Real Estate


Q1 2008

Editors' View

  • March 01, 2008
Welcome to the first issue of Real Estate Quarterly of 2008.

Moskva-City Changes Hands

  • March 01, 2008
Oleg Deripaska’s Base Element holding company is selling off more than 50 percent of City, the official managing company of Moskva-City, to Sergei Polonsky’s Mirax Group, Vedomosti reported.

Three New Towns to Appear Outside Moscow

  • March 01, 2008
Singapore’s government real estate investment fund announced on January 21st it would invest $233 million in cooperation with PIK Group to build a self-contained neighborhood in the Moscow Region.

Chelyabinsk Is Next Stop for Renova

  • March 01, 2008
Renova construction subsidiary Renova StroiGrup presented its second project for a brand new satellite city for 116,000 residents at the 7th Urals Investment Forum, held in Chelyabinsk in early December.

IKEA to Expand Again, Crosses Urals

  • March 01, 2008
Swedish furniture giant IKEA is moving closer to encircling both Moscow and its market with the purchase of a 50-hectare plot in the city’s northeast, and plans are in the works for the construction of a fourth Mega mall.

New Moscow General Plan Approved

  • March 01, 2008
City Hall has approved the new general plan for the development of Moscow up until 2025 following public hearings and could present it to the City Duma for review as soon as June this year, reported Noviye Izvestiya.

Volkswagen Opens Kaluga Factory

  • March 01, 2008
Volkswagen, Europe’s largest carmaker, opened a factory in Kaluga, 160 kilometers southwest of Moscow November 28 as it seeks to triple its share of the country’s market over the next three years, Bloomberg reported.

Technology Park Boom for Moscow

  • March 01, 2008
29 new technology parks will appear in Moscow in the near future, mayor Yury Luzhkov announced February 18 at a round table chaired by First Deputy Prime Minister Dmitry Medvedev, Prime-Tass reported.

MoscowТs Hotels Are WorldТs Most Expensive

  • March 01, 2008
The average cost of a room in a four- or five-star hotel in Moscow jumped by 11 percent to $483 according to a survey of 50 cities worldwide by British travel consultants Hogg Robinson Group (HRG), Vedomosti reported.

MIRAX to Exploit Air Rights Over Railway Lines

  • March 01, 2008
A project for building a 2.4-million square meter multi-functional complex over the railway line leading out of Kievsky station was approved at a sitting of the mayoral planning committee November 7.

What's Up

  • March 01, 2008

Russia in 2008: The Big Picture

  • March 01, 2008
As the Russian markets shudder in the wake of expectations of a slowdown in the US economy, it is natural to feel a little uneasy about Russia’s prospects this year. Since the US looks to be slowing down, investors are asking whether Russia can weather the storm, or even outperform when developed markets appear likely to take something of a beating. Over the short term, Russia has clearly been driven by global sentiment as markets attempt to price in the potential effect of a slowdown in US demand. Over the medium to long term, however, we believe Russia is in a particularly strong position in the event of a contraction in US economic growth. Below we outline a few reasons why we remain optimistic for Russia’s prospects in 2008.

Public-Private Partnerships

  • March 01, 2008
Until fairly recently, any visitor to Moscow could have been forgiven for thinking that the last person to make a major impact on the city’s image was Joseph Stalin, when he commissioned the Seven Sisters in emulation of the skyscrapers of New York.

What Currently Determines the Cost of Building Materials in Russia

  • March 01, 2008
Price formation in the construction industry in Russia has a long and varied history and equally deep rooted problems. The procedure whereby prices are set for building materials is based not just on actual economic processes, which are by nature subjective, but also on the desire on the part of suppliers to take part in the redistribution of the profit earned on the end products of the entire construction industry.

Retail Overview

  • March 01, 2008
Russia’s shopping center development boom is spreading to the country’s less developed regional cities as traditional forms of retail give way to modern formats. By 2010, shopping center density levels in many regional cities could rise sharply, increasing their investment attractiveness.

Valuing Russian Hotels

  • March 01, 2008
One of the most characteristic features of the Russian hotel market is the lack of international-standard properties. Most of the infrastructure that Russia inherited from the Soviet Union is outdated and requires extensive modernization. Given the increase in tourism, particularly in the last few years, the surge in demand for hotels and other types of accommodation is causing major problems in Moscow, Saint-Petersburg, and almost all of the regional centers. Moscow alone hosts some 4.5 million tourists every year. The current average occupancy rate in Moscow is estimated at 73 percent overall, rising to around 80 to 90 percent in the three-star hotel segment. The shortfall equates to roughly 10,000 rooms every year.

Beating Slow Builders

  • March 01, 2008
Statistics and mere observation show Moscow has been undergoing a construction boom in recent years. Various buildings are going up all over town. Derelict and Soviet buildings are being replaced with new retail and office centers, housing and logistics facilities.

The 'Olympic' Law

  • March 01, 2008
Draft Federal Law No. 469622-4, ‘Concerning alterations to separate legislative acts of the Russian Federation in order to prepare for and hold the 22nd Winter Olympic Games and 9th Paralympic Games in 2014 in Sochi’ was drafted and read in the State Duma in September last year. The draft law stipulated alterations to be made to a number of federal laws. Its main aim is the integrated resolution of issues facing the Russian International Olympic Committee in order to allow the 22nd Winter Olympic Games and 9th Paralympic Games of 2014 to be held properly and to a high standard.

Weathering the Storm

  • March 01, 2008
Despite the white-knuckle atmosphere of the international liquidity crisis, it is still a heady time for the real estate business in Russia, and especially for project and private equity investing. Despite the crisis, there is evidence of some real estate fund players building up their war chests to take advantage of the credit crunch and we are expecting that some of them will be able to commit to investing in Russian and CIS real estate in 2008.

Special Economic Zones

  • March 01, 2008
In 2005, the federal government initiated the creation of new Special Economic Zones (SEZs) in widely scattered areas of Russia in order to attract more diversified investment, although the Kaliningrad exclave SEZ had already been in existence since early 1996 and another existed in the Magadan region. These were retained, but all other zones that had existed prior to when Federal Law No. 116, which governs the operation of SEZs, came into force were wound up. The special economic zones have attracted a lot of attention from investors since their inception. “Currently there are 54 residents, and the total investment in 2006 amounted to more than 5 billion rubles ($204 million). [As of October] there are 44 residents in the technical innovation zones and 10 in the industrial zones, five of them in the Tatarstan SEZ and five in the Lipetsk region SEZ,” said Andrei Alpatov, deputy director of Russia’s SEZs in Sovetnik Prezidenta (The President’s Advisor), a publication dedicated to covering federal projects.