Russian retail market 'underestimated' - Mapic

The Russian retail market is being seriously underestimated, David O'Hara, general director of DTZ Moscow said during the Russian Breakfast event at Mapic. Many well-known investors are quicker to consider the prospects in the Warsaw, while the Russian capital has the potential to grow to challenge Paris for the retail crown, O'Hara said.

The 5th annual Russian Breakfast brought 250 of the leading investors and developers in the Russia market together on the second morning of the Mapic retail real estate event in France. Representatives of Noble Gibbons, who act for property advisors CB Richard Ellis in Russia, DTZ and end-user Ikea addressed the gathering to explain why Russia is so important. A survey among 200 of Europe's largest retailers found that most are enthusiastic about prospects in Moscow, followed by St Petersburg and Dublin/Bucharest.

Moscow owes its number one placing to its population's enormous spending power; no other European city has as many millionaires, according to Forbes Magazine. DTZ illustrated that a middle-manager in Houston, Texas has a lower discretionary income than an employee in a similar position in Moscow. O'Hara said an important point to note is the Russian market is dependent on the dollar and not the Euro due to the major influence on dollar-denominated oil prices on the Russian economy.

The meeting heard that initial yields for A-Class retail property in Moscow will drop next year from more than 11% to 9%. The Ukrainian capital Kiev is expected to experience a similar decline, but these yields levels remain the highest in the European context, which produces average yields of 4% in 2007, O'Hara said. Jeff Kershaw of CBRE Moscow predicted yields for the Russian capital of 9.9% for 2007.