Sanctions take toll on Russia’s real estate market

World Today

The past few months haven’t been kind to Russia’s economy as the ruble and economic growth have both taken hits from Western sanctions. The downturn has also affected Moscow’s real estate market. CCTV America’s Anya Ardaveya reports that the city’s most expensive office buildings are bearing the brunt of the slowdown.

Sanctions take toll on Russia’s real estate market

The past few months haven’t been kind to Russia’s economy as the ruble and economic growth have both taken hits from Western sanctions. The downturn has also affected Moscow’s real estate market. CCTV America’s Anya Ardaveya reports that the city’s most expensive office buildings are bearing the brunt of the slowdown.

Between 2001-2008, real estate prices in Moscow increased sixfold and then fell by 30 percent following the global financial crisis. The recovery has been slow and hampered by the war in Ukraine and Western sanctions that followed. The market has also been affected by the decline in the ruble against the dollar and falling oil prices this year.

Elite office prices have declined 10 percent this year as the uncertainty over economic prospects leads to many companies looking to cut down their costs and move to cheaper offices. Experts say the vacancy rate in Moscow’s elite office real estate has also reached a historic high. The World Bank’s economic forecast also puts Russia’s economic growth rate at only 0.5 percent next year.

“We already see existing vacancy of about 25 percent in the Moscow market and we expect it to grow up to 30 percent, I can confirm that by the end of this year,” said Vyacheslav Kholopov, a partner at residential and commercial property firm, Knight Frank Russia.

However Olesya Koshkina, the marketing director of one of Moscow’s skyscrapers, the Empire, said that even though vacancy rates across the city’s most elite offices have been growing, the company expects to benefit from the slowdown as people are more likely to invest in property.

“We are very much anticipating to see the results of the fourth quarter, because it will show how the market of commercial real estate will develop. But we are generally optimistic,” said Koshkina.