Boom in Moscow’s commercial real estate

Currently commercial real estate in Moscow – including offices, trade and warehouses – offer the highest yields in Europe. At the same time Russia’s regions are also becoming attractive for investors with long-term strategies.

According to Knight Frank research, despite the challenges caused by the global credit crisis, investor interest will only grow.

“The German funds, English, Irish investors – all of the people we would see in the emerging markets. I've just come from Dubai. There's a lot of interest in commercial space there, but because it's all sold strata title it's less attractive for the big investors. What we're seeing here is big funds interested in making big purchases,” said Jeremy Oates, Managing Director of Knight Frank Russia and CIS.

However, Knight Frank says rents are growing faster in Moscow than anywhere else, bar London. Consequently, rapid growth brings its own risks.

Russia's regions serve as a foil to the capital – lacking infrastructure but offering more potential.

According to Marina Usenko, Senior Vice President of Jones Lang LaSalle, in the regions it’s possible to start in almost any sphere of commercial real estate, “be it offices, retail, or logistics”.

Also, experts say investors are attracted by comfortable conditions offered by local governments.

Still, for all the attraction, the regions have fewer tenants and that means Moscow is likely to remain Russia's number one market in commercial real estate.