According to Cushman & Wakefield, Q3 2012 saw modest investment activity: the total volume of investments accounted for US $1.22 bln (approx. 0.94 bln) that is 33% less compared to Q3 2011 ($1.89 bln) and more that 50% less than Q2 2012.
In total year-to-date investments for 2012 accounted for $5.52 bln (approx. 4.27 bln). This is just 15% less than Q1-3 of record breaking 2011, when we saw $6.39 (approx. 4.94 bln) of investments.
Alexander Zinkovskiy, Senior Analyst, Research at Cushman & Wakefield comments: "Although we observe the minor deceleration of investment activity, the overall market performance was in line with our expectations, we have increased slightly our forecast and now expect about $7.2 bln of investments by the end of 2012".
The structure of investment has changed compared to 2011. The leading position is now held by the retail segment with year-to-date investment volumes of $2.2 bln (approx. 1.7 bln), that is, almost 10% higher than the same figure for the entirety of 2011. We believe this year will be a record-breaker for this segment. Among investors' main preferences are the best shopping centers in Moscow, St Petersburg and 1 million+ cities.
$1.67 bln (approx. 1.29 bln) of year-to-date investment volumes has put the office segment into second place. Investors are seeking opportunities among prime and class-A buildings in Moscow, which is their core market for office investments.
The W&I market saw only $513.6 mln (approx. 397 mln) of investment so far this year. After an outstanding performance in 2011 ($1.08 bln) it has shown an almost 50% contraction in 2012, which is mainly caused by the investment cycle.
The quantity of available investment opportunities has reduced, which has affected investors' behavior. Most of the transactions are build-to-suit but they are much smaller. It is expected that a new increase in this sector will start at in Q4 2013, when many W&I newly developed properties will appear.
The capitalization rates for prime office and W&I assets have increased slightly, by 25 bps on average, and now account for 8.75% for offices, 11% for quality W&I objects. The capitalization rates for retail and hospitality assets remained at 9.25% and 9.5% respectively. And as usual, the best assets on the market are traded at 40 50 bps lower rates.
Alexander Zinkovski, Senior Analyst, Research continues: "This year's performance looks modest, compared to 2011's outcome, however, this does not mean a change in investors' behavior. Still, investors are focused on the best assets and on well-developed markets, which are obviously Moscow and St. Petersburg. Properties of real investment quality are scarce and many of them were transacted in 2011 and 2012. Those investors who are looking for new investment opportunities require some time for this, but still the Russian commercial real estate market keeps its potential."
Source: Cushman & Wakefield