Moscow's Property Market Still Immature

Cranes clutter Moscow's skyline and construction workers toil around the clock, but industry officials say the city's real-estate market is still suffering from a lack of properties. The market, hit hard by the 1998 economic crisis when firms either tried to slash rental costs or leave Russia altogether, is now recovering, and supply is seriously lagging behind demand. "What was free after the crisis is occupied now and there is not enough new space to satisfy demand," said Polina Kondratenko, a research and appraisal consultant at Colliers International. "What's on offer is quite limited." According to Mark Stiles, head of the representative office of Stiles and Ryabokobylko, top Moscow assets yield 17-22 percent returns, much higher than in Eastern Europe, where yields are sometimes below 10 percent. "Even higher returns are achievable for less shiny properties and when investors are prepared to take development risks," Stiles said. According to Colliers International data, investors need four years to see a return on their investment in Moscow real estate, which compares favorably to six or seven years in Eastern Europe. But the period is starting to lengthen as competition rises. Amanda Spring, managing director at real-estate firm DTZ, pointed out the immaturity of the local market. "We actually see a lot of interest at the moment from oversees investors who are looking to purchase property with returns of 18-20 percent and above. The real problem is that there are very few buildings available for sale at that price," Russia Journal quoted her as saying.