A report on investors’ sentiments toward real estate markets across Europe has found strong “buy” recommendations for all property types in Moscow.
But although the Russian capital ranked second for capital growth and development prospects, it came in 26th — or second-last — in the risk-adjusted total return ratings, according to “Emerging Trends in Real Estate, Europe 2006,” published at the end of January by the Urban Land Institute and PricewaterhouseCoopers. The report reflects the views of more than 300 investors, developers and property companies who were either personally interviewed or completed surveys.
Even though Moscow finished toward the bottom of the pack overall, respondents positively evaluated all the city’s property types, especially industrial. Moscow suffered in the rankings largely because of its poor risk ratings, with respondents rating it the highest-risk city of all 27 in the survey.
The industrial “buy” recommendation jumped from 45 percent of respondents in 2005 to 74 percent in 2006. The warehouse sector is underdeveloped with “incredible demand,” one respondent said. Retail and warehouse vacancy rates have been declining since 2002.
The study found demand is increasing for a high-quality Class A office space. Class A office vacancy rates have steadily declined over the last two years.
One of the most notable changes from last year was the growing number of investors now prepared to take a development risk. In some Central European cities, risk-taking is the only way to obtain a high-quality product, the report said, adding that “speculative development is making a comeback.”
Paris received the highest ranking overall, with top marks for its size and liquidity. London was ranked second, with investors in all property sectors wishing to buy or hold in 2006. Helsinki jumped from sixth place last year to third place this year, followed by Madrid in fourth place and Barcelona in fifth, up from eighth last year.
The search for property investments and development is now spreading to many second-tier property markets, with respondents frequently mentioning cities in Cyprus, Croatia, Ukraine, the Baltics, Slovenia and Romania.
According to one interviewee active in Russia and other CIS countries, the need remains “for the market to become more transparent and open; people should feel more comfortable that there are fair, open, clear rules.”