From Russian Property, With Love
MOSCOW—Despite being marginally affected
by the global downturn and a lack of government transparency, Russia is still popular for new development and leasing. The
country is experiencing growth from exposure with various world stage events, including economic meetings and the 2018 FIFA
In Cushman & Wakefield’s recent
European Cities Monitor, Moscow was
ranked the most desirable city to open new
offices, beating 35 other European markets
for the second consecutive year. Fifty-seven
European firms plan to expand there within
the next five years, up from 47 in 2010,
according to the survey. The city has seen
strong expansion in consumer spending
along with growth in business-to-business
sales and the potential of secondary cities,
says Tom Millard, managing director of
Class A office rents in Moscow and St.
Petersburg showed the best growth in the
Europe, Middle East and Africa region dur-
ing the first half of 2011, according to a new
study by Colliers International. Rents in
Moscow rose 11% in the first half to about
$54.32 per square meter, and St. Petersburg
saw rates rise by 10% to $31.86 per meter.
Foreign Investors in US Move Up Risk Spectrum
Foreign investors’ appetite for US properties is diversifying, broadening from core assets in coastal US cities to secondary markets,
value-add and distressed properties. These options are reigniting
interest by European and Asian buyers. The year ahead should also
show a marked change in the appetite for development as longtime players consider projects in high barrier-to-entry markets.
Previously, a large number of investors competed for the preeminent assets in the top
those in New York City, San Francisco and
Washington, DC. Now, the US is experiencing
a notable thinning of the peloton as those
same investors move slightly further out the
risk continuum into solid, well-located properties in secondary cities. Alternately, they may stay within core markets but broaden
their search to include value-add or even distressed assets.
In August, Allianz, along with joint venture partner CCP
Investment Board of Canada, purchased two multifamily properties in Boston: the Archstone North Point for approximately $186
million and the Archstone Woodland Park for about $84 million.
The North American Development Group of Ontario, Canada
acquired the Edgewood Retail District in Atlanta for $81.7 million
in September, while a partnership of Chinese and Korean investors
bought Three First National Plaza in Chicago in August for approximately $348 million.
For the majority, JVs remain the foreign investment vehicle of
choice for US-based office investments, particularly those from
By Steve Collins
Germany and France, while Middle Eastern and Asian investors
have their eyes on multifamily. In Germany, institutional investors
are shying away from open-ended funds and increasingly amassing
capital in Spezialfonds, as real estate remains a target asset class.
German open-ended funds are also re-analyzing their US real
estate volumes and may consider concentrated domestic selloffs to
feed cash redemptions.
Development also appears poised for a tentative comeback as
longtime international players begin investigating opportunities
for office developments in those same barrier-to-entry markets of
New York and Washington, DC. Little to no office construction
over the past two years has resulted in falling vacancies and higher
rents in these core markets. Some foreign investors who have gone
through three to five cycles throughout the years are now beginning to feel more comfortable with future development plans.
Aggressive foreign buyers with higher risk appetites could be the
first to break ground.
Foreign lenders have also become more aggressive in 2011, with
overseas banks and funds quoting interest rates around 3.25% with
interest-only components for as long as five years, though underwriting remains extremely tight. A number of US borrowers are
now choosing foreign lenders due to their ability to take down a
larger loan, with longer terms and shorter execution. While large-scale transaction activity is muted, foreign investors could be in a
position to break away from the pack in 2012.
Steve Collins is the Washington, DC-based international director for Jones Lang
LaSalle. He may be contacted at firstname.lastname@example.org. The views
expressed here are the author’s own.
Vital Signs...In Q3 2011, Asia Pacific office rents and values rose by 12.9% and 16.5%, respectively, from Q3 2010.—CBRE