REAL ESTATE - Demand for Russian commercial real estate is "exceptionally high", driven by eight years of strong macro growth and a meagre supply of modern buildings, according to a report from ResearchWorldwide.

The report claimed economic growth had "built up a head of steam, propelling the demand for office, retail, warehousing and hotel rooms". It quoted figures from Jones Lang Lasalle indicating domestic and foreign investment of $2.84bn (€2.21bn) in commercial real estate for the first nine months of 2006 – a 1000% increase over the same period in 2005.

With annual turnover growth at 12% and a 1% vacancy rate, shopping centres are forecast to increase by more than 2m square miles by the end of 2007. Forecasts over the same period for warehousing suggest an increase of 1m square miles, despite doubts over completion of existing projects.

The firm did not respond to requests for clarification over its claims for putative "increasing structural governmental economic reforms" and "a far better managed macroeconomic environment".

However, a press statement accompanying the report acknowledged "certain reservations" about excess local liquidity, risk perceptions, counterparty risks, market opacity, regulatory infrastructure, corruption and tax legislation.

In recent weeks, two Finnish institutions have announced their intention to invest in Russia. Evli Property Investment in November signed a deal with a local partner for two major projects in St Petersburg – one office, one logistics – with a combined value of €100m.

At the same time, Sponda reaffirmed its interest in the Russian market after acquiring a St Petersburg logistics centre in June.

The firm, which is 5% owned by Dutch pension fund ABP and has the Finnish state pension fund and Yleisradio Pension Trust as major shareholders, had previously mooted investing with a Finnish corporate new entrant to the Russian market and a local construction partner.