Tapping up Russian real-estate resources
Spiralling property prices have developers champing at the bit for a piece of the action but many remain wary of the red menace of Russian bureaucracy, and the country's volatile political situation and economy. However, for investors canny and courageous enough to venture as far as Moscow, the spoils can be spectacular.
Anecdotal evidence paints a bizarre and tempting picture, with one developer offering a free helicopter to anyone who buys a property along the prestigious Rublyovka highway. Although it is one of the priciest and most prestigious roads in Moscow, the helicopter could come in handy as the road is shut down twice a day so President Vladimir Putin can drive to work. Prices in Moscow have spiralled in certain locations to astronomic proportions, and this has led many to look further east than Poland for higher yields.
A new company in Warsaw hopes to tap directly into this investor demand. Dominique Renard, commercial and industrial property consultants, recently opened its Warsaw office, as part of an expansion from its original base in Moscow into Poland, Slovakia and the Czech Republic. Although its team is tight, its managing director, Dmitri Renard, is adamant that it can succeed among the larger players on the Polish scene.
Forward thinking
"The project was started in September 2004, and currently employs five people," says Renard. "To understand how we work I can say that in the field of agency services our average deal was for 500 sqm in September 2004, 1,000 sqm in March 2005 and [we predict] 2,000 sqm in August 2005. In the area of building purchases, we are currently working with property with prices in the range of $15-60 (zl.48-193) million."
The Warsaw office will act as a two-way street for investors, offering property in Russia and the rest of the CEE region. "Our new office will help us communicate with Central European investors who are interested in Russia and we will be a player on the commercial real-estate markets of Central Europe in 12 months' time," claims Renard.
Challenging times
However lucrative Russia may seem, the challenges it presents are never far from investors' thoughts. Renard is only too well aware of this and pulls no punches in his description of the market: "Russia is a very aggressive real-estate market and it requires aggressive investors." He rattles off a list of the major problems facing the market: "The obscure cash flows; the unpredictable government; the business culture, or lack thereof, and the motivation of people," but assures that his company is well equipped to guide investors through every step of the process safely. "We have been working with international companies in Moscow for years and we have seen the mistakes that can be made. Our goal is to escape these."
Despite the positive attitude, there is no denying that the Russian property market, while lucrative, is fraught with problems and obstacles. One major Polish company, confounded by bureaucracy and corruption, found business too difficult and pulled out of Russia last year. Renard dismisses this as that firm's own problem and points to AIG Lincoln as an example of how to succeed. "AIG Lincoln has announced the construction of one million sqm of warehousing space in the district near the Domodedovo Airport with a local partner. But bureaucracy is still a big problem," he concedes.
The right attitude
Renard sees the investor's attitude as crucial to their success. "People must have experience to work in emerging markets and have an entrepreneurial spirit. That goes for anywhere. [Investors] must work in an aggressive atmosphere such as Russia." Experience on the ground is central to Renard's thinking and, rather than simply taking investors money, he insists that they come and see their properties. "Deals have to be fulfilled after visiting Moscow," he says, and "strong reliable partners" are crucial to counter problems the Russian market presents.
Although the residential market is where many of the more fantastic tales of Russian real estate come from, in Renard's opinion it has reached a "saturation period" and he believes the development of the mortgage market will dictate any further growth in this area.
Regardless of this, Russia will continue to attract investors, especially those who have exhausted other, perhaps more straightforward if less lucrative opportunities in the CEE region, which will most likely keep Dominique Renard busy for some time to come.
Anecdotal evidence paints a bizarre and tempting picture, with one developer offering a free helicopter to anyone who buys a property along the prestigious Rublyovka highway. Although it is one of the priciest and most prestigious roads in Moscow, the helicopter could come in handy as the road is shut down twice a day so President Vladimir Putin can drive to work. Prices in Moscow have spiralled in certain locations to astronomic proportions, and this has led many to look further east than Poland for higher yields.
A new company in Warsaw hopes to tap directly into this investor demand. Dominique Renard, commercial and industrial property consultants, recently opened its Warsaw office, as part of an expansion from its original base in Moscow into Poland, Slovakia and the Czech Republic. Although its team is tight, its managing director, Dmitri Renard, is adamant that it can succeed among the larger players on the Polish scene.
Forward thinking
"The project was started in September 2004, and currently employs five people," says Renard. "To understand how we work I can say that in the field of agency services our average deal was for 500 sqm in September 2004, 1,000 sqm in March 2005 and [we predict] 2,000 sqm in August 2005. In the area of building purchases, we are currently working with property with prices in the range of $15-60 (zl.48-193) million."
The Warsaw office will act as a two-way street for investors, offering property in Russia and the rest of the CEE region. "Our new office will help us communicate with Central European investors who are interested in Russia and we will be a player on the commercial real-estate markets of Central Europe in 12 months' time," claims Renard.
Challenging times
However lucrative Russia may seem, the challenges it presents are never far from investors' thoughts. Renard is only too well aware of this and pulls no punches in his description of the market: "Russia is a very aggressive real-estate market and it requires aggressive investors." He rattles off a list of the major problems facing the market: "The obscure cash flows; the unpredictable government; the business culture, or lack thereof, and the motivation of people," but assures that his company is well equipped to guide investors through every step of the process safely. "We have been working with international companies in Moscow for years and we have seen the mistakes that can be made. Our goal is to escape these."
Despite the positive attitude, there is no denying that the Russian property market, while lucrative, is fraught with problems and obstacles. One major Polish company, confounded by bureaucracy and corruption, found business too difficult and pulled out of Russia last year. Renard dismisses this as that firm's own problem and points to AIG Lincoln as an example of how to succeed. "AIG Lincoln has announced the construction of one million sqm of warehousing space in the district near the Domodedovo Airport with a local partner. But bureaucracy is still a big problem," he concedes.
The right attitude
Renard sees the investor's attitude as crucial to their success. "People must have experience to work in emerging markets and have an entrepreneurial spirit. That goes for anywhere. [Investors] must work in an aggressive atmosphere such as Russia." Experience on the ground is central to Renard's thinking and, rather than simply taking investors money, he insists that they come and see their properties. "Deals have to be fulfilled after visiting Moscow," he says, and "strong reliable partners" are crucial to counter problems the Russian market presents.
Although the residential market is where many of the more fantastic tales of Russian real estate come from, in Renard's opinion it has reached a "saturation period" and he believes the development of the mortgage market will dictate any further growth in this area.
Regardless of this, Russia will continue to attract investors, especially those who have exhausted other, perhaps more straightforward if less lucrative opportunities in the CEE region, which will most likely keep Dominique Renard busy for some time to come.
