News roundup: Russia

The last few weeks have seen several developments for the Russian construction industry. From increasing investments to the announcement of new projects, the region has seen a burst of activity, most of which is positive for the industry.

However, there are still signs of changes that Russia might need to make in order to empower build and interiors firms, particularly when it comes to attracting companies from outside the country. This is something Russia is doing more and more, which could be very economically beneficial to the country if it can manage it correctly.

 

Asian investors to increase their stake in Russia

Both domestic and foreign investment in Russian real estate are major drivers of construction work in the country, so the news that interested parties from Asia are expected to increase their spending in this area is very welcome. According to CBRE Consultancy, organisations from countries as far apart as Qatar and Korea are expected to boost their investments this year.

This is not a new phenomenon by any means. Asian firms have been investing in Russian building projects for a while now. For example, Lotte Group from South Korea invested around 1.6 billion rubles (roughly $25.5 million) in a St Petersburg hotel project at the beginning of 2015. Similarly, a Qatari firm invested heavily in the Pokrovsky Hills Complex in Moscow in late 2014.

The amount Asian investors put into the Russian real estate market in 2014 totalled around $445 million. This year, that figure is expected to hit $500 million. However, this will depend on a number of other factors that could hamper overall investment in the nation.

"The volume of Middle Eastern and Asian investments into Russia’s commercial real estate market in 2015 will strongly depend on how fast the country’s financial market stabilizes," said Anna Melnik, CBRE Consultancy's head of capital markets research.

 

Moscow to get State Hermitage Museum

A major new construction project is set to come to Moscow in the near future, as St Petersburg's State Hermitage Museum is opening a 'satellite' museum in Russia's capital. The project has no official end date as of yet, but it is thought that it could be completed as early as 2018.

Mikhail Piotrovsky, the Hermitage Museum's director, signed a contract for the site on Wednesday (March 11th) with developers LSR Group. The company's board chairman Andrei Molchanov told the Kommersant newspaper that LSR could well end up making between 3.5 billion and 4 billion rubles from the project.

The new museum will be constructed on the former site of Moscow's ZIL car factory, with the building having been designed by Canadian architect Hani Rashid. The factory dates back to the days of Stalin and is currently the home of the ZIL Culture Center since it was opened in 2012.

This project has come about as part of the Hermitage's 250th anniversary, when the museum announced it would be opening a number of other franchises throughout Russia along with an international branch in Barcelona. The museum already has several satellites in Russia, as well as one in Amsterdam.

 

How to avoid being hampered by sanctions

In St Petersburg, many construction projects are completed by firms from Finland. However, this is beginning to become difficult as these businesses have been hit especially hard by a series of events stemming from EU sanctions imposed on Russia. These have caused banks to be conservative about lending, which in turn is hampering the construction industry overall.

This has hit the many Finnish firms working in St Petersburg particularly hard, but it has certainly not caused them to avoid doing business in Russia. As it turns out, there are a number of steps international firms can take to avoid being negatively affected by the current economic climate in Russia.

For example, many Finnish companies have taken to repatriating their employees who visit the St. Petersburg operations in the week rather than staying there full-time. Finnish companies in particular are keen to continue business in Russia despite the sanctions due to the credit insurance they are eligible for if they do.

This has caused some firms to enter the Russian market even when others are struggling. Finnish window and door company Skaala, for example, just opened a factory in St Petersburg in order to prepare itself for the recovery it sees in Russia's future.

Talking to YLE Uutiset, the company's chief executive Jouni Niinikoski said: "We believe that we came at the right time and we’ll be ready once there’s a recovery."

 

Pskov to see housing construction from across the border

The Russian city of Pskov has also been seeing a boost in construction work thanks to foreign investment; in this case from neighbouring Belarus. The country's architecture and construction minister Anatoly Chernyi met with representatives of the Pskov city administration and private sector on Tuesday (March 10th) to discuss increasing housebuilding activity in the city.

Mr Chernyi said: "Today we have 44,000 certified specialists in Belarus. This year fewer construction projects will be carried out in the country, so we are ready to enter the Russian market with some interesting ideas."

Belarusian companies already have considerable experience working in Russia, such as the Gomel home construction factory. This company currently operates out of Smolensk and is looking to expand into Pskov. The company's director general, Alexander Goncharov, has already said his firm has the infrastructure available to complete these projects.?
Pskov's mayor, Ivan Tsetsersky, has indicated that the city would potentially look to reciprocate in the future, creating a "Pskov district" in the Belarusian city of Vitebsk. For now, the city will look to benefit from the experience and manpower of Belarusian companies.

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