Russia is poised to see a 20% decline in investment activity this year amid growing concerns that the turmoil in Ukraine may escalate, JLL's managing director for Russia Charles Boudet told PropertyEU.
Russia is poised to see a 20% decline in investment activity this year amid growing concerns that the turmoil in Ukraine may escalate, JLL's managing director for Russia Charles Boudet told PropertyEU.
The country, which saw a total of $8.5 bn (€6.2 bn) of commercial property transacted in 2013, has reported a feeble start to the year with no major transactions signed so far. As such, investment volumes are likely to come in at $7 bn in 2014, well below previous years’ figures.
Although foreign investment represented 45% of total deals last year, up from 17% in 2012, domestic capital is expected to dominate the market again in 2014.
‘After the acquisition by a number of foreign players like Calpers for Metropolis we saw a build-up in confidence last year with several new players looking to enter the market. This situation came to a halt in early 2014 with the uncertainty surrounding Ukraine, and hopefully investors’ plans have only been postponed until the situation improves,’ Boudet noted.
Russia’s property market is also suffering from a depreciation of the rouble, which slipped 15% so far this year, he added. 'This is having an impact on retail rents which are denominated in dollars,' Boudet commented, adding that as a result rents are likely to soften in the near term.
The logistics sector in particular is expected to play a larger role this year, thanks to strong demand for build-to-suit projects as well as current deals in the pipeline. 'The Russian logistics sector is heavily undersupplied and the vacancy rate is just 1.5% at the moment. There is currently no global player active in the market and I expect to see strong consolidation in the sector in the coming decade,’ he commented. 'Yields for the sector currently stand at 11.5%.'