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. Last Updated: 07/27/2016

Commercial Property Investment Rises 38%

Investment in Russian commercial real estate climbed 38 percent last year as surging incomes bolstered demand for shopping malls and hotels, Jones Lang LaSalle said at a presentation May 29.

Investment reached $682 million last year and "the trend will continue in 2007," said Peter Hensby, senior consultant for capital markets at Jones Lang LaSalle in Russia. The country has "a low share of free space, a lot of planned projects and the business climate is improving."

Investment in all construction projects surged more than 35-fold in the past five years to about $4.5 billion in 2006, Michael Lange, chairman of the local office for Jones Lang LaSalle, said in February.

Real wages increased 18.5 percent from January through the end of April, prompting retail sales to expand an annual 13.6 percent, the Economic Development and Trade Ministry said last Monday.

Russians spend more than 70 percent of their incomes on shopping, Jones Lang LaSalle's Hensby said. International retailers such as IKEA, the world's largest seller of home furniture, and Metro, Europe's No. 3 retailer, expand across the county to tap rising consumer demand.

Carrefour, Europe's biggest retailer, plans to open its first Russian stores next year, CEO Jose Luis Duran said in March. Wal-Mart, the world's largest retailer, may team with a local partner to open stores in the country, Juan Figuereo, vice president for international mergers and acquisitions, said in February.

"Russia is no longer just a local developing market," said Maxim Karbasnikoff, head of retail projects at Jones Lang LaSalle. "It's a top priority for many large real estate investors. We are no longer perceived as an old, Soviet economy with people struggling to survive. We are now the country with the most dynamic growth of disposable incomes."

Retail real estate projects in the country drew 238 million euros ($322 million) in investment in the first quarter, making it the second-biggest market in Europe after Germany, Jones Lang said May 10 in a report. European projects attracted a total of 3.1 billion euros over the period, Jones Lang said in the report.

Rodamco Europe, Europe's largest mall owner, bought 50 percent of Metropolis, a planned shopping and entertainment center in Moscow that is being developed by Capital Partners, an international private equity group, Jones Lang LaSalle said.

Capital Partners also is leading construction of a Ritz-Carlton hotel in Moscow.

Morgan Stanley last year bought 10 percent of RosEuroDevelopment, a construction company focusing on regions outside of Moscow and St. Petersburg.