Total new construction and refurbishment of Class A and B office space in Russia totalled some 490,000 m[sup]2[/sup] in the first half of 2007, a 50% rise on 2006 figures, according to new research by global advisor Colliers International. Class A accounted for 6% of the total new volume of office space, down from 20% a year earlier. The pipeline for the second half of the year totals 960,000 m[sup]2[/sup] of Class A and B office space.

Total new construction and refurbishment of Class A and B office space in Russia totalled some 490,000 m2 in the first half of 2007, a 50% rise on 2006 figures, according to new research by global advisor Colliers International. Class A accounted for 6% of the total new volume of office space, down from 20% a year earlier. The pipeline for the second half of the year totals 960,000 m2 of Class A and B office space.

About 628,000 m2 of office space was leased and 490,000 m2 was sold in the first half of 2007. Average vacancy rates for Class A office space decreased from 1.7% at the end of Q1 2007 to 1.3% at the end of Q2 2007, while Class B offices saw vacancy rates increase from 3.5% to 4%. In the first six months of 2007, base rental rates in the office sector increased by 20% to 30%, and in some cases up to 50%.

The Russian warehousing sector saw a noticeable increase in demand, and it is estimated that outstanding demand is still about 1.5 million m2. Just 15% (or about 80,000 m2) of the warehousing space expected to enter the market this year was delivered in the first half of 2007. Vacancy rates for Class A warehousing space are less than 1%, Colliers International said.

Russia's commercial real estate investment market has seen a significant level of activity so far this year. The number of foreign banks providing project financing is steadily increasing in the country due to higher transparency in the market and reduced risks. Colliers' report stressed that an increasing number of investment banks and private equity funds are interested in acquiring shares in Russian development companies. The report noted that last March, Morgan Stanley Real Estate acquired a 25% stake in RBI, one of the leading players in St. Petersburg.

Russian commercial real estate players are increasingly interested in purchasing stakes in international construction companies, which allows them to reduce costs as well as improve quality and shorten delivery dates. Last April, Russian firm Basel bought a 30% stake in Austria's Strabag and said it is interested in buying a stake in Germany's Hochtief.