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Jones Lang LaSalle presents its real estate market results for 2013 and its outlook for 2014
Moscow, 16 January, 2014 – 2013 was the year of economic downgrades for Russia. The World Bank decreased its initial estimate for 2013 to 1.3% from 2.3% as well as cutting its forecast for 2014 to 2.2% from 3.5%. The IMF lowered its growth expectations to 1.5% in 2013 and 2.0% in 2014 from initial 3.7% and 3.8% respectively. Nonetheless, despite these downgrades, Russia’s real estate investment market shows good results with investment volumes firmly above pre-crisis levels, Jones Lang LaSalle’s analysts noted.
Real GDP Growth* 35 countries: Australia, Austria, Belgium, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong SAR, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Malta, Netherlands, New Zealand, Norway, Portugal, San Marino, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan Province of China, United Kingdom, and the United StatesSource: IHS Global Insight
2013 became another successful period for the Russian market. According to Jones Lang LaSalle analysts, investment into Russian real estate reached USD8.1bn in 2013, which is close to the results of the previous two years, down a mere of 7.5% YoY from 2012 levels.
Olesya Dzuba, Deputy Head of Research, Jones Lang LaSalle, Russia and CIS, noted: “As for 2014, according to our preliminary forecast investment volumes into Russian real estate market will again exceed pre-crisis results, at USD7.0bn. However this doesn’t necessarily reflect declining activity on the market, it merely shows that the market does not expect the $bn deals that were a feature of 2011-2013.”
In Q4 2013 capitalization rates in Moscow remained at 8.75% for offices, at 9% for shopping centres and at 11.0% for warehouse sector. The uncertain economic situation in Russia is unlikely to change them in 2014 and we expect capitalization rates to remain flat.
“Foreign capital amounted to USD3.7bn in 2013, or 45% of total volume, compared to USD1.5bn in 2012 (17% of total investment volume in 2012), – Olesya Dzuba said. – We expect the domination of domestic capital in 2014 and its share to reach around 60% of total investment volume, nonetheless we expect foreign investors will continue to be interested in high-quality assets in Moscow.”
In 2013 investor interest was still focused on office and retail market segments and their share accounted to around 37% each. Increased investment volume into retail sector (compared to 21% in 2012) is the result of the sale of Metropolis shopping centre. Moreover, investments into under-development retail assets reached USD635m and increased by 127% YoY in 2013. Also investments into warehouses reached 14% compared to 7% in 2012, this became possible thanks to the MLP transaction and several built-to-suit deals.
Source: Jones Lang LaSalle“We expect that investors will continue to be interested in office and retail sectors in 2014, but the office market segment will dominate, – Olesya Dzuba forecast. – Among the recently announced deals for 2014, we note MTS’ plans to purchase more than 100,000 sq m in Nagatino i-Land BC. According to our estimates, investments into warehouses will exceed 10% of total investment volume in 2014, this will be possible because of several deals at the active negotiation stage (for example, Logopark Sever is at the stage of due diligence) as well as elevated demand for built-to-suit projects. Also Russian regional shopping centres have great potential with steadily increasing investor interest, although somewhat constrained by the lack of high quality assets.”
About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 242 million square meters and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.7 billion of real estate assets under management.In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg and Kiev. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg. For further information, please visit www.jll.ru
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