Demand for retail real estate at the end of 2023 decreased due to an increase in deposits and higher mortgage prices

The increase in the profitability of bank deposits and the increase in the cost of mortgages led to a decrease in demand for retail real estate in Russia as a whole by 5%, in some cities the decline reaches 37%. Experts predict a halving of investment in this segment by the end of 2024. According to them, interest in such properties is also decreasing from potential tenants.

Demand for the purchase of retail space at the end of December 2023 decreased by 5% year-on-year, according to Avito Real Estate. Simple Estate CEO Nikita Kornienko attributes the decline in investor interest in commercial real estate to the fact that some buyers, instead of investing in the acquisition of a ready-made rental business, leave it on bank deposits. “As a rule, these are non-professional investors with a capital of up to 50 million rubles,” he says.

So far, you can earn more than 13% per annum on deposits, so investors first of all consider this instrument and only then investments in commercial real estate or OFZ, confirms Ivan Barinov, consultant for the street retail department of the Magazin Magazin company. For comparison: the average profitability of a ready-made rental business in Moscow, according to Simple Estate, is now 7.5%.

Mr. Barinov adds that for the purchase of retail premises, mainly commercial mortgages are available, which have become significantly more expensive. According to Banki.ru, the average rate of such loans is 17.59%. Irina Ushakova, head of the investment and capital markets department at CORE.XP, adds that over the last few years, retail properties have been acquired mainly for investment purposes; transactions from end users are rare. Ivan Barinov estimates their share at 15%.

So far, the decline in buyer activity is more clearly visible in regional markets. Thus, in Moscow, according to Avito Real Estate, demand for retail space decreased by 2% year-on-year, while in St. Petersburg the gap reached 19%, in Tula and Ryazan – 37%, in Krasnoyarsk – 32% .

Nikita Kornienko recalls that previously the activity of investors in the commercial real estate segment was noticeably higher due to the limited number of available investment instruments. Irina Ushakova recalls that for the entire last year, retail objects formed 35% of the total investment in real estate versus 9% a year earlier. In total, it was about 290 billion rubles. But the figure was achieved largely due to large transactions involving the purchase by Russians of assets of foreign owners in the Russian Federation, including the Mega and Metropolis shopping centers, the expert says.

But now the process of leaving many foreign players has ended, and the volume of investment in real estate this year, according to Ms. Ushakova’s forecasts, may decline. NF Group partner Stanislav Bibik speaks about the same thing: “Large transactions of 2023 will be difficult to repeat.” The expert predicts that in 2024 the share of retail properties will account for no more than 20% of the total investment in commercial real estate, while in 2023 it was 40%.

At the same time, according to Avito Real Estate, the average cost of retail premises in Russia over the year as a whole increased by 12%, to 181 thousand rubles. for 1 sq. m, or 23.5 million rubles. per object. Victoria Safronova, head of sales for the Avito commercial real estate category in the Russian Federation, attributes the trend to a reduction in supply: there are 9% fewer available lots. Thus, in Nizhny Novgorod, where there were 27% fewer properties, they rose in price by 40%, to 134 thousand rubles. for 1 sq. m. Ms. Safronova believes that as demand continues to decline, supply, on the contrary, will increase, which should lead to a price correction.

Activity remains restrained not only in terms of purchases, but also rentals of retail space. At the end of December, demand in this segment in Russia as a whole, according to Avito Real Estate estimates, decreased by 8% year-on-year. The most pronounced decline – by 41% over the year – was noticed by analysts in Voronezh and Ryazan. In Moscow and St. Petersburg the decline was 15%.

Alexandra Mertsalova