MarketBeat Q2 2019 is Cushman & Wakefield’s quarterly report on Russia’s commercial real estate market at the start of the “expensive money” era: economic growth is slowing, households are highly leveraged and corporate lending is tight — yet offices, retail, warehouses and hotels show a surprisingly resilient picture.
The report combines a macroeconomic outlook for Russia through 2022 with a sector‑by‑sector review of commercial real estate. It explains why national projects have effectively become the “new oil” for the government, what risks this creates for the consumer market, and how the real cost of money and the household credit boom are shaping both demand and development activity.
Against this backdrop, the report tracks a tentative revival of the investment market, the behaviour of capitalization rates, the return of pre‑lease deals in the Moscow office sector, the growing pressure on consumers, Moscow’s leadership in new retail construction, the shortage of speculative warehouse development and the almost flat growth in modern hotel supply.
What’s inside
- Macroreview: baseline forecasts for GDP, inflation, FX, rates and key external balances; the widening gap between official Russian and foreign forecasts; the onset of a prolonged “expensive money” period since 2017 and its link to low growth; household credit boom without a classical bubble, rising debt burden and shrinking consumer capacity; corporate credit squeeze in construction and wholesale/retail; stock performance of listed developers and retailers.
- Capital markets: where Russia stands versus core CEE markets; composition and dynamics of investment volumes in H1 2019; evidence that the market has likely found its bottom; continued net outflow of foreign capital; why prime cap rates did not respond to a lower key rate and how further compression of the investment market may push capitalization rates higher rather than lower.
- Offices (Moscow): stabilised market with balanced new supply and take‑up; sharp increase in construction after a record‑low 2018, led by class A schemes and the northwest submarket; the return of pre‑lease deals for the first time in five years as tenants compete for large consolidated blocks; strong demand supported by banking, finance, construction, IT and the rapidly growing flexible workspace sector; vacancy movements by class and location, with New Moscow gradually absorbing space; net absorption turning negative at the start of the year and expected to move back into positive territory; rental growth in both RUB and USD terms, driven mainly by class B.
- Retail: consumer market under strain, with weak real income dynamics and higher mandatory payments limiting retail turnover; use‑of‑income breakdown showing consumption at multi‑year highs and savings at lows; generational view of shopping habits and preferred formats; key retail trends (holistic experience, ethical consumption, omnichannel, changing loyalty, AR) and their impact on shopping centre concepts; Moscow’s dominance in new retail supply in 2019 and shift of construction activity to regions thereafter; moderate national pipeline with 500–700k sq m of new space annually; growing outlet sector around Moscow, smaller formats in transport hubs and neighbourhood schemes; multi‑format and multi‑channel strategies, collaborations between brands and the rapid expansion of pick‑up and dark‑store models.
- Warehouse & Industrial (Moscow region): low development volume overall and a five‑year low in speculative construction, with the majority of new space delivered as built‑to‑suit; continued decline in vacancy and upward pressure on class A asking rents; significant imbalance between strong demand (led by retailers, logistics and production) and limited new speculative stock; geography of available space by direction; deal structure by sector and by lease vs. sale, with several landmark transactions involving FMCG and value retailers; expectations for only modest growth in speculative supply despite rising rents.
- Warehouse & Industrial (Russian regions): predominantly speculative nature of new construction outside Moscow, with H2 activity set to far exceed H1; concentration of development and demand in a handful of key regions (including Yekaterinburg, Rostov‑on‑Don, Novosibirsk, St Petersburg); strong interest from retailers driving the largest regional deals; overall regional take‑up exceeding the previous year’s levels.
- Hospitality (Moscow): practically no new modern rooms added in Q2 and minimal net growth in 2019 as a whole; 2019 supply growth significantly below the previous year and revised down from earlier forecasts; project launches pushed further out due to macro uncertainty and rate stagnation; operating performance in the first five months of 2019 with modest occupancy gains and weaker ADR, resulting in almost flat RevPAR in RUB terms and notable decline in USD due to FX volatility; segment‑by‑segment analysis (from Economy to Luxury), showing who gained and who lost ground; long‑term ADR stagnation since 2013 as a reflection of the broader economy rather than just added supply.
- Appendix: standard commercial lease terms for offices, retail and industrial property in Russia — typical lease lengths, break options, assignment and subletting practice, agent fees, rent structures (including turnover rent in shopping centres), indexation norms, service charges and tax treatment — plus research team contacts and company profile.
Practical value
- For investors: a concise framework for understanding how Russia’s low‑growth, high real‑rate environment interacts with commercial real estate; where the investment market is in the cycle; and why cap rates have decoupled from the downward trend in the key rate.
- For developers and landlords: clear benchmarks on supply, demand, vacancy and rent levels across Moscow offices, retail and warehouses, as well as Moscow’s hotel market; insight into where the market is genuinely under‑supplied (large class A office blocks, quality warehouse space) and where concept and tenant mix are now more important than raw square metres (retail, hospitality).
- For occupiers: context for negotiating leases and planning location strategy — understanding the balance of power in Moscow offices, the limited elasticity of warehouse supply, the stability of vacancy in quality shopping centres and the typical commercial terms used in the Russian market.
- For retailers, logistics operators and hotel companies: a grounded view of the constraints on consumer spending, generational shifts in shopping habits, the rise of multi‑format, multi‑channel strategies, and the real state of Moscow’s hotel operating performance in a flat‑rate environment.
- For banks, analysts and advisors: a link between macro fundamentals (credit boom, expensive money, national projects) and sector‑specific CRE metrics, useful for risk assessment, lending policy and medium‑term strategic planning.
To explore the full set of charts, forecasts and sector‑by‑sector analysis, download the complete MarketBeat Q2 2019 report.
