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News Release

Moscow

St. Petersburg outpaced Moscow by real estate investment volume

JLL presents the Q1 2018 results


Moscow, March 29, 2018 – Russia’s real estate investments reached USD728m in Q1 2018, down 8% YoY (USD792m in Q1 2017), says JLL.

“Russia real estate market continues to recover, although an element of uncertainty remained. Main positive factors include economic recovery, rouble stabilization and historically low inflation. The financing is getting cheaper on the back of Central Bank rate cuts driving commercial rates down. However, investors have seemingly decided to take a break before the presidential election, which resulted in lower investment volume in Q1. Meanwhile, key market players show their interest in Russian assets, and a number of deals are being negotiated. We expect that these factors will support positive market dynamics during the year.” – Olesya Dzuba, Head of Research, JLL, Russia & CIS, comments.

Russia real estate investment volume dynamics* 
Russia real estate investment volume dynamics_29032018.png

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

Source: JLL

In Q1 2018, the retail sector received the prime investor attention, with 33% of the total volume. The main reason for that was a multi-regional sale of 12 K-Rauta stores to Leroy Merlin. Offices followed, with the 29% share.

St. Petersburg became the most popular investment destination for the first time, with 50% of all deals closed in the city, compared to 22% in the same period last year. In absolute terms, the St. Petersburg investment volume more than doubled YoY, from USD172m to USD361m. The city outperformed Moscow due to Leroy Merlin’s purchase of local K-Rauta stores (which accounted for 39% of its volume) and a number of residential deals (37%). The share of Moscow deals declined from 61% in Q1 2017 to 44% in Q1 2018. JLL expects St. Petersburg to maintain a high share in Russia investments throughout the year.

St. Petersburg real estate investment volume dynamics
St. Petersburg real estate investment volume dynamics_29032018.png
Source: JLL

The share of foreign investments increased from 21% in Q1 2017 to 33% in Q1 2018, confirming a consistent interest in Russian assets. JLL anticipates several more deals with foreign capital to close in 2018.

“On the back of owners’ readiness to exit projects and reinvest the capital, buyers and sellers are reaching a compromise on the Russian investment market more often. The investor confidence in the Russian market is recovering. The effects of banking sector uncertainty, which made several Russian investors take a pause in their activity, is mitigated by the economic recovery and cheaper bank financing cost,” – notes Evgeniy Semenov, Head of Capital Markets, JLL, Russia & CIS.

Prime yields compressed by 25 bps in Q1 2018. As benchmarks for the market players, JLL analysts consider Moscow prime yields between 8.75-10.25% for offices and shopping centres and 10.75-12.25% for warehouses; St. Petersburg prime yields at 9.25-11.25% for offices and shopping centres and 11.25-13.25% for warehouses. Following key rate cuts by the Central Bank, the cost of bank financing will continue declining.


About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, 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, 2006-2017 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, 2016, St. Petersburg; Consultant of the Year at the RCSC Awards in 2015.