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Moscow

H1 2014 Russian real estate investment market: investors continue to tread carefully


Moscow, 03 July, 2014 – In H1 2014 Russian real estate investment volumes decreased by 59% compared to the same period of the previous year, with total investment volumes at USD1.4bn, according to JLL analysts' calculations. This number includes Q2 investment volume of USD842m, down 36% YoY and Q1 investment volumes of USD545m, down 73% YoY.

"The slowdown in the Russian economy, exchange rate volatility, uncertainty in Ukraine combined with international sanctions against Russia were main concerns amongst market players", - Tom Mundy, Head of Research, JLL, Russia and CIS, noted. – "Investors remain cautious which is driving down investment volumes relative to 2013."

Russian Real Estate Investment Volume Dynamics, USD bn*

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* Investment deals, excluding land acquisitions, JVs, direct residential sales to end-users

Source: JLL

In Q1-Q2 2014 investments into the hotel and office segments dominated the market, accounting for 37% and 24% of total volumes respectively. But it is worth noting that the sale of 84.1% of Hotel Company OJSC has significantly increased the share of hotel sector.

 Russian Investment Volume Breakdown by Sector

H1 2013


 

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H1 2014

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Source: JLL

Investors continued to be focused on assets which are located in Moscow, accounting for 85% of total investment volume in H1 2014. The share of St. Petersburg increased to 8% compared to 5% in the same period of 2013, Russian regions attracted 7%. The share of foreign capital came  to 18% for H1 2014 vs. 59% in respective period of 2013, this was mainly a result of Metropolis SEC deal closure in the first half of last year.

Investors by Origin

H1 2013

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H1 2014

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Source: JLL

Despite investors' cautiousness during the second quarter we did see some encouraging signs for the market. For example, Austrian real estate investor and developer Immofinanz will continue to invest in Russian shopping centers, real estate tycoon Donald Trump has not abandoned plans for business development in Russia, despite the political and economic situation.

"We maintain our Russian real estate investment volume forecast for this year at USD3.4bn because we believe that the recent economic slowdown and exchange rate volatility will continue to influence on demand. In addition, economic sanctions are providing extra business risks, such as increasing costs, reflecting broader concerns amongst foreign investors, - Tom Mundy added. - On the plus side, we maintain that the Russian commercial real estate market is generally in pretty good health, having restructured well following the 2008 crisis and benefiting from a fundamental undersupply of quality stock. So after the disappointment of 2014, 2015 may prove a very strong year."

About JLL

JLL (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 fee revenue of $4 billion, JLL has more than 200 corporate offices and operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $48.0 billion of real estate assets under management. JLL is the brand name of Jones Lang LaSalle Incorporated.

In Russia and CIS JLL has offices in Moscow, St. Petersburg and Kiev. JLL, Russia & CIS was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 , 2013 and 2014 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg and The Best Real Estate Consultancy in Ukraine at the Ukrainian Property Awards in 2013.

For further information, visit www.jll.ru