Russia’s real estate investment volumes reached €1.57bn (USD1.84bn) in Q1-Q3 2018, down 31% YoY from €2.27bn (USD2.66bn) in Q1-Q3 2017, says JLL. Within the total, Q3 2018 investments were €408m (USD478m), down 9% from Q3 2017.
“The 10% rouble devaluation in August as a result of new US sanctions against Russia and the global emerging markets sell-off have weighed heavily on foreign investor activity in the past quarter. This has forced us to revise the 2018 investment volume forecast from €4.3bn (USD5bn) to €3bn (USD3.5bn). We note the likely temporary effect, with the rouble already shedding some of its initial weakening and continuing to reverse the initial currency overshooting subsides. Export proceeds, boosted by rising oil prices, help to restore the balance on the local FX market. More inflows will follow from rising gas exports as a new heating season starts in Europe,” said Tom Devonshire-Griffin, Managing Director, JLL, Russia & CIS, comments.
Russia real estate investment volume dynamics, USD bn*
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* Investment deals, excluding land acquisitions, JVs, direct residential sales to end-users.
In Q1-Q3 2018, the residential sector (land plots for residential development) received the most investor attention, with the historical record 29% of the total volume. The retail followed with a 26% share of the total volume. Offices accounted for 25.6% of investments, with only one deal in Q3 2018. JLL also notes the pickup in the industrial sector investments in the recent months, which share has risen to 12% year-to-date, which is comparable to European and American levels.
Russia real estate investment volume by sector
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Q1-Q3 2017 |
Q1-Q3 2018 |
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St. Petersburg’s share in the Q1-Q3 investment volume reached the record high of 31% versus 22% in the same period of the previous year exceeding 2011 share of 27% when Galeria shopping centre has been sold. The Moscow share declined to 62% from 70% in the same period of 2017.
The share of foreign investments reached 26% in January-September 2018 versus 24% a year earlier. The third quarter was marked by a deal with foreign capital; Raven Property Group has acquired an extension to the Sever-2 logistics park in Moscow. Aside from closed deals, foreign investors continue to show interest in Russian assets, while rouble volatility forces delays in a decision-making process.
Olesya Dzuba, Head of Research, JLL, Russia & CIS, said: “External sanctions represent a non-negligible risk, as the events earlier this year have demonstrated. While the passing of the US parliamentary elections in November will likely ease the currently elevated tensions, it is hard to expect a significant improvement in bilateral relations in the near term. Russia’s relations with the EU have been thawing recently, although this is yet to bring significant economic effects. Expanding trade wars and investor concerns about emerging markets also shed a negative light on Russia, reducing potential foreign investments. These processes will likely remain a drag and restrict Russia real estate volume deal in the near term.”
