Property developers look to complete frozen projects
A large hole in the ground near Moscow’s Paveletskaya station was planned to be a fully operational shopping centre this year meant to be a shopping center fully operational this year. The global financial crisis and subsequent economic downturn left many ambitious plans in limbo, as financing dried up, and potential clients put up the shutters.
The situation continued to worsen though 2009 – with a total of 8 million square meters of retail projects around Russia lying silent – and almost all regional projects still frozen.
The situation is better in the capital, home to a third of the country's retail space. But even here, one fifth of retail projects are sill frozen according to Tim Millard, managing partner at Cushman & Wakefield
“Restarting retail projects is much slower than for office projects, because the confidence whether retailers are going to come back to the occupation market is not there yet.”
In the office sector, some big clients are taking advantage of lower prices. TNK-BP’s taking of 40 000 square meters in the Moscow business center suggests growing demand.
Experts say banks have taken control of many debt-ridden developers, and are busy completing projects. Millard says Russia’s largest banks, Sberbank and VTB have both increased their financing of real estate.
“A lot of those who took a lot of money from banks, they have shifted to having fairly heavy bank ownership in the equity structure, and, those banks are the Russian banks with state ownership – that helps – because banks are ready to finance them. And it’s also a political pressure to get real-estate moving again. Because it’s an important driver for the economy.”
But the return on investment in commercial real estate has more than halved from the 30 or 40% on offer during the boom. That suggest only those projects that were in an advanced stage will be finished, and the sound of cranes and jack hammers will remain a distant memory on many sites.