Investment in Russia's real estate sector increased by 65 percent year on year in the first half of 2010 to $903 million, Jones Lang LaSalle consulting company said on Tuesday.
The company forecast investment flow would increase in the second half of the year to reach $4 billion for the whole year.
"Market activity is based on the predominance of Russian investors (71 percent of all investment flow in the first half of 2010). Transactions with foreign investors are rare," the company said.
In the first half of the year, developers and investors focused on the low risk markets of Moscow and St Petersburg with 57 percent of deals struck in the capital and 35 percent in St Petersburg. Regional cities saw just eight percent of all deals, Jones Lang LaSalle said.
Deals in the residential segment of the market in the first six months of 2010 accounted for 40 percent of all activity.
"The government made several large purchases for a further use as social housing, whereas other deals were with projects under construction," Jones Lang LaSalle said.
Interest in office property grew to 59 percent of all deals in the second quarter of 2010 from 12 percent in the first quarter of the year.
Investor interest in projects under construction rose again due to falling profits and stable rent rates. Deals on such projects accounted for 41 percent of all deals in January-June 2010 against 17 percent a year ago.
Investor interest spurred a decrease of the lowest capitalization rates in Moscow in the second quarter of 2010. The rates fell 50 basis points for offices and trade centers to 10 percent and 11 percent respectively. The rates for warehouses decreased by 25 bps to 12.25 percent.
St. Petersburg rates were flat compared with the first quarter of the year at 12 percent for offices, 12.5 percent for trade centers and 13.5 percent for warehouses, Jones Lang LaSalle said.
"An overall recovery and a liquidity increase will lead to a further rise in investment in real estate, particularly in larger projects," Jones Lang LaSalle predicted.
MOSCOW, Aug 4 (RIA Novosti)