Investment in the Russian commercial real estate market reached $2.4 billion in the first quarter of 2013, according to a new report released by CBRE Group. This figure marks an all-time high in the sector. In the same quarter in 2012, investments were $101 million.
The recently-released figures shatter the previous record, which was set in 2006. At that time, investors brought $843 million into the commercial property market during the first three months of the year.
Valentin Gavrilov, head of research at CBRE, said, “Such figures are not typical for the first months of the year because large deals are traditionally closed at the end of the year.”
He went on to point out that the new record can be linked to technical reasons; some of the deals included in the total began in 2012 and were closed in the early part of 2013.
Approximately 60 per cent of all investments in the first quarter were in the retail property sector. In previous quarters, office property had been the sector where investors poured the majority of their resources, according to a representative from Jones Lang LaSalle.
The vast majority of transactions took place in Moscow (96 per cent) and 82 per cent of investments were made by foreign companies.
Gavrilov went on to say that the level of investments was likely to decrease over the next few months due to the situation in Cyprus. Russian companies and individuals would be hit hard if the proposed tax of up to 15 per cent on depositors’ accounts in Cypriot banks is imposed.
The European Commission, the IMF and the European Central Bank have put forward the one-time levy as a condition for a $10 billion bailout of Cyprus.
The Cypriot parliament has rejected the proposal, citing the threat to small depositors and Russian investors. Vladimir Putin has described the tax plan as “unfair, unprofessional and dangerous,” and Prime Minister Dmitry Medvedev described it as something resembling the confiscation of private property which occurred during the Soviet era. The Cypriot government is negotiating with the Russian government for some possible financial help.
Colliers International CEO Nikolay Kazansky said that commercial real estate transactions “will continue to be closed through sales of Cypriot companies because it is the most convenient structuring instrument.”
He pointed out that the crisis in Cyprus is connected with Cypriot banks and deposit accounts and that companies may have accounts in other jurisdictions.
Jones Lang LaSalle’s revised forecast for 2013 is for a total of $7.5 billion in investments. This figure takes events in Cyprus into account.
