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
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.