Buying opportunities will emerge in Russia where repricing is finally on the horizon after a substantial lag.
A report by real estate advisory firm DTZ said that opportunistic and value-added real estate investors would be among those best placed to take advantage of deals, once sellers started to accept higher yields and lower capital values.
DTZ's 2009 Central and East Europe investment market overview added that a lack of liquidity and transparency had delayed repricing in Russia compared to markets such as the UK. Nicolas Spiro, a director at DTZ's Budapest office and a member of the authoring team, added that the bid-ask spread had been “persistent”.
Since the autumn of 2008, Russia has fallen down the list of attractive investment destinations with investors concerned about a heavily indebted private sector and declining oil prices among other things.
Private equity real estate investors are currently taking a “wait and see” approach, Spiro said, while narrowing the scope of their interest in Russia. Regional cities that previously attracted investment are now “off the radar” as firms place a strong emphasis on Moscow and St. Petersburg.
“It is a market clearly for opportunistic and value added players but not at the kind of yield levels still being demanded. Until the level of distress reaches a critical level and until the banks really start to call in their loans you will not see the kind of deal flow which one would expect,” said Spiro.
Although Spiro expected distress to trigger repricing soon, he said the scale of the distress had been “wildly overstated” due to limited financing.