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Q3 2015 Russia Real Estate Investment Volumes the Weakest in a Decade

September 30, 2015, 12:58 (PX Newswire)

Moscow, 30 September, 2015 – In 3Q 2015 Russian real estate investment volumes decreased by 38% compared to the same period of the previous year, with total investment volumes at USD641m, according to JLL analysts’ calculations.

Year to date, investment volumes stand at USD1.72bn, which is 35% below the same period last year and almost 15% below the same period in 2009 - the peak of the global financial crisis. JLL maintains the full year target of USD3bn though acknowledge that there are some downside risks to this already conservative figure.

Tom Mundy, Head of Research, JLL, Russia and CIS, commented. “As the ruble started to stabilize through the second quarter there was growing confidence that risk appetite would improve through the third quarter which would feed into an improvement in investment volumes. The third quarter is typically a quiet one, nonetheless, a falling oil price, question marks over Chinese growth and a shift in central bank policy to allow for a weakening ruble, pushed volumes down to levels that are the lowest in a decade. The final quarter of the year, is typically the strongest, and we do see a pipeline of deals that can support our FY target of USD3bn, however, we acknowledge that there are downside risks to this forecast.”

Though overall volumes are weak, the assets that are transacting are generally of high quality, and in good demand. This has kept yields unchanged against the previous quarter. In Q3 2015, JLL experts estimate that prime yields in Moscow remained at 10.5% and 10.75% for offices and shopping centres respectively, at 12% for warehouses. Due to the limited number of transactions, these yields are indicative and are defined by understanding of the market by JLL experts.

As is usual, the vast majority of the deals were seen in Moscow, or in close proximity to Moscow, with only 12% of deals done in St Petersburg, and the remainder in the capital. Interestingly, there was strong interest from international investors, who accounted for some 44% of total deals in the third quarter, across the office and industrial sectors.

Saydam Salaheddin, Regional Director, Head of Capital Markets, JLL, Russia and CIS, noted: “Overall, investment volumes for the third quarter were weak, however, we still see a reasonable pipeline of deals through to the end of the year to support our full year target. Much will depend in the short term on ruble volatility and, looking beyond next quarter, the market will also need to see evidence of an increase in dollar liquidity to support investment volumes and yield compression.”

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