A thaw in the Moscow land market

According to Cushman & Wakefield, the land market in the Moscow Region is clearly beginning to segment. Land plots for cottage construction are no longer popular and in our forecast demand for these land plots will not increase over 2009. However, land plots for commercial usage (retail center construction, logistics terminals) remain attractive and demand for this type of land is gradually increasing.

Potential buyers are also displaying particular interest in land plots located up to 30 km from the Moscow Ring Road. Longdistance land plots have lost their appeal and we forecast that demand for these will not increase in 2009.

Land plot buyers are currently a clearly defined group of companies acquiring land plots for business developing purposes. Among these are retail chains, logistics operators and industrial companies. Other groups of buyers are not currently displaying any activity. We can see interest developing from Russian producers. High levels of tax for imported goods and the Ruble devaluation have made imported goods too expensive for Russians consumers. Now is a good time for Russian companies to develop production. Among companies interested in purchasing land plots are food processing companies, furniture makers etc.

We find interesting that many land plot buyers are ready to make definitive steps to acquire land plots due to the current low prices. In January and February, there was little activity on the land market. In March-April 2009, however, buyers have been increasingly active in signing letters of intent and undertaking legal and technical due-diligence. We expect that many land plot deals will be finalized in July- August 2009. We are currently working on 12 deals for the purchase of land plots.

As far as regional land markets go, we can note that cities with populations of 500,000 - 1,000,000 have lost their attractiveness for potential buyers. However, cities with populations of over 1,000,000 remain popular. The only exception to this is the Central Federal District, where cities with populations of fewer than 1,000,000 continue to be attractive. Buyers of regional land plots are mostly retail chains. Prices have fallen up to 40% in comparison to pre-crisis levels and are currently almost US $1 mln. per hectare for cities with populations of over 1 million and less than $600,000 per hectare for cities with populations of under 1 million.

Source: Cushman & Wakefield