Overview of the Russian real estate market at the end of 2021 - PART TWO

Warehouses and light industrial:

Among all the commercial real estate segments, the warehouse and light industrial market seem to have been the least affected by the effects of the pandemic.

The restrictions have almost exclusively benefited online sales companies, which have seen growth of almost 60% in 2020 alone and have had to take on huge storage and sorting complexes.

This led to a sharp increase in demand for large warehouse and storage spaces as early as 2020, with some fluctuations in the following months. By the end of winter 2021 a record-setting demand is being witnessed especially in the regions (+70%) in comparison with the pre-pandemic period. Even in the metropolitan areas of Moscow and St Petersburg, however, the increases were significant (ca. +10-15% and +30% respectively).

In the 2nd and 3rd quarters of 2021, demand, although still strong, declined slightly, but still recorded higher figures if compared to pre-COVID times.

The general expectation is that this trend will continue into the first half of 2022, which will support the current price levels, perhaps even allowing for a slight further increase.

Retail premises and shopping centres:

The growing popularity of online shopping and the unfavourable epidemiological situation have led to a sharp decline in footfall in shopping centres. On the one hand, shopping centres have to try to attract an increasing number of visitors, on the other hand, they have to comply with all the measures imposed by the authorities to avoid being fined and closed down.

In this context, the demand for spaces for rent in shopping centres has declined much more than for offices or warehouses and despite the gradual removal of restrictions, it still seems far from pre-pandemic levels. 

On the other hand, the street-retail space segment seems to be recovering better than the shopping centres and had shown signs of some (timid) liveliness already after the lifting of the restrictive measures.

This applies above all to St Petersburg and the large regional cities with a population of over one million. In the capital, however, demand has not returned to pre-pandemic levels to this day (around -20%).

As a result, it seems reasonable to expect a drop in rents for commercial premises and retail space in Moscow in the coming months for a variety of reasons, including the impossibility of ruling out new restrictions in the future, the decline in the population's purchasing power (which usually implies people being less inclined to buy "non-essential" items, with a consequent reduction in the turnover of most shops), and, last but not least, the rapidly spreading habit of making online purchases with home deliveries or at pick-up points (now scattered throughout the city districts), which seem to leave fewer and fewer reasons to big-city denizens for offline store visits.


Alessandro Alessio
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