REVIEW 2009 COMMERCIALREALESTATEMARKET Moscow KnightFrank EXECUTIVE SUMMARY • The government measures for supporting the economy and the country’s financial banking system, as well as positive changes in the foreign economic environment that shaped in the middle of 2009, enabled Russia to meet the crisis’ events of the past year with relatively light losses. • Moscow’s high–end office real estate market experienced material difficulties in Q1 2009, when vacancy rates skyrocketed and rental rates decreased. By the end of the year the situation had stabilized, bringing absorption up. It is forecasted that the market will see a slow–paced recovery in 2010 – the transaction volume will increase and rates for premium properties will grow gradually. • A decrease in demand on the retail real estate market educed mistakes in the conceptual designs of many retail projects. A steep separation was seen between successful projects, the demand for which maintained a high level during all of 2009, and less successful projects, which, without conceptual correction, will remain in lower demand among tenants. • Reduced demand has predetermined negative dynamics for key indicators in the Moscow hotel segment. For example, the average annual level for occupancy rates in Moscow’s 5 hotels for 2009 decreased by almost 18% in comparison with the previous year. • Positive dynamics in the economy and financial fields, which were seen during the second half of 2009, slightly improved the investment climate. Some growth in potential buyers’ interest in quality assets on the real estate market was noted. At the same time, a number of serious restrictions remain, affecting both investment demand and the supply of objects on the market.