Letter From the Editors

Alec Luhn

2011 was a year of new records and first-time achievements for Russia. The most surprising of these occurred in December when tens of thousands protested the State Duma elections in the largest anti-government rally since the fall of the Soviet Union.

It was a record-setting year for Russia's commercial real estate market, as well, with total investment reaching about $10 billion. Of this, $7.34 billion was invested in Moscow and the surrounding region, almost twice as much as the previous year. Meanwhile, investment volume in St. Petersburg increased almost tenfold to $2.1 billion and catapulted the northern capital into the ranks of leading real estate investment cities for the first time, as noted in our article on the St. Petersburg retail sector.

2011 was also Mayor Sergei Sobyanin's first full year in office after he replaced Yury Luzhkov, who had run the city for more than 18 years. President Dmitry Medvedev immediately charged Sobyanin with the herculean tasks of addressing corruption, traffic and social stability in the capital. Added to these was the related but by no means easier feat — also called for by Medvedev — of transforming Moscow into a global financial center.

The capital's real estate market is a major component of these challenges. Tackling them will require creative new approaches from policymakers and market players, which is why we've dedicated this issue to innovation.

From a city-planning perspective, officials and real estate experts discussed a number of innovative strategies at the first Moscow Urban Forum in December, especially the repurposing of the city's many old industrial sites for residential, commercial and mixed-use projects. Our article on industrial redevelopment describes how this approach could better distribute workplaces outside of the overburdened downtown and relieve Moscow's land crunch. At the forum, Sobyanin's deputy mayor for economic policy, Andrei Sharonov, also spoke with REQ about the city's efforts to deal with issues of transportation, housing, waste processing and land use.

Of course, we would be remiss to discuss innovation on the real estate market without mentioning green building. Our article about the office sector profiles three new office centers that are planning to receive green certification and examines the possibilities that this trend will continue. On the residential side, we look at an innovator who is developing a project that might sound crazy to the cynical real estate observer: an economy-class house that is not only more energy-efficient than an average home, but also cheaper to build.

Although covering these innovations illustrates the magnitude of the challenges Moscow faces, it also gives reason to believe that they will be surmounted, perhaps starting already in 2012.