Russia Real Estate Report Q4 2013 - New Market Report

This report examines the commercial office, retail, industrial and construction segments in Russia in the context of a construction market that has returned to growth.

With a focus on the principal cities of Moscow, St Petersburg, Ekaterinburg and Samara, the report covers the rental market performance in terms of rates and yields. It also examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of external macroeconomic headwinds. The key growth areas driven by increasing (comparative) attractiveness for investors, as well as the potential offered through the hosting of the Winter Olympics and 2018 FIFA World Cup, are also addressed, alongside the buoyant outlook for the retail sector.

The Russian economy continues to face enormous challenges of weakening external demand and continued uncertainty over the policy environment, which affects business sentiment. However, we continue to believe that the government will pursue a more business-friendly approach and seek to attract financing for major infrastructure projects, which should help to sustain a solid longer-term growth outlook for Russia's economy. In addition, we believe a number of factors should help ensure Russia's building industry achieves at least modest growth over the medium term, compounding the upside risks to our real estate outlook. Market performance over 2012 has compounded this view, with the commercial real estate sector performing well over the year, with the majority of key indicators registering year-on-year (y-o-y) growth.

Full Report Details at
- http://www.fastmr.com/prod/712822_russia_real_estate_report_q4_2013.aspx?afid=301

Key Points

* The 2018 World Cup preparations will bolster the latter and drive a spike in overall construction growth in 2017 and 2018, but as this will dissipate post-World Cup, then the industry will fall back on to the resources sector to drive growth.
* Construction and Infrastructure sector growth in Russia will be underpinned by the government's drive to develop its vast natural resources, especially in Siberia and the Far Eastern provinces. The flagship is the multibillion dollar Eastern Gas Programme, which will cement Russia's economic pivot towards Asia. In light of the developments planned, especially in the oil and gas sector, we see this remaining the case to the end of the decade.

With investor demand for emerging market assets already cooling, we see risk aversion to investing in Russia to rise further on the back of the recent high-profile trial of Aleksei Navalny. Moreover, the recent announcement by the Russian monetary authorities to rein in credit implies even tighter credit conditions for the consumer than we previously anticipated. As a result, we have revised down our household spending and investment growth forecasts for 2014-2015.

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