Review of the office real estate market Q2 2011

• The instability on the world`s financial markets that clearly manifested itself at the end of Q3 2011 has not yet affected the activity of prospective renters and buyers of office space. We may see a marked decline in the real estate market if the negative trends start to affect the real sector of the Russian economy. Nevertheless, we believe that if oil prices hold steady at $95-100 per barrel, business activity will hold steady, ensuring the continued growth of the office market.
• Several investment deals were signed in Q3, including the purchase by Heitman, a multinational investment firm of one of the office buildings of the Metropolis mixed-use complex from Capital Partners and UFG Real Estate`s purchase of the Pushkin House and Concorde office centers from Capital Group. Negotiations are also underway on the purchase of the Oruzheyny Office Center, currently under construction, from DS Development by companies belonging to Alisher Usmanov.
• Despite significant investment activity on the Moscow office market, a number of foreign investors have announced plans to divest some properties in Russia. The European investor and developer Orco Property Group is planning to sell office, warehouse and residential projects, while Well REIT II has announced the sale of a building in Dvintsev Office Center. The building was its only property in Moscow.
• A clear trend was the intention of a number of developers to switch to residential construction. These include MR Group, Ecooffice, Storm Properties and others. It should be noted that we saw the opposite trend shortly before the crisis. In 2007 a number of residential developers got more involved in commercial real estate, incuding Don-Stroy, Barkley, Krost and others.