Real Estate


Q1 2006

Editors' View

  • March 01, 2006
A new year, a new issue, and a new exhibition: we at Real Estate Quarterly try our best to fly the flag for Moscow wherever it has a chance to take the stage in front of international realty players, and so 2006 sees us at MIPIM. We wish all delegates involved, or looking to get involved, in the Russian realty market an enjoyable trip to Cannes and a profitable one, too — in every sense of the word.

News in Brief

  • March 01, 2006

Going Up In Moscow

  • March 01, 2006

Investment-Grade Offices

  • March 01, 2006
Despite rapid development in recent years, the commercial real estate market in Moscow is still severely constrained in terms of the supply of international-quality office space. This may be the most populous city in Europe, but there are still only 355 square meters of Class A and B space per 1,000 inhabitants, which puts Moscow behind even comparatively tiny Budapest. Much of what is officially classed as Class A space would not be so classified in other European countries. This is especially true of developments built in the 1990s when the market was still at a very early stage of development and there was little competition to drive up standards of quality. Buildings from that period have worn badly in many cases and are starting to show marked signs of their age. Even today, standards are still lower than might be expected, partly because many projects are built by developers who are building for the first time — last year this was true of 70 percent of them — and they do not have experience of what a market working to international standards demands.

How to Forecast Office Saturation

  • March 01, 2006
It is generally agreed that the most important thing for any company looking to invest in real estate is choosing the right time to enter the market. If it chooses the right moment, then the project will bring high returns. This is why investors undertake careful market research and try to forecast the possible saturation point by bringing in a realty consultant.

Speeding Up Traffic Flow

  • March 01, 2006
Doubling the length of the metro, banning free parking in the center and moving offices beyond the city limits were among suggestions to solve Moscow’s traffic crisis at a forum late last year organized by the local chapter of the Washington-based Urban Land Institute think tank.

Recapitalization

  • March 01, 2006
One of the common stages in a real estate investment, or, for that matter, virtually any private equity project is an operation known as refinancing, or recapitalization. Refinancing means securing a bank loan, backed by the pledge of real property, or to be entirely precise, the building, its future operating cash flows, as well as shares of the SPV on the books of which the asset is held and the leasehold or freehold rights to the land lot on which it is situated.

Investment Climate

  • March 01, 2006
On the back of Russian’s economy going into its sixth consecutive year of strong and continuous growth, the Russian real estate investment market witnessed a very successful year in 2005.

Playing by the Rules

  • March 01, 2006
The case with Anno Wolff (see above), who has been working in Russia for more than 10 years, reflects the realia of working in Russia very accurately.

Special Economic Zones

  • March 01, 2006
Federal Law No. 116-FZ, On Special Economic Zones in the Russian Federation, of July 22, 2005, came into effect on August 25, 2005, laying the groundwork for the establishment of special economic zones (SEZs) in Russia.

To Bribe or Not to Bribe?

  • March 01, 2006
Stories of bribes, kickbacks, delays and general inefficiency when dealing with the Russian planning authorities abound. Yet when Akzo Nobel’s powder coatings factory opens, as scheduled in June, the planning and construction will have taken just two years, and so far not one bribe has changed hands.

Housing Solutions

  • March 01, 2006
Irina Rukina, head of the Moscow branch of the Party of Life, former leader of the party fraction in the Moscow City Duma, where she was chairwoman of the committee for economic policy, industry and investment from 1993 until December 2005, and adviser to the Federation Council on housing issues talks about all the major obstacles still preventing the development of a market of affordable new housing and an innovative new scheme which could point the way forward.

Land Acquisition Law

  • March 01, 2006
Land in the Russian Federation is divided into seven categories, according to its function: agricultural land, lands of settlement, industrial lands, lands of sites or structures under special protection, forestry lands, expanses of water or watercourse and lands held in reserve by the state. But it is lands of settlement and industrial lands which are best suited for the construction of industrial or commercial real estate.

News In Brief

  • March 01, 2006

Hotel Market Heats Up

  • March 01, 2006
Intercontinental and Ramada are the latest international hotel operators to announce their arrival on the St. Petersburg market this year, while Rezidor SAS also signaled further expansion, Maxim Sokolov, chairman of the city committee for investment and strategic projects, was quoted by Interfax as saying.

Investing in Ukraine

  • March 01, 2006
The favorable political and economic situation in Ukraine is currently having a positive effect on the development of all sectors of the economy, particularly the national real estate market, which has been experiencing extremely high price growth over the last three years. Major macroeconomic indicators point to both continuing growth of the Ukrainian economy and the national realty market’s attractiveness for foreign investors. Representatives of municipal government say the influx of international investments to Kiev in the first six months of 2005 increased by 42 percent as compared to the same period in 2004.

Investing in Suburban Realty

  • March 01, 2006
Given the falling stability of financial instruments across the board, with declining deposit rates and problems on the investment fund market, suburban realty is becoming a steadily more attractive investment. Today, investing in land, the construction of cottage settlements and simply purchasing liquid properties are the safest and most reliable form of increasing the value of savings. There are several reasons for this: the increasing demand for the most attractive and expensive areas of the Moscow region, the impressive price dynamics for land, thanks to its being by nature a product with limited supplies, and the low maintenance required — land appreciates in value while its owner is free to get on with something else.

Croatian Real Estate

  • March 01, 2006
The stigma of being directly associated with a violent conflict can hang over a country for years, and Croatia has had to shoulder more than its fair share of negative publicity. Even now, a full 10 years after the end of what is known by Croats as the War of Independence or the Homeland War, there is still a common misconception that Croatia holds some kind of danger for visitors and that making any investment there should be approached with extreme caution.

Supply Still Well Down

  • March 01, 2006
The law on stakeholder construction, which came into force in spring 2005, made property buyers rethink purchasing apartments at the project stage. Market players described the situation as a crisis in confidence in developers and it had a knock-on effect on the secondary market. The end of last year was marked by a sharp rise in prices and a record low in supply, which analysts attributed to both psychological and economic factors.

Moving House

  • March 01, 2006
In terms of the level of personal stress, moving house comes in second only to a wedding. In fact, to move does not mean just to pack your belongings, buy a ticket and go. It means to completely change everything: to live as an alien in a strange land, to speak a foreign language, to see strange and unfamiliar customs and to get used to a new way of life.