In December 2009 Omsk and Yekaterinburg joined Moscow, St. Petersburg and Samara – cities, which have become traditional hosts of the Guild’s end-of-the-year events.

The summit series was opened in Moscow, where experts and market professionals summarized main results of the year. In the opinion of Maxim Gasiev (Colliers International) the year will be remembered by the active expansion of large Western retailers in the Russian capital, where new commercial centers were launched (Golden Babylon Rostokino, Metropolis, Filion). A lot of Moscow commercial property has changed hands as a result of multi-million deals.

Changed consumers’ behaviour and priorities of 2009 affected the retail landscape of Moscow. Due to a drop in financing available for development projects companies have revised project schemes. Some projects originally conceived as office centres are rehashed as hotels and mixed-use property. Nevertheless Moscow experts are sure that 2010 will prepare the market for future commercial boom.

In the opinion of Vladimir Alexandrovsky, Detsky Mir Director for commercial property, Russian regions still lack high-quality property. Many finished projects have no pool of target tenants and specialized facility management companies. Project owners often have no idea what to do with property and how to attract customers/tenants.

Yekaterinburg summit confirmed that the young real estate market of the Ural – West Siberia was badly affected by the slump. The number of players dropped, small companies burdened with large credits had to sell their projects to stronger competitors. The time of “construction pyramids” is definitely gone, as their superprofits vanished. Even in the stabilized situation prices on completed property will continue to drift in the direction of project cost level. In the coming years the narrowest cost-price margin will be maintained. A positive indicator was that in the end of 2009 companies made not survival, but development plans.

Summits in Samara and Omsk confirmed the general market phenomena of 2009: capital and investment flight from new and risky markets, closure of projects hit by the crisis at their early stages, bankruptcy of development and construction companies. Among survivors were mostly those supported by institutions and authorities. The theme of PPP has gained even higher relevance. In spite of expectations regional markets did not register a radical price reduction on housing and commercial property.

St. Petersburg summit convened more than 150 participants representing most prominent construction, development and management companies, authorities, Russian and international financial organizations, banks and consultancies.

St. Petersburg authorities responsible for the urban development and real estate sector discussed the role of government in reviving the RE industry after the crisis

Vyacheslav Semenenko, GMD President, Head of St. Petersburg Committee for construction, warned authorities against “playing on the market”. Only in case of crisis the government should use the “rainy day package” – proven means and instruments for supporting economy and business in a difficult situation.

Igor Metelsky, Head of St. Petersburg Committee for managing public property, added that in 2009 the city showed its understanding and flexibility by permitting delays in payments within investment schemes, but this practice will be stopped in 2010. The Committee is the largest property owner in St. Petersburg, and its strategy influences the market. To boost the economic activity in 2010 and attract investors the city is planning to offer for sale 7 historical and cultural landmarks (of more than thousand, which the city recently received from the federal level). The properties on sale in the first part of 2010 are palaces and public buildings of XVIII-XIX centuries. The city departs from the previous practice of leasing such property, the government is intending to sell it to Russian and international owners. The first auction is planned for the second quarter of 2010.

The public-private partnership (PPP), which speakers see as a mechanism of crisis-combating strategy, was discussed. Alexey Chichkanov, Head of the Committee for investment and strategic projects, said that in 2010 the city will prioritize so-called “mini PPPs”. That is, projects having less than $50 million budget. The city will support projects on health centers, parking places, transport infrastructure and waste management.

The city center badly needs the underground parking, and the Committee will announce location and terms of reference of the project tender early in 2010. Mr. Chichkanov surprised the audience by saying that New Holland, one of the most ambitious projects of St. Petersburg, may face another architectural competition, which will be aimed at “reformatting the project for its higher adequacy”. According to Maxim Sokolov, his predecessor, the project was in full progress and more that $63 mln. had been spent on its engineering infrastructure.

Yuri Mitirev, Chief Architect of St. Petersburg, told that the current prohibitive land use legislation, which had restricted development in the city center, was mitigated by new St. Petersburg regulations enacted in 2009. They specified procedures for getting approvals for new projects in the built-up downtown.

Mikhail Voziajanov, General Director of YIT Lentek, responded to this by saying that the problem was not in the number of regulations, but in their inferior quality, especially of those, which set procedures for approval and implementation of masterplanning projects.

Juuso Hietanen, General Director of NCC Real Estate, explained that Russian real estate market suffered from the absence of clear quality criteria and from monopolies (in particular, on basic construction materials). He noted that St. Petersburg also had a “quality monopoly” – houses having the quality of European level could be built only by a small number of companies.

Charles Voss, General Director of Aberdeen Property Investors St. Petersburg commented on the unpredictability and high risks of the Russian market. Foreigners coming to Russia have to keep track on all changes in the market situation and be prepared for sudden changes in the legislation, due to which projects have to be revised. The influx of international investment into Russian commercial real estate can hardly be expected earlier than in 2,5 years.

Christmas summits summarized the survivability of commercial real estate sectors in 2009. Office property market shrank, tenants changing office centers made the main contribution into the sector activity. Owners and managers of office property had to take the crash course on how to be more attractive than competitors. Vacancy in retail property, which early in the year had been gaping from the windows of all main streets of Russian cities, was quickly filled by new tenants often belonging to “the reasonable price level”. Against bad forecasts all large retailers declared profits. Commercial properties opened in 2009 had the hardest time, especially if it was not ‘the prime location’.

Vyacheslav Semenenko, GMD President, Head of St. Petersburg Construction Committee, shared his personal vision: In my opinion the situation in the industry got stabilized, we all had feared worse. Companies, which did not leave their construction sites and did not brought situation to public defaults, are controlling the growth, even if they do not account for the major share of the market. The Guild has demonstrated stable growth: 53 new companies have joined in. By the end of 2009 we have more than 260 member companies and associations. New GMD offices have been opened in Krasnodar, Omsk, Yekaterinburg, Kazan and Vladivostok.

GMD is in the process of establishing itself as the interregional self-regulating organization (SRO) uniting companies in the construction and property management business. It has started and supported initiatives on energy efficiency and green technologies. In 2009 the Guild brought more Russian professionals abroad. GMD delegation at MIPIM was record-breaking, Russian professionals are interested in direct exchanges and first-hand information, which they get during business tours. In 2009 they went to German cities and London. International presence was more evident at PROEstate 2009. 

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