Moscow, 11 April 2023. In the first quarter of 2023, 100 billion roubles ($1,348 million) was invested in Russia’s commercial real estate. Nearly 61.4% of the total, $828.3 million, was invested in retail facilities. The first quarter’s landmark deal was disposal of Metropolis shopping centre. Hospitality sector attracted 17.6% of the aggregate amount, $238 million; 11.4%, $154 million, was invested in office properties; and 9.5%, $128 million, was spent on warehousing facilities.

Investment activities in retail segment over the last three years have been moderate.   Investors’ confidence was dented both by COVID-19 spillover effects and the events of 2022, when parts of shopping mall spaces were mothballed exacerbating the risk of high vacancy rates. Amid retail projects’ high leverage and international business being pressured by the risk of sanctions, a number of quality retail property assets were put up for sale, including Zelenopark shopping mall in Zelenograd (120,000 sq. m) and Nevskiy Centre facility in St. Petersburg (91,000 sq. m), currently owned by the Czech Republic-based PPF Real Estate.

Overall, in the first quarter of 2023, total investments in retail assets amounted to $1,348 million (net of land-plot investments), almost four times as much as in the first quarter of 2022 and 47% of the full-year result.

Some 1,138 million worth of these investments (84%) is attributed to international owners’ disposal of their assets in Russia. In 2022 and 2023 year-to-date international companies sold a total of $2,600 million worth of assets.

Denis Platov, Nikoliers capital markets department director: “Pent-up demand and unfriendly jurisdiction companies’ exodus from Russia highlighted Russian investors active interest for high-potential retail and hospitality assets viewed as complementary to their portfolios. Russian investors prioritise undervalued assets and properties with the most stable cash flows. We expect investment activities to persist through the year-end and estimate that the full-year commercial real estate investments may total some $3.0-3.5 billion in 2023.”