Russia poised for 30% drop in investment volume: CBRE

Investments in commercial real estate in Russia fell 11% to $1.31 bn (EUR 1.05 bn) in the third quarter of 2012 compared to the year-earlier period, according to preliminary data from CBRE. Over the full year, the decline in volumes could be as much as 30%, the adviser said.

CBRE based the forecast on the cumulative volume of investments in the first nine months of the year which came to $2.85 bn, a drop of 32% on the same period of 2011. In an optimistic scenario the 2012 investment volume could exceed both 2007 and 2008’s volumes and hit $4.5 bn, it added.

CBRE said the fall so far this year was not surprising, given that 2011 saw record investments due to pent up demand during 2009 and 2010. Increased uncertainly and economic troubles across Europe in 2012 have also contributed to the slowdown. Despite the fall, investment activity in Russia is coming back to pre-crisis levels, the adviser pointed out.

Foreign investments accounted for just $60 mln, or 4.6% of total investments volume in Q3. Their cumulative share from the beginning of 2012 reached just 20%. However, If the rumored transaction of the Metropolis shopping centre closes in Q4, then the share of foreign investments could jump to 44%.

According to press agency Reuters, Morgan Stanley's real estate business was in exclusive talks in mid-September to acquire Metropolis mall for between $1.1 bn and $1.2 bn (EUR 850 mln to EUR 927 mln) from Russian private equity group Capital Partners.

Russia lacks a supply of investment grade real estate assets, but a number of professional foreign investors are actively contributing to the development of new objects. These include Ghelamco; Hines; Immofinanz; MLP; PPF; Radius Group; and Raven Russia.

A key retail deal that took place in Q3 2012 included Raven Russia’s acquisition of the Sholokhovo logistics park for $49.8 mln. Russian nvestors, in turn, were active mostly in the office and hotel segments over the period.