Chinese investors may be more likely to be in the news, due to the outsized role they have played in U.S. commercial real estate acquisitions recently, but the Russian influence is beginning to be felt outside the U.S. Capitol as well.
Tranio.com, which tracks overseas property investment, recently came out with a report on the growing role Russian investors are playing in the global commercial real estate market. The report was based on a survey filled out by 269 real estate brokers who work with Russian-speaking clients.
Here are some of the takeaways from the report:
1. Reasons for Investing
Political and economic stability, potential for growth in asset prices and family or existing business interests in the country were among the main reasons cited for Russian investors’ interest in purchasing real estate properties in the United States.
2. Preference for "Simple Rentals"
Russian investors have little interest in development or redevelopment projects and prefer the “simple rental” strategy. All told, 80 percent of the survey respondents based in the U.S. noted that fewer than 10 percent of their Russian clients have targeted development or redevelopment opportunities. The Russians also prefer the direct investment strategy over investment in real estate funds, according to 81 percent of the survey respondents.
3. Investment Time Frames
Globally, the majority of Russian investors prefer a five- to 10-year investment timeframe, but in the U.S. that period is more likely to be three to five years, said 43 percent of the U.S.-based brokers.
4. Yield Expectations
They are willing to accept relatively low yields on commercial property investments, of between 4.0 percent and 8.0 percent. That’s because they currently associate higher yields (north of 7.0 percent) with smaller markets and higher risk.
5. Favorite Asset Types
In the U.S., Russian investors’ preferred property types include apartment buildings and shopping centers.
6. Spending Power
When buying commercial properties in the U.S., they are most likely to spend between $3.24 million and $10.8 million.
Two of the biggest challenges Russian investors face when it comes to real estate investments involve finding attractive opportunities (cited by 55 percent of survey respondents) and obtaining loans to finance their transactions (cited by 24 percent of survey respondents).