The results of a new report by Cushman & Wakefield have been released, and the commercial property market in Russia is putting up some positive numbers. The total volume was $2.8 billion (£1.7 billion), which is 15 per cent higher than the volumes posted in the same quarter in 2011.
Since the start of the year, $4.18 billion (£2.67 billion) has been invested in Russian real estate. This figure is seven per cent lower than the $4.5 billion (£2.8 billion) invested in the first half of 2011. Domestic investors were more willing to invest in the second quarter of 2012, though, with commercial property investments being evenly split between foreign and Russian investors.
Instability in currency and bond markets is leading investors to turn to real estate as an investment option. In 2011, office space was the most popular type of commercial property investment in Russia. Over $3 billion (£1.9 billion) was invested in this sector, and this figure was similar to the amount invested in 2010. Retail and industrial were the next big segments of the market, with over $2 billion (£1.2 billion) and $1.5 billion (£960 million) in investments, respectively.
According to the Cushman & Wakefield report, the retail sector will benefit from an influx of funds from investors this year, with total investment volumes predicted to top $2 billion (£1.2 billion). Retail shopping centers, with their regular foot traffic and cash flows, appeal to commercial real estate investors who are looking for stability following the global financial crisis of 2008-2009. Prime retail centers, such as Moscow’s Golden Babylon Rostokino and Galleria in St. Petersburg are attracting investors due to their low vacancies and stable rental rates.
Investors are also drawn to commercial office space, due to its relative stability. Quality office buildings in Moscow are preferred by investors, with prime locations being the first choice over Class A and B+ buildings. These types of tenant-occupied assets are considered to be good investments, since they can be expected to perform well even during periods of turmoil in the market.
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