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Russian property to remain above pre-crash levels

Property investment in Russia is expected to remain above pre-economic crisis levels in 2012, according to new research

The Commercial Real Estate Market Report from professional services firm Jones Lang Lasalle said several large deals were likely to be closed later this year.

The report said US$547m was invested in the sector in the first quarter of this year.

While this figure was down significantly on the same period last year, 2011 saw record high volumes of money spent on property in Russia.

‘Past presidential elections in Russia, continuing uncertainties with the Eurozone and low investment volumes across Europe impacted Russian real estate investment [in Q1],’ said the report.

‘Nevertheless, we are aware of several large deals in progress that are expected to be closed in 2012. Consequently we expect total real estate investment volumes to reach about US$6.5bn in 2012, slightly lower than the record volume in 2011, but higher than pre-crisis levels.’

There was more good news for UK architects in Russia in a separate report from JLL.

Its European Office Index found that prime office rental rates in Moscow were 20 per cent higher in the first quarter of 2012 than in the same period last year.

This was the highest growth of any European city, with St Petersburg joint fourth with a 10 per cent hike.

Matt Fairman of Assembly Studios said: ‘We’re experiencing good volumes of new and on-going brand creation and marketing campaign work commissioned by developers and investors within the Moscow market. This has mainly been across commercial schemes but there is also activity across some retail and residential projects as well.

‘Some of our bigger clients have recently approached us a few times to suggest UK architects and designers that may prove a good fit for various new projects around Moscow and Ukraine.’

Michael Graham, whop heads up PRP’s Russian office said: ‘The upturn in the market in Russia, which was patchy in 2010, grew with more consistency later in 2011 and this is continuing in 2012. We are finding more opportunities in the residential and retail sectors.

Margins are much tighter so minimising risk and maximising efficiency are more important than increasing turnover

However he added: ‘But the funding commitment to realise projects remains difficult in comparison with pre 2008 and for us margins are much tighter so minimising risk and maximising efficiency are more important than increasing turnover.

‘We are therefore going through a period of further consolidation and keeping a close eye on the way that the market looks likely to develop. The advent of increasing rents, particularly in Moscow, is not necessarily helpful as it might have been seen to be in pre-crisis days.

 

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