Russian property volumes top €2.5b in Q1

Real estate investment in Russia reached $3.3 bn (€2.5 bn) in the first quarter of 2013, according to Colliers International.

This is four times more than both the first quarter of 2012 ($0.9 bn) and 2011 ($0.8 bn). The office segment accounted for the largest share (56%), while retail real estate ranked number two (38%).

Over 50% of all transactions were completed by foreign investors. In the first quarter of 2013, Morgan Stanley Real Estate Fund closed a deal to acquire the Metropolis Shopping Center from Capital Partners (ca. $1.15 bn), which continues the series of deals made by foreign investors in 2012 such as Immofinanz Group, Sponda, Raiffeisen Bank and Raven Russia.

Increasing Russian investments in office real estate was another rend at the beginning of 2013. For example, 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. Consequently, O1 Properties has increased its real estate portfolio value to $3.5-3.7 bn.

The main reason for the transaction volume growth in the first quarter of 2013 was the closing of a number of investment deals initiated in 2012.

'The closing of a number of major transactions in the first quarter of 2013 brought in a new wave of optimism. If positive trends in the Russian economy last long enough, investors will most likely consider liquidity allocation options, where real estate will be a top priority due to the low-risk profile and level of return,' stated Stanislav Bibik, executive director for capital markets with Colliers International.

But asset value growth has come to a stop. The trend was affected by the Cyprus crisis, which led to price adjustments in spring and a lowered Russian GDP for this year. In 2013, the total investment transaction volume in the Russian commercial real estate market will remain at the 2012 level and will reach $7 bn.