Russian investors have lost interest in commercial real estate

Dollars are not money

Over the three quarters of this year, offices, shopping malls, warehouses and hotels received a total of 732 million euros from investors, according to a Cushman & Wakefield report. Analysts, by habit, calculate investments in the Russian economy in foreign currency (formerly in dollars, now in euros), although counterparties in the field of commercial real estate have long since switched to calculations in the national currency, it records rental rates and transaction prices. The outflow of foreign investment this year amounted to 9 million euros - as opposed to 800 million a year earlier. According to Denis Sokolov, the head of analysts at Cushman & Wakefield, this means that the exit of foreign investors from the Russian market is actually complete.

The population followed investors: in September alone, individuals withdrew $ 900 million from Sberbank deposit accounts, outflow of dollars from VTB amounted to approximately $ 43 million (according to banks). And this is despite the assurances of Finance Minister Anton Siluanov that the state does not plan to convert citizens' dollar savings into rubles. However, in October, he announced on the TV channel Russia 24 that the Russian government plans to transfer state-owned companies to settlements in rubles by prescriptive methods. Indeed, in November, a new round of sanctions against Russia is expected, which will actually deprive state banks of the ability to conduct operations in the US in dollars and freeze their assets. “The banking system will be forced to adapt and operate exclusively with rubles or other currencies,” Nataliya Orlova, chief economist at Alfa Bank, commented to Vedomosti in August.

Problems in years

As Tim Millard, regional director of JLL, joked in an interview with Investment Guide magazine, the umbrellas from the festive closing ceremony of the Moscow Football World Cup did not have time to dry up, as negative news reappeared on the pages of newspapers. The radical decline in commissioning in all segments of commercial real estate, Vladimir Pinaev, CEO of CBRE, observed in 2018, calls the deterioration of the macroeconomic situation, the increase in the cost of financing and the high volatility of the ruble, which began in 2014. The development cycle, on average, is about three years; the construction of facilities that enter the market in 2018 should have started in 2015–2016. As a result, 2018 shows anti-records: not a single major shopping or business center. The forecast is plus 200,000 sq. M. m high-quality offices and approximately 90,000 square meters.

Investors nevertheless, without losing hope, are waiting for the market to start recovering, consultants say. “We need to invest now, when the market offers unique - in terms of price and quality - conditions”, - their appeals sound like a refrain. “There is interest in foreign money, but we are not seeing strong growth here,” said Konstantin Timofeev, head of Moskomstroyinvest, at the XII Moscow forum of real estate market leaders, organized by the Vedomosti newspaper. According to him, Moscow should raise "its investors."