian commercial real estate market came from abroad, while 80% has a domestic origin.

Valentin Gavrilov, research director at CBRE Russia, told the Voice of Russia by  phone, "The main problems are volatility and lack of investment grade assets in Russia currently. One emerging trend that we see is related to foreign investors' readiness to enter projects on early stages of construction. They are trying to develop high quality properties themselves, rather than search for completed assets."

Gavrilov added, "The process allows us to speculate about a transition that is presently happening in this segment. As a result, foreign players become more accustomed to building high grade objects themselves with the aim to either sell them later on, or keep them for investment purposes."