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Russian real estate investments grew to $3.3 bn in Q1 2013

The Russian commercial real estate sector is still appealing to foreign investors: in the first quarter of 2013 they closed over 50% of all market deals. However, for this year no records are forecasted — total figures will not exceed those of 2012.
According to Colliers International, in the first quarter of 2013 overall real estate investment in Russia reached $3.3 bn which is 4 times more than both in first quarter of 2012 ($0.9 bn) and 2011 ($0.8 bn). The office segment accounted for the largest share (56%), retail real estate ranked number two (38%).

Above 50% of all transactions were completed by the foreign investors. In the first quarter of 2013 Morgan Stanley Real Estate Fund closed a deal to acquire the Metropolis Shopping Center from Capital Partners (ca. $1.15 bn), which continues the series of deals made by foreign investors in 2012 such as - Immofinanz Group, Sponda, Raiffeisen Bank, Raven Russia.

Increasing Russian investments in office real estate became another important trend of the beginning of 2013. Thus, in March 2013 Russian investment company O1 Properties completed purchase of White Square Office  Center from AIG Lincoln, VTB Capital and American private equity fund TPG Capital for $1 bn. Consequently, O1 Properties increased its real estate portfolio value to $3.5—3.7 bn.

The main reason for the transactions volume growth in the first quarter of 2013 was closing a number of investment deals initiated in 2012. 

"Closing a number of major transactions in the first quarter of 2013 brought in a new wave of optimism. If positive trends in Russian economy last long enough, investors will most likely consider liquidity allocation options, where real estate will be a top - priority due to low-risk profile and level of return," stated Stanislav Bibik, Executive Director for Capital Markets with Colliers International.

It ought to be noted that asset value growth commenced in late 2012 has come to a stop. The trend was affected by the Cyprus crisis, which led to the price adjustments in spring and lowered Russian GDP for this year. In 2013 the total investment transactions volume in the Russian commercial real estate market will remain at the 2012 level and will reach $7 bn.