Russian commercial real estate investment looks set to top $8 bn (€6.2 bn) in 2013, if two $1 bn deals in Moscow, Metropolis shopping centre and the White Square office complex, are assigned to Q1 this year

Russian commercial real estate investment looks set to top $8 bn (€6.2 bn) in 2013, if two $1 bn deals in Moscow, Metropolis shopping centre and the White Square office complex, are assigned to Q1 this year

Both deals ‘spilled over’ from 2012, leading different brokers to take different approaches on when the deals were officially closed. Cushman & Wakefield assigns both big to this year, resulting in a Q1 volume of just under $3.4 bn.

The broker notes that this is a record for Q1 and is almost half of $8 bn anticipated for the full-year 2013. In comparison, London, C&W says, raked in just over $4 bn in deals during the first three months of the year. All brokers acknowledge there is appetite for Russian property; the main limiting factor is lack of institutional-grade product on the market. ‘Many of the bigger assets have been transacted but there are a number of other situations on the market,’

Tom Cashel, head of capital markets at C&W, said. ‘So, I think in terms of volumes we will see similar types of numbers this year, even though the transaction mix may look different.’ C&W is currently marketing the 100,000m2 Shchuka mall in Moscow. With an asking price of €450 mln it is the largest official asset on the market at the moment.

Some sources think, however, it will trade for about $400 mln or even lower. Cashel: ‘There may be one other transaction out there in the $1 bn range. Everything else is likely to be smaller and we will probably go back to a more normalised deal size of $250-500mln though even those numbers are big on a relative basis.’

Knight Frank is at the higher end of the scale, recording a volume of $10 bn for 2012. Evgeny Semenov, director Capital Markets Russia and CIS, doubts whether this will be achieved again this year. ‘We don’t have a huge number of assets of investment quality, and some of the good assets have changed hands twice already. The market is very hard to predict but I doubt we will top last year.’

Colliers International recorded $3.3 bn for Q1, which it says was 4 times more than the same periods in 2012 and 2011. ‘We forecast around $7 bn for the full-year 2013, more or less the same as the two previous years,’ said Sayan Tsyrenov, director of capital markets at Colliers International. Tsyrenov noted that new international players are coming into the market, such as The State Oil Fund of the Republic of Azerbaijan which Colliers acted for in a deal last year.

CBRE, alongside JLL, advised on the sale of the White Square complex to 01 Properties and it registered the deal in the 2012 volumes, according to Valentin Gavrilov, head of Russian research at CBRE. Metropolis, which JLL was an adviser, was attributed to 2012. ‘We expect $6.5 bn to $7.1 bn this year, about 10% up on 2012,’ he said.

Jones Lang LaSalle’s head of capital markets, Thomas Devonshire-Griffin, anticipates a similar number. ‘Last year was $8.7 bn and we have a number of $7.5 bn for this year, but obviously at this stage you are slightly sticking your finger in the air.’

Metropolis was the second major acquisition by Morgan Stanley’s MSREF 7 fund. The first, the $1 bn acquisition of St Petersburg’s Galeria mall in 2011, made big waves. ‘Galeria certainly generated an amazing list of interested parties from outside Russia who turned up not necessarily to 'press the trigger' but who were asking themselves whether they were missing out on something.’

That said, MSREF 7 comprises about 50 institutional investors such as CIC and Calpers, so many of property-world’s heavyweights are already active in Russia. Devonshire-Griffin: ‘The likes of Norges are not necessarily here yet. All of these guys tend to start in London then Paris, and they then go further east and further east. This is a natural step when you start chasing yields.’