Russian Commercial Property Market grows despite Economic Slowdown

Posted on 27 September, 2013 by Jodee Redmond

The Russian economy has been slowing down since the beginning of the year and is expected to continue to struggle over the next 12 months or so, according to a statement released by Capital Economics. The London-based research firm has said that it will be “nudging down” its forecast for growth this year to 1.7 per cent.

Despite this, the commercial property market has been showing signs of growth and was much quicker to get back on its feet than other European countries, producing very attractive property yields for investors, according to Jones Lang LaSalle.

In the first six months of this year, investment grew by 31 per cent compared to the same period in 2012, almost reaching the record-setting level set in the first half of 2011.

Most of the activity was in the office and retail segments while demand for retail space is being fueled by strong growth in sales in Russia and the Ukraine.

According to company data, about 85 per cent of retail space under construction is being built in Moscow, Kiev and St. Petersburg. Over the next two years, the construction volume in Moscow will be at record-high levels, with over one million square metres to be built.

The JLL report said that pension funds could be a major driver in the global real estate sector, which could potentially double in size over the next 15 years. The company stated that savings are growing to fund future pension fund liabilities and investors will look at real estate as a “comparatively attractive asset class.”

Commercial real estate is a very popular sector, since the business provides higher returns than the housing sector. Investors can start to see profits in as little as 10 years.




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