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The Russia Real Estate report examines the commercial office, retail, industrial and construction segments throughout the country in the context of a construction market that has returned to growth.
With a focus on the principal cities of Moscow, St Petersburg, Ekaterinburg and Samara, the report covers the rental market performance in terms of rates and yields. It also examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of external macroeconomic headwinds. The key growth areas driven by increasing (comparative) attractiveness for investors, as well as the potential offered through the hosting of the Winter Olympics and 2018 FIFA World Cup, are also addressed, alongside the buoyant outlook for the retail sector.
The Russian economy continues to face enormous challenges of weakening external demand and continued uncertainty over the policy environment, which affects business sentiment. However, we continue to believe that the government will pursue a more business-friendly approach and seek to attract financing for major infrastructure projects, which should help to sustain a solid longer-term growth outlook for Russia's economy. In addition, we believe a number of factors should help ensure Russia's building industry achieves at least modest growth over the medium term, compounding the upside risks to our real estate outlook. Our latest data collection, conducted in July 2012, has compounded this view, with the commercial real estate sector performing well over H112, with over 75% of key indicators registering yearon- year (y-o-y) growth.
KEY POINTS
The Russia Real Estate report examines the commercial office, retail, industrial and construction segments throughout the country in the context of a construction market that has returned to growth.
With a focus on the principal cities of Moscow, St Petersburg, Ekaterinburg and Samara, the report covers the rental market performance in terms of rates and yields. It also examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of external macroeconomic headwinds. The key growth areas driven by increasing (comparative) attractiveness for investors, as well as the potential offered through the hosting of the Winter Olympics and 2018 FIFA World Cup, are also addressed, alongside the buoyant outlook for the retail sector.
The Russian economy continues to face enormous challenges of weakening external demand and continued uncertainty over the policy environment, which affects business sentiment. However, we continue to believe that the government will pursue a more business-friendly approach and seek to attract financing for major infrastructure projects, which should help to sustain a solid longer-term growth outlook for Russia's economy. In addition, we believe a number of factors should help ensure Russia's building industry achieves at least modest growth over the medium term, compounding the upside risks to our real estate outlook. Our latest data collection, conducted in July 2012, has compounded this view, with the commercial real estate sector performing well over H112, with over 75% of key indicators registering yearon- year (y-o-y) growth.
KEY POINTS
- Our previously held view that 'political risk is the main element that can ultimately curtail growth as public policy remains opaque, convoluted and subject to frequent change' continues to play out. The planned privatisation scheme has yet to take hold, and on the back of continued capital outflows and strong vested interest, we believe the attractive assets potentially up for sale will remain without a buyer for the time being. Nevertheless, the construction sector remains buttressed by flagship projects for the 2014 Sochi winter Olympics and the 2018 FIFA World Cup, as well as a steady pipeline of projects within the extractive sector. Hence, we maintain our forecast for 2012 construction industry value growth, with 3.5% anticipated.
- A gradual reshaping of the Russian business environment will be underpinned by a weakening external climate, a decrease in oil-fuelled surplus and a need to maintain capital inflows. With this in mind, we see partial privatisation of big state-owned assets. Transport and energy assets have been earmarked among the 5,500 state-owned companies, in which the state plans to divest stakes. Political risk is obviously the biggest stumbling block to this venture. On the one hand, vested interest within the political caste may thwart efforts to open up state enterprises to private capital; however, we do not believe that investment sentiment will initially be conducive to privatisations.
- We expect an intensification of construction activity over 2013 as the 2014 Winter Olympics loom, demand for housing remains buoyant and the non-residential sector grows through the development of peripheral areas and the modernisation of existing infrastructure. As such, we are positing 5.5% y-o-y real growth in 2014. Despite our positive outlook, we note that a number of factors will continue to weigh on industry growth - most pertinent amongst these being Russia's poor business environment, which continues to exhibit high levels of corruption and red tape, thereby constricting foreign investment flows.
Executive Summary
SWOT Analysis
Russia Real Estate/Construction SWOT
Russia Political SWOT
Russia Economic SWOT
Russia Business Environment SWOT
Real Estate Market Overview
Market Analysis - Office
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Market Analysis - Retail
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Table: Retail Sales Indicators, 2009-2016
Market Analysis - Industrial
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Forecast Scenarios
Infrastructure Report
Table: Russia Construction And Infrastructure Industry Data, 2009-2016
Table: Russia Construction And Infrastructure Industry Long-Term Forecast, 2014-2021
Construction and Infrastructure Forecast Scenario
Macroeconomic Outlook
Table: Russia - Economic Activity, 2009-2016
Real Estate Risk/Reward Ratings
Real Estate/Construction Risk/Reward Ratings
Table: Real Estate Risk/Reward Ratings
Russia's Business Environment
Table: BMI Business And Operation Risk Ratings
Institutions
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
Market Orientation
Table: Emerging Europe - Annual FDI Inflows
Table: Trade And Investment Ratings
Table: Top Export Destinations
Operational Risk
Competitive Landscape
Company Profiles
Jensen Group
LSR Group
Peresvet-Group
SU-155 Group
Demographic Data
Table: Russia's Population By Age Group, 1990-2020 ('000)
Table: Russia's Population By Age Group, 1990-2020 (% of total)
Table: Russia's Key Population Ratios, 1990-2020
Table: Russia's Rural And Urban Population, 1990-2020
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Sources
SWOT Analysis
Russia Real Estate/Construction SWOT
Russia Political SWOT
Russia Economic SWOT
Russia Business Environment SWOT
Real Estate Market Overview
Market Analysis - Office
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Market Analysis - Retail
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Table: Retail Sales Indicators, 2009-2016
Market Analysis - Industrial
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Forecast Scenarios
Infrastructure Report
Table: Russia Construction And Infrastructure Industry Data, 2009-2016
Table: Russia Construction And Infrastructure Industry Long-Term Forecast, 2014-2021
Construction and Infrastructure Forecast Scenario
Macroeconomic Outlook
Table: Russia - Economic Activity, 2009-2016
Real Estate Risk/Reward Ratings
Real Estate/Construction Risk/Reward Ratings
Table: Real Estate Risk/Reward Ratings
Russia's Business Environment
Table: BMI Business And Operation Risk Ratings
Institutions
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
Market Orientation
Table: Emerging Europe - Annual FDI Inflows
Table: Trade And Investment Ratings
Table: Top Export Destinations
Operational Risk
Competitive Landscape
Company Profiles
Jensen Group
LSR Group
Peresvet-Group
SU-155 Group
Demographic Data
Table: Russia's Population By Age Group, 1990-2020 ('000)
Table: Russia's Population By Age Group, 1990-2020 (% of total)
Table: Russia's Key Population Ratios, 1990-2020
Table: Russia's Rural And Urban Population, 1990-2020
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Sources
