Russian exhibitors at EXPO REAL
Ministry of Construction
83.6
million m² of new housing in 2014
Ulmart
7
retail parks in the pipeline
Ikea
14
anchor stores and 270 million visitors a year
Moscow
12
1.3
Nizhny Novgorod Region
million population, 6,500 foreign firms
6
million people, 3.5 hours from Moscow
Moscow Region
Tula Region
52
% rise in GDP over four years
64
industrial estates, 19 with foreign firms
misunderstandings about the Russian investment market
Special
Russia
6
misunderstandings about the Russian investment market
Article and graphics by Denis Sokolov, Cushman & Wakefield Russia
There may not have been much positive news from Russia over the past year. However, investors considering real estate opportunities in the Russian capital and its regions often overlook a few facts. foreign investors’ share decreased to less than 30%. In total, over the last 10 years, over $51.8 bn was invested in Russian commercial real estate. European investors were most active with a 24% market share. North American and Asian investors were significantly below this, with 7% and 6% respectively. Most of the investors aimed at Moscow and the Russian capital attracted 82% of total investment over past 10 years. St Petersburg is
In 2012-2013 Moscow was the third biggest European investment market after London and Paris. In 2013 Russia became the largest consumer market in Europe. Devaluation and recession wiped out some of those achievements but it is simply a matter of time before the market recovers to that level. Foreign investment in commercial real estate dominated in 2006-2008 when it accounted for over 60% of total volume. After 2009
in second place with 10%. Investments in other cities are minor. For example Nizhny Novgorod attracted $160 mln from foreign investors over the past 10 years and Tula just $20 mln. Obviously, lower economic growth and higher saturation levels have hit the attractiveness of Russian commercial real estate for less professional investors. However, there are still lots of opportunities in the market for investors who are focusing on a longer term strategy.
Investments in Russian real estate By sector: $mln 9,000
SOURCE: CUSHMAN & WAKEFIELD RUSSIA
Office
8,000
Asia 5% Europe 10% North America 11% Domestic 74%
Retail
7,000
Industrial
6,000
Other
5,000
Forecast
4,000 3,000 2,000 1,000 0 01
02
03
By origin: % 2011-2015
04
05
06
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07
08
09
10
11
12
13
14
15
Investment opportunities
Construction industry demands quality
1
Shorter real estate cycle Cycles in Russia are shorter than in developed countries, due to the characteristics of an emerging economy. In real estate, in particular, the pricing cycle tends to last 3-5 years, compared with 7-10 years in some EU markets.
2
Low title risks In spite of the number of well known disputes surrounding Russian assets, the commercial real estate sector remains immune to legal wrangles. The Russian legal system provides strong protection for real estate ownership. There have been no modern real estate legal disputes with the state authorities over titles and ownership. Not a single investment grade asset with a clean title has ever been disputed. In addition, Russian real estate assets can be owned through a variety of holding structures (SPV’s, direct asset ownership, REIT), which provide investors with considerable flexibility.
3
Dual currency market Historically, prime Russian real estate assets are traded in US dollars. The ruble volatility has triggered a shift in the leasing market by introducing dual currency. This applies to prime assets in the retail and warehouse segments, while main core offices tend to remain in dollars. The Russian ruble has devalued by some 50% over the past six months but is currently fairly stable. The dual currency system is actually a strength of the Russian market, providing additional flexibility that helps absorb volatility. Even the 50% devalua-
tion did not lead to any significant increase in vacancy rates in the Russian commercial real estate.
4
Inflation can be positive Given that Russia is a developing economy, its inflation level is higher than those in western counties and this offers more immediate increases in value. However, inflation is not always bad for investors: on the back of the recent market downturn, inflation will allow foreign investors to achieve higher returns on foreign currency capital.
5
Urban development challenges Russian cities are going through a process of deindustrialisation and a new post-industrial economy is emerging all over the country. This is driving the consumer market and the demand for modern real estate. New public spaces and pedestrian zones are changing the face of Russian cities. While Moscow and St Petersburg are already positioned as modern mega cities, destinations like Nizhny Novgorod, Tula and the Moscow region have yet to establish themselves as innovative urban centers.
6
Infrastructure development The commercial market may be slowing but the government is continuing to invest heavily in infrastructure. Projects include Moscow transport development, railways and the 2018 football World Cup. Together, these investments will reach several hundred billion dollars and create opportunities for commercial development and investment.
The construction industry is one of the most dynamic sectors in the Russian Federation. An absolute record of 83.6 million m² of housing was built in 2014. The Ministry of Construction, Housing and Utilities actively supports both existing housing developers and new investors. The emphasis is not only on the number of square meters, but on the actual quality of housing. Nowadays, people want more than simple space. They need housing which utilizes high quality technology. They also want to pay less for utilities, so the Ministry of Construction is actively working on the implementation of innovative technologies, including energy efficiency. The ministry supports the primary residential market with a program of preferential mortgages and state-compensated interest rates. This program has been active since April 2014 and involves the partial compensation of interest rates via the federal budget. The ministry is also planning to establish
a federal building research center for the introduction of new technologies in construction and improvements in the quality of existing buildings. The concept of a scientific and technological platform will appear by the end of 2015. Foreign companies with relevant experience are actively invited to work towards this. It also should be stated that Russia has very liberal legislation when it comes to attracting private investment in housing and communal services. This may be the last sector which has not yet been fully opened to private capital. The ministry has introduced long-term interest rates that allow the profits of an entire project to be calculated up to 20-30 years. The law will work in all regions of the country from 2016 and will offer good support and guarantees for investors.
SPECIAL RUSSIA | EXPO REAL 2015 | 3
Moscow City Government KEY SEARCH
STAND: B1/110
FOREIGN PRIVATE CAPITAL, PARTNERS
Creating a favourable business climate in the Russian capital Nearly $73.8 bn in foreign investments flowed into Moscow’s economy throughout 2014. Foreign investments accounted for roughly 53% of the total volume of foreign investments received by the entire Russian economy. Total foreign trade turnover amounted to $333.4 bn for the year. KEY PROJECTS The Moscow City Government is presenting a number of current investment projects and programs in the area of capital infrastructure, urban planning, the development of the city’s sprawl-
ing space, the development and renovation of industrial and socio-cultural facilities, addressing transportation challenges and preserving the unique identity of Russia’s largest metropolis.
Moscow River: concept for urban planning development of the embankment area. Campus Modernization The College Space: development and modernization of student campuses at 15 educational institutions. Modernization of DSK: the modernization of large panel housing in Moscow. KEY CONTACT Anatoly Valetov, Deputy head, Department for External Economic and International Relations +7 (495) 633-65-44 ValetovAI@mos.ru
Moscow Region Government KEY SEARCH
STAND: B2/220
INVESTMENTS, PARTNERS FOR JOINT PROJECTS
A leader in attractive investment The Moscow Region is the largest consumer market in the country and has the most developed transport and energy infrastructure. A network of industrial parks and special economic zones is being created. The Moscow Region is one of the leaders in terms of its population’s education. KEY PROJECTS Helicopter complex Heliport Reutov This is a new complex for the chain Heliports of Russia. It includes a helicopter fleet, hangars, service centers and aeronautical training centers.
KEY CONTACTS Industrial estates The JSC Moscow Region Development Corporation presents 64 projects in the Moscow Region, 19 of which involve placements for Russian and foreign companies.
Anton Loginov Head of Department for territorial development and international cooperation LoginovAV@mosreg.ru
Alexander Aksenov Deputy head of Department for territorial development and international cooperation +49 (157) 783-80-654 AksenovAA@mosreg.ru 4 | EXPO REAL 2015 | SPECIAL RUSSIA
The Ministry of Construction of the Russian Federation
STAND: B1/442
KEY SEARCH INVESTMENTS, ENERGY EFFICIENCY, HOUSING DEVELOPMENT, INNOVATIONS IN CONSTRUCTION, RENTAL HOUSING
A platform for exchanging international experience in innovation For the first time in the history of EXPO REAL, the Ministry of Construction of Russia will present investment projects for both commercial and residential real estate developed by specific Russian companies. The Russian stand will become a platform for exchanging international experience about introducing innovations in construction and attracting foreign investments to the Russian market.
KEY CONTACT Elena Chernyavskaya +7(905) 708-31-02 +7(495) 734-85-80, add. 61040 Elena.Chernyavskaya@minstroyrf.ru
KEY COMPANIES
Zapad
Investment and construction company www.ulzapad.ru zapad-uln@mail.ru +7(8422) 249-211 Nail Alimov, Chairman of the Board ICC Zapad Konstantin Lushin, General Director ICC Zapad Ruslan Alimov, Director of DSK Etalon, +7 (937) 275-14-80
Koshelev Corporation Construction company www.koshelev-proekt.ru
Koshelev Vladimir koshelev@k-inc.ru, +7 (937) 955-05-05 Gaganin Maksim gaganin@k-inc.ru, +7 (917) 108-77-77
Stroypromavtomatika
Construction of residential and industrial buildings in Moscow and the region www.zvnd.ru spa-holding@zvnd.ru Alexander Golitsyn General Director, +7 (903) 796-82-47 Eugene Andgel Chief Engineer, +7 (903) 169-03-22
YUGO-ZAPADNYI District, Ulyanovsk Largescale presidential project. Planned by 2018: One million m² of housing on a 85 hectare site. In total the new district will accommodate up to 25,000 people. CENTRALNYI District, Ulyanovsk Residential neighborhood Central was begun in 2011. Planned by 2018: 530,000 m² of housing. More than 20,000 people will live in this modern district with developed infrastructure.
Koshelev project, Samara The largest new residential district in Russia in five years. The total area of residential buildings is currently one million m² with 65,000 inhabitants. By 2020 the population will reach 250,000. Aviacor-reinforced concrete, Tolyatti Modern plant providing facilities for the construction of the largest house-building industrial complex. Production capacity of 500,000 m² of housing per year.
Helio Park, Zvenigorod Rehabilitation center with modern medical equipment on an eight hectare site offering cardiology, neurological, orthopedic and oncological services. PAKHRA The Chulkovskoe Integrated development involves the creation of a 440 hectare agroindustrial complex with greenhouse production, packaging and storage; trade and logistics; power unit; industrial, business and shopping centers; living area with social infrastructure.
SPECIAL RUSSIA | EXPO REAL 2015 | 5
Ministry of Investment Policy of the Nizhny Novgorod region
STAND: A1/122
KEY SEARCH INVESTMENT, AGREEMENTS, PROJECTS, COOPERATION
Nizhny Novgorod region: The territory for investment Nizhny Novgorod is one of the biggest transport and logistics hubs in Russia and a center of research and innovation. The most promising industries for investors are mechanical engineering and the automotive industry, research, IT, chemicals and petrochemicals, transportation, logistics and woodworking. KEY PROJECTS The Ice Palace The creation of 15,000 visitor stadium with ice arena of 1600 m². The development on the Oka embankment will include hotels, a shopping center and parking. The 20 hectare site has civil engineering infrastructure.
KEY CONTACTS Cable car stations The planned stations between Nizhny Novgorod and Bor are conceived as part of the infrastructure aimed to improve passenger service quality. The project will increase the region’s investment attractivenes.
Natalia Kazachkova Minister of investment, land and property +7(831) 419-90-41 official@invest.kreml.nnov.ru
Ksenia Gerk Deputy Minister of investment policy +7(904) 909-44-64 inter@invest.kreml.nnov.ru
Tula Region Government
STAND: B1/100
KEY SEARCH INVESTMENT, DEVELOPMENT, INDUSTRIAL PARKS, CONSTRUCTION OF RESIDENTIAL REAL ESTATE
The Tula Region: ingenious and easy The proximity to Moscow, developed infrastructure, skilled workforce and favorable investment climate are the main advantages of the region. More than 200 companies with foreign capital successfully operate in the Tula region, among them Unilever, Cargill, Procter & Gamble, SCA and Knauf. KEY PROJECTS Industrial Park Uzlovaya 2500 hectares some 180 km from Moscow, at the intersection of the main highways, equipped with engineering and transport infrastructure plus qualified staff. Favorable conditions for the deployment of large industrial companies.
KEY CONTACTS New Tula – a satellite of Moscow Construction of modern housing estates, cottage settlements and technology parks on an area of 1,500 hectares in a quality environment. Social infrastructure includes schools, recreation, parking and a shopping center.
Yury Andrianov First Deputy Governor, Chairman of the Government +7(4872) 56-53-52 predprav@tularegion.ru
Denis Tikhonov Autorized Representative for Investments in Tula region +7(4872) 338-008 corporation@invest-tula.com
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Ulmart
STAND: B1/430
KEY SEARCH INVESTMENT, RETAIL PARKS, PARTNERS IN LOGISTICS
E-retailer with the highest market valuation Ulmart is the leading Russian e-retailer. The company’s immediate plans include the development of logistics infrastructure and in-house investment projects. Seven centers will be built for a total investment of more than RUB6 bn between September 2015 and December 2016. KEY PROJECT
KEY CONTACTS
New generation of retail parks: MIZAJ MIZAJ is a novel project that transforms the con- date Ulmart Suburban Fulfillment Centers and cept of a retail park itself. It combines an individ- Wholesale clubs Ryady. New generation MIZAJs ual approach for each client and will accommo- will be located in St Petersburg and Moscow.
Evgeny Ivanchenko Director of Capital Construction +7(812) 336-37-77 ivanchenko.e.a@ulmart.ru
Brian Kean Director of Communications and International Relations +7(921) 947-81-40 kin.b.p@ulmart.ru
IKEA Centres Russia
STAND: C2/123
KEY SEARCH TENANTS, RETAILERS, BRANDS, FRANCHISING
The largest shopping centre operator in Russia Between now and 2020 IKEA Centres Russia is implementing a €2 bn investment program to build new MEGA shopping centres, accomplish significant mall extensions and a major commercial upgrade at the existing malls to take long term advantage of the strong Russian retail market. KEY PROJECT MEGA Mytischi in north-east Moscow The new flagship will be a super-regional mall with a focus on food & beverage, entertainment and lifestyle services, as well as shopping. MEGA Mytischi will be a destination for a family day out offering a wide variety of services with a multichannel experience for the customers. With 230,000 m² GLA, MEGA Mytischi will be one of Europe’s largest shopping centers and is scheduled to open in 2018. MEGA Mytischi will benefit from an IKEA store as a powerful anchor tenant. The shopping center will have 10,000 parking lots and will be surrounded by a park with a community centre.
KEY CONTACTS 14 MEGA branded shopping centres With more than 270 million visitors annually, each centre comprises circa 130,000 m² with over 200 stores, making MEGA shopping cent ers Russia’s market leading retail destinations.
Svetlana Kholodnaya Senior Advisor Leasing department +7(495) 221-33-11 (ext. 12679) svetlana.kholodnaya@ikea.com
Arnoud Bakker Head of Lease Group Leasing Department +7(495) 221-33-11 arnoud.bakker@ikea.com
SPECIAL RUSSIA | EXPO REAL 2015 | 7
Meet the Russian exhibitors Confirmed exhibitors as per September 1, 2015
Exhibition Hall Plans
C1
C2 Ikea Centres Russia 123
Ikea Centres Russia C2/123 www.ikeascr.com The Ministry of Construction B1/442 www.minstroyrf.ru Koshelev Corporation B1/442 www.koshelev-proekt.ru
B1
The Ministry of Construction 442
B2
Zapad B1/442 www.ulzapad.ru
Ulmart 430
Moscow Region Government 220
Ulmart B1/430 www.ulmart-dev.ru
Moscow City Government 110 Tula Region Government 100
A1
Stroypromavtomatika B1/442 www.zvnd.ru
A2
Nizhny Novgorod Region Government 122
Moscow Region Government B2/220 www.mosreg.ru Moscow City Government B1/110 www.mos.ru Tula Region Government B1/100 www.invest-tula.com Nizhny Novgorod Region Government A1/122 www.mininvest.ru
8 | EXPO REAL 2015 | SPECIAL RUSSIA