Boston, MA -- (SBWIRE) -- 08/20/2012 -- The Russia Real Estate report examines the commercial office, retail, industrial and construction segments throughout the country in the context of a construction market that has returned to growth.

With a focus on the principal cities of Moscow, St Petersburg, Ekaterinburg and Samara, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of external macroeconomic headwinds. The key growth areas driven by increasing (comparative) attractiveness for investors, as well as the potential offered through the hosting of the Winter Olympics and 2018 FIFA World Cup, are also addressed, alongside the buoyant outlook for the retail sector.

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The Russian economy continues to face enormous challenges of weakening external demand and continued uncertainty over the policy environment, which affects business sentiment. However, we continue to believe that the government will pursue a more business-friendly approach and seek to attract financing for major infrastructure projects, which should help to sustain a solid longer-term growth outlook for Russia's economy. In addition, having returned to positive territory in 2011, we believe a number of factors should help ensure Russia's building industry achieves at least modest growth over the medium term; compounding the upside risks to our real estate outlook.

Key Points

- The Russian government's decision to create a US$10bn investment fund highlights the state's commitment to sharing the risks inherent in investment in Russia with the private sector, in an effort to attract a greater level of private capital. The government aims to use this investment fund as seed money to mobilise between US$50bn and US$90bn over the next five years, by financing up to 20% of the cost of privately procured development projects.
- Our Oil & Gas team have raised the average annual Brent Crude price forecast for 2012 to US$115 per barrel (bbl), from US$102/bbl previously. This, combined with higher private consumption and fixed investment expectations, has prompted us to upwardly revise our real GDP growth forecast for Russia in 2012 to 3.4%, from a previous forecast of 3.2%. This keeps us somewhat below consensus, as we believe that weaker external demand conditions will offset the effects of higher oil prices.

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