Developers resume construction across Russia: GVA Sawyer

Russian real estate developers are gradually resuming construction on a number of projects in a clear sign that the market is moving towards recovery, according to Elena Prosvetova, senior analyst at GVA Sawyer's consulting department.

'In Q1 2010 several projects were announced, but they have been scaled down in terms of size compared to the pre-crisis period,' Prosvetova told PropertyEU in an interview, adding that it is still 'early to speak about a complete recovery in the development sector'. According to GVA Sawyer, it will take a further three years before the market will be back to 2007 levels.

Earlier this year, AFI Development announced plans to resume development of a 155,000 m² office complex on Ozerkovskaya embankment and a 90,000 m² business park on Paveletskaya. In the Moscow International Business Center, Inteco and S&T Equity have re-started construction of the City Palace project while developer MGG recently reached an agreement with Sberbank to refinance the financing of the Eurasia tower project. Similarly, Mirax Group has announced plans to complete the development of the Federation tower, which will feature 97 floors.

According to Prosvetova, these developers are planning to take advantage from a scarcity of office supply envisaged for the market from 2012.

In the course of Q1 2010, a number of developers also managed to restructure their debt, including Alfa-bank granting a $150 mln (EUR 112 mln) refinancing to Forum Properties for the Ermitazh Plaza business centre. Meanwhile, Don-Stroy has transferred ownership of the Nordstar tower to Sberbank in exchange for RUB 11 bn (EUR 282 mln) of debt and the refinancing of a further 9 billion rubles.

'It is still hard to obtain financing, which mostly depends on the type of project and the risk assessment, as well as developer's financial condition,' Prosvetova said. Lenders such as VTB and Sberbank took on billions of rubles in real estate on their balance sheets during the crisis, and now plan to start bringing these assets on the market from this summer. According to Prosvetova, Alfa-bank has already started divesting properties with the sale of the Krasnaya Presnya and Sevenoe Siyanie business centres, formerly owned by the Kopernik Group.