CBRE: Moscow remains the main center for investment in commercial real estate (RU)
Thursday 15 November 2012
|According to the latest research by CBRE, the volume of investment into commercial real estate amounted to US $1.3 bln (approx. 1 bln), which is 11% down y-o-y. It was a drop of just 3% compared to Q2 2012. Cumulative amount of investments has reached $2.85 bln (approx. 2.23 bln) since the beginning of the year.|
|There were 10 investment deals in Q3 2012 compared to 17 investment deals in Q3 2011, although, the average deal size in Q3 2012 was approximately $130 mln (approx. 102 mln). This compares with an average deal size of $85 mln (approx. 66.7 mln) in the record year of 2011 (Q3). |
Valentin Gavrilov, Director, Research Department in CBRE, Russia, said:
“Russian real estate market feels quite comfortable, being far ahead of European recovery levels. The lack of clear signals of a turnaround in the eurozone economy is having a conservative influence on investors’ activity in Russia. This is due to the high risk of, at least, one of the southern countries exiting the eurozone, and the subsequent high volatility on the financial markets. In this context the European markets are facing greater difficulties with recovery.”
According to the recent data by CBRE investors were finding the ways to lower the risks and there were three major strategies that they followed: they were either buying high-calibre investment grade properties that are fully rented out, in good locations and with good, preferably foreign tenants with long-term interests in Russia, or they included development projects into the investment portfolio to optimize 'risk-reward' ratio (investing at the development stage increases the overall profitability of the portfolio, and having high-calibre investment grade properties stabilizes cash flows), or they were investing in niche segments, characterized by a deficit of supply (for example, warehouses or retail outlets).
In Q3 2012 CBRE reported a drop in investment activity in retail commercial real estate. In Q3 2012 the volume of investment was USD 75.6 mln. At the same time, the total share of investment into retail property since the beginning of the year amounted to about 29%, which broadly corresponds to mid-term market trends.
Investment in the office segment was more than 1.5 times greater than for Q2 2012, although – 20% less than for Q3 2011. In Q3 2012 the volume of investment was $764 mln (approx. 599 mln). Altogether, in Q1-Q3 2012 the office segment attracted 44% of all investment into commercial real estate.
The largest deals of the third quarter were:
- The sale of the Silver City business center for $333 mln. (CBRE acted as a broker on behalf of the Seller)
- The Summit multi-purpose center as part of the BIN Group acquisition of Unicor Management Company assets (expected formal deal closure).
Investment in the warehouse segment amounted to $50 mln. with Raven Russia acquisition of the Sholokhovo logistics complex. This segment takes 9% of the total volume of investment, which broadly corresponds to pre-crisis levels.
The activity of the Moscow government in selling assets has led to a short-term investment boom in the hotel sector. In the third quarter the volume of deals in this segment totalled $427 mln. One of the largest deals was Metropol Hotel sale at the auction for about USD 272 mln. The share of investment in this segment reached a historic high of 15% of the total volume.
The capitalization rates for Class A properties have remained stable for more than a year, and are 250-325 base points above that in alternative investment centres.
- Offices – 8.75%
Retail (shopping malls) – 9.5%
- Industrial real estate (warehouses) – 11%
Despite some decrease in volumes of investment in Q 2012, the Russian investment market reached the pre-crisis levels, while European investment volumes are still on 50-60% mark of pre-crisis levels.
Moscow remains the main centre for investment in commercial real estate. In Q3 2012 the volume of investment in other regions was $85 mln., or just about 6.5% of the total volume. Practically all of this investment was aimed at retail property.
Russian investors are the main market drivers, while activity by foreign investors is showing signs of decrease.
Since the beginning of the year foreign investors have realized property to the tune of $1,291 mln., of which $1,016 mln. were purchases by Russian investors and $275 mln. - by foreign. The largest deals by foreign investors on assets sales were Ducat Place III and Silver City business centers.
Valentin Gavrilov, concluded: “At the moment we see temporary declining foreign investor’s interest to Russian commercial real estate. Regardless, it remains attractive due to more solid macroeconomics and higher offered yields. Foreign investors do decrease their activity on their own markets as well. The majority of investors are just waiting for good news from Europe to start acting.”
Real Estate Brokers / Advisors