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. Last Updated: 07/27/2016

Malls May Capture More Investment Than Offices

MTAlmost 76 percent of investors in a survey advised investing in retail realty.
Moscow shopping malls probably will become more attractive to real estate investors than offices and industrial developments, as the consumer boom lures supermarket and clothing chains.

Almost 72 percent of 390 investors interviewed by the Urban Land Institute and PricewaterhouseCoopers recommended buying Moscow retail developments, the highest proportion for the sector in any of the 27 cities across Europe covered a the survey of the region's real estate industry.

Demand for property in Russia is rising as the economy expands, offsetting concerns about political stability and property rights. Moscow, regarded as the riskiest city of those surveyed, improved seven places this year to be ranked as the 19th-most attractive market, up from 26th in the 2006 survey.

"There's a ton of attention from both international and domestic investors," Chuck DiRocco, managing director for industry trends and analysis at the Urban Land Institute, said Wednesday at a conference in Moscow. "There is opportunity, but also just so much risk associated with it."

Retail developments in Moscow and the regions might follow similar trends to those witnessed in East European countries such as Poland, where yields have narrowed over the past decade as high-revenue tenants moved in across the region, said Lee Timmins, the head of Hines International's Moscow.

Moscow office properties, where vacancy rates have fallen to be the second-lowest, may suffer as a drop in the supply of new developments drives down yields at a time when political stability concerns are intensifying, the Urban Land Institute and PwC survey showed.