Russian investment activity hits record level

Real estate investment activity in Russia hit a new high of $3.39 bn (€2.6 bn) during the first quarter of 2013, according to a report from Cushman & Wakefield.

The record figure represents almost half the $8 bn (€6.1 bn) investment volume projected for 2013 as a whole and was bolstered by two deals in excess of $1 bn (€0.78 bn).

In March 2013, Russian investment company O1 Properties completed the purchase of White Square Office Center from AIG Lincoln, VTB Capital and American private equity fund TPG Capital for $1 bn (€0.78 bn).

The period also saw the closure of Morgan Stanley Real Estate's acquisition of the Metropolis shopping centre in Moscow for an estimated $1 bn (€0.78 bn).

The office property sector was preferred by investors and was a leader with $1.58 bn (€1.2 bn) in total investments. Although a minor increase in vacancy rates was noticed across the market, trophy assets in A and B+ class continue to be in high demand and are the main investment focus.

The retail market also hit a record high, boosted by the Metropolis deal. Rental rates remain high but the report warns this may change in the near future when 1.8 million m2 of quality retail assets are delivered in the city regions.

Cushman & Wakefield research head Alexander Zinkovski commented: ‘Although the Russian property market keeps setting new records, the lack of new institutional investors and deficit in quality supply holds it back.’

‘Nevertheless, the investment potential of Russian commercial real estate market is high. We expect stable performance in 2013 but there should be increasing activity in 2014 when a large number of attractive projects, especially in the retail and warehouse sectors, get delivered across Russia.’