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Antonio, moscow times conference the market in crisis

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Moscow Times Conference on commercial real estate. Correction of market. Potential of Russia.

Moscow Times Conference on commercial real estate. Correction of market. Potential of Russia.

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  • 1. March 2009 The Real Estate Market in Crisis
  • 2. Real Estate Market in Crisis Anthony Selman Director for Investments & Capital Markets at Blackwood Previously Cushman & Wakefield Client Solutions C&W Amsterdam Fortress Europe Acquisitions for the Netherlands and Germany CBRE LAC Miami Investments Latin America
  • 3. Real Estate Market in Crisis Today Crisis in the market Offices Hotels Residential Resi vs Commercial Investments Global Context Foreign Direct Investments Investor’s Considerations
  • 4. Real Estate Market in Crisis Depression? Considered a rare but extreme form of recession, a depression is characterized by abnormal increases in unemployment, restriction of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Pricedeflation or hyperinflation are also common elements. The World: Probably soon Russia: 1 Quarter of negative GDP Other fast growing emerging markets: Maybe a little better Reasons: Commodity based economy – other factors..
  • 5. Real Estate Market Russia 10 years of growth – average 7% GDP GDP 2008 Demand for all kinds of space Demand for quality World 78,360,000 Demand Demand Demand European Union 18,930,000 1 United States 14,330,000 Potential for growth – fundamentals 2 Japan 4,844,000 3 China (PRC) 4,222,000 Russia population 140 m 4 Germany 3,818,000 5 France 2,987,000 Total GDP smaller than Italy 6 United Kingdom 2,787,000 7 Italy 2,399,000 8 Russia 1,757,000 9 Spain 1,683,000 10 Brazil 1,665,000 11 Canada 1,564,000 12 India 1,237,000
  • 6. Office Market Prediction Before Crisis: Moscow. Rental rates and predicted rates.
  • 7. Office Market Before Crisis Moscow. Rental rates. Before crisis
  • 8. Office Market in Crisis Insecurity in the market among all players. Occupiers. Landlords. Investors and Developers. Nobody moves. Few transactions. Very few large transactions. Sublease market. Overreaction. End of stupid competition. Long term high rents can be justified. Central Moscow Class A. USD 500. Outside central Moscow Class B. USD 300.
  • 9. Hotel average accomodation cost (in rubles per night) december 2008 60 000 50 000 40 000 30 000 20 000 10 000 0 2* 3* 4* 5* min max
  • 10. Hotel Projects announced in 2008 Crisis Room rates down 8 % Occupancy from 75% to 70% New properties come on the market
  • 11. Residential Market Prices dynamics in primary and secondary markets of Moscow, $ per sq. m 7 500 7 000 6 500 6 000 5 500 primary market 5 000 secondary market 4 500 4 000 Jan.08 Fev .08 Mar.08 Apr.08 May .08 Jun.08 Jul.08 Aug. 08 Sept. 08 Oct. 08 Nov . 08 Dec. 08 Jan.09 Fev .09
  • 12. Residential market Elite segment Average prices dynamics, elite segment, Moscow, $ per sq. m 24 000 23 000 22 000 21 000 20 000 $20 300 19 000 per sq. m 18 000 17 000 Jan.08 Fev .08 Mar.08 Apr.08 May .08 Jun.08 Jul.08 Aug. 08 Sept. 08 Oct. 08 Nov . 08 Dec. 08 Jan.09 Fev .09
  • 13. Residential market vs Commercial Market Residential transactions do take place Discounts in both residential and commercial Largest discounts in residential are non prime Largest discounts commercial also in prime Resi business class suffers. Commercial A class suffers
  • 14. Global Context Compare markets TOTAL RETURN TABLE, feb 2009 Compare city fundamentals Gross regional product OFFICES SHOPPING CENTRE WAREHOUSE GEOGRAPHIC LOCATION Prime Prime Moscow rents Prime rents Prime Prime rents Prime London €/sq m/ yr yields % €/sq m/ yr yields % €/sq m/ yr yields % Paris AMSTERDAM 335 5,07 1155 5,5 92,5 6,75 BRUSSELS 275 6 1800 5,5 60 6,75 FRANKFURT 444 5,4 1560 5,75 69,6 7 LONDON 1057 5,25 2605 6,75 141 7 MADRID 480 6 1236 6,25 91,2 6,5 MILAN 550 5 700 5,75 60 6,75 MOSCOW 1000 11 2880 11 100 12,5 PARIS 830 5,5 2000 6 53 7,4
  • 15. Global Context Compare markets GDP 2008 Compare country fundamentals World 78,360,000 European Union 18,930,000 1 United States 14,330,000 2 Japan 4,844,000 3 China (PRC) 4,222,000 4 Germany 3,818,000 5 France 2,987,000 6 United Kingdom 2,787,000 7 Italy 2,399,000 8 Russia 1,757,000 9 Spain 1,683,000 10 Brazil 1,665,000 11 Canada 1,564,000 12 India 1,237,000
  • 16. Real Estate Market in Crisis Yields today -No deals No yields -Offers set the market? -Market sets the market?
  • 17. Investment Market, a detailed look 2500 Warehouse 17% 2000 Hotel 7% 1500 Retail 1000 54% Office 22% 500 USD mln 0 2003 2004 2005 2006 2007 Foreign Direct Investment Foreign Investment into real estate 2007 55 billion 2007 7 billion 2008 60 billion 2008 6 billion 2009 40 billion? 2009 1 billion?
  • 18. Investment Market, What investors look at.. Access to financing in Eastern Europe Setting the yields Market. First deal. Everything comes back to life? Russian Economy -Oil price. USD 20 per barrel scenario -Reserves (1998 – 12 b / 2008 – 600 b / 2009 200 b) -Stock market. 70% down Other factors Geopolitical – Georgia USD 20 b Out in August Regional investments CIS Ukraine is hurting Global FDI Asia more attractive now? Emerging Markets recover faster?
  • 19. About Blackwood Blackwood is Moscow’s no 1 real estate services firm. Founded in Moscow in 1991 Blackwood provides access to the local market and combines local business practice with international industry experience. Blackwood’s 300 plus professionals cover every aspect of the real estate industry advising investors, developers as well as landlords and tenants. Blackwood provides a wide array of real estate services from research, consulting and strategic planning to transaction management and fund management.