Crimean crisis impedes Russian investment

There are a number of channels through which the current political crisis in Ukraine is affecting the commercial real estate market in Russia. In the short term we can see tenants and investors becoming slower in their decision making and waiting for more certainty in regard to future economic trends. This change is making landlords, who are offering better commercial terms for tenants and increasing commissions for brokers, more flexible. Investors are becoming more conservative, asking for higher capitalisation rates and lower asset prices. As a result, at least in H1 2014, we expect to see lower than forecasted leasing and investment activity. It is still possible that we might see a decline in take-ups just within the 10 pct range compared to H1 2012. In the mid-term, the adverse situation could depress economic activity and lead to an imbalance between supply and demand. As a result, in early 2015 we might see growing vacancy rates and a stronger downward pressure on rental rates