MarketBeat Q2 2020 is Cushman & Wakefield’s in‑depth snapshot of how Russia’s commercial real estate market passed through the strict lockdown phase and entered the first stage of reopening. The report shows that Russia faced almost the same challenges as other countries for the first time since sanctions, successfully absorbed the immediate shock — but is likely to experience a long and uneven recovery across sectors.
The first part of the report sets the global and Russian macro context. It compares alternative scenarios for global GDP recovery (V‑shape, U‑shape, “swoosh”), explains why Russia’s official and independent forecasts converge on a slower return to pre‑COVID levels, and highlights key constraints: structural weaknesses, conservative fiscal policy, muted consumer demand and rising costs along supply chains. The Business Barometer section tracks business activity, “COVID pessimism” and expectations for remote work, showing how attitudes evolved between March and June 2020 and how quickly companies adapted operationally to lockdown.
The second part provides a sector‑by‑sector view of Offices, Retail, Warehouse & Industrial and Hospitality in Moscow and Russia. Offices experienced a sharp but short‑lived shock in May: construction sites were shut, vacancy rose and absorption turned negative, but large pre‑leases were still signed and flexible workspace emerged as one of the few segments fully aligned with the “new normal”. Retail is identified as the most affected segment: a consumer market under pressure, delayed launch of regional schemes, Moscow‑heavy new supply, rising vacancy expectations and a structural boost to e‑commerce and delivery. Warehouses stood out as comparatively resilient: demand from food and online retailers replaced shrinking SME demand, keeping vacancy low and rents stable to slightly higher, while construction slowed temporarily and then began to recover. Hospitality in Moscow suffered a severe collapse in demand, with Q2 almost paralysed, planned openings pushed to H2 and beyond, occupancies slashed and recovery dependent on domestic business and leisure travel.
What’s inside
- Global context & macroreview: comparison of global GDP recovery paths and Russia’s baseline scenarios; discussion of why Russia managed the immediate pandemic effects relatively well, yet its structural economic problems cap the speed of post‑COVID recovery; Oxford Economics projections for GDP, inflation, exchange rate, interest rates, consumption and unemployment through 2023; analysis of shrinking private demand and rising costs in supply chains as drivers of output stagnation; assessment of household debt dynamics, with consumer loans contracting under lockdown while mortgages continue to grow and show high early‑repayment rates, underlining housing as a national priority project.
- Actual topic – “Through lockdown”: results of Cushman & Wakefield’s Business Barometer: business activity index as a share of “normal” operations, COVID pessimism index and expectations for office returns; how companies prepared for lockdown, adapted quickly in April–May and became more optimistic in June; sharp revision of views on remote work between May and June, with most respondents coming to see work‑from‑home as a lasting trend rather than a temporary measure; generational and spatial reflections, including the notion of a “COVID generation” and discussion of potential de‑urbanisation/suburbanisation, density myths, accessibility challenges and the role of education and innovation hubs in suburban areas.
- Offices (Moscow): key Q1–Q2 2020 indicators for classes A, B+ and B‑ — total stock, new construction, take‑up, vacancy, absorption and rents; description of how forced site closures in Q2 led to a record‑low level of completions, with some projects postponed to 2021; analysis of demand showing only a modest year‑on‑year decline in take‑up and the signing of one of the largest office deals in Moscow’s history, underlining ongoing appetite for large quality space; structure of new supply by location (South and South‑West), including fully pre‑let schemes; vacancy trends by class, including a rise driven by space optimisation and delayed negotiations, but also a halving of long‑term (>1 year) vacancy as tenants shift to more cost‑effective options; office absorption remaining negative in H1 due to increased vacancy, with expectations of stabilisation by year‑end; rental rate trends, where a single landmark pre‑lease in a prime scheme pushed YTD averages higher, while the underlying market is expected to hold around 2019 levels in local currency; overview of the flexible workspace market, its total stock, dominance of chain operators, key 2020 deals and the emerging “total workplace ecosystem” balancing office, home and third places.
- Retail (Russia & Moscow): consumer market under pressure with sharp falls in retail sales during lockdown and a forecast full‑year decline; dynamics of real disposable incomes and the timing of a return to 2019 levels; survey‑based insight into household perceptions of financial stability and planned spending cuts across categories (F&B, entertainment, clothing and footwear); footfall patterns in Moscow shopping centres in June 2020 and benchmark comparisons with Central and Eastern Europe, including expected recovery ranges (70–90% of prior levels) and reasons why pre‑crisis footfall is unlikely before next year; channel‑specific expectations (convenience/supermarkets, hypermarkets, online, mall‑based mono/multibrand stores, street‑retail) and how consumers plan to reallocate spending among them; category‑level shifts in spending intentions, with net growth in isolation‑related categories and deep cuts in leisure and entertainment; e‑commerce trends, including a step change in online’s share of total retail, growth dynamics relative to past years and infrastructure investments enabling online to reach a substantially higher long‑term share.
- Retail real estate & construction: overview of new retail schemes delivered in H1 2020 — concentrated in Moscow only, with regional openings postponed; profile of key newly‑opened centres and their readiness level pre‑lockdown; forecast of new construction in Russia and Moscow for full‑year 2020, with a strong Moscow bias and minimal regional deliveries; explanation of why many projects are being moved to later dates until markets stabilise; retailer strategies amid financial stress and development programme adjustments — business optimisation, store closures, but also continued openings and even international expansion by selected players; examples of Russian and international newcomers and expansions illustrating continued interest in the Russian market despite the crisis.
- Warehouse & Industrial (Moscow region): comparison of warehouses with other CRE segments, showing the warehouse market as less affected by the pandemic shock; summary of total stock, new construction, take‑up, vacancy and prime yields; discussion of how a shortage of quality warehouse space and slowdown in construction activity helped keep rents and vacancy close to end‑2019 levels; new construction patterns in H1 and forecast for H2 2020, including a relatively high share of speculative projects and the continued importance of the southern corridor; demand and take‑up trends, with an H1 decline versus 2019 but a strong Q2 uplift driven by food and online retailers and transport companies adapting quickly to lockdown conditions; expectation of broader sectoral demand recovery later in 2020; vacancy and rental rate dynamics for class A warehouses, including regional variations within the Moscow region; forward‑looking commentary on urban logistics and “last mile” warehouses, including the potential redevelopment of some retail assets into urban logistics hubs and the growing strategic focus on data centres and digital infrastructure in response to data localisation laws.
- Hospitality (Moscow): structure of Moscow’s hotel stock (classified vs modern quality); impact of mid‑March restrictions on hotel demand, with Q2 2020 almost paralysed and business mechanisms “on hold”; postponement of all planned H1 openings to H2 2020 and potentially to 2021; expected new supply in 2020 and its contribution to market growth if projects are delivered as planned; sharp drop in occupancy across segments in H1, partially offset in midscale and economy hotels by quasi‑governmental demand for medic accommodation at fixed rates; ADR dynamics by segment, with luxury and upper‑upscale retaining nominal rate levels, while other segments cut ADR more materially; discussion of why base business demand is likely to recover only with the autumn/winter season and why MICE and international demand will take longer; expected operating challenges through year‑end, including the need to rethink staffing and cost structures under high uncertainty.
Practical value
- For investors: a clear picture of how the Russian CRE market performed through the strict lockdown phase and which sectors (warehouses, certain office segments, prime retail) demonstrated resilience versus those under continuing stress (shopping centres, hotels); insight into the medium‑term recovery path against a backdrop of structurally slower GDP growth and constrained consumer demand.
- For developers and landlords: up‑to‑date benchmarks on supply, take‑up, vacancy and rents in the middle of the pandemic, with realistic short‑term forecasts for each sector; guidance on which projects to defer, phase or reconceptualise (regional malls, some office schemes, hotel openings) and where pent‑up demand and structural trends (e‑commerce, urban logistics, flexible offices, neighbourhood retail) can justify new investment.
- For occupiers: context for decisions on office footprints, store portfolios and warehouse networks in an environment of increased remote work, changing consumer behaviour and pressure on costs; understanding of how landlords are reacting on commercial terms and where flexible workspace, urban logistics and “hub‑and‑spoke” office models can add resilience.
- For retailers and logistics operators: evidence‑based insight into consumer sentiment, spending plans by channel and category, and the sustainability of the e‑commerce surge; input for format, location and logistics strategies, especially around dark stores, last‑mile hubs and integration of online and offline operations.
- For hotel owners and operators: a realistic assessment of Moscow’s hotel market under peak COVID‑19 pressure, segmented by quality class, with scenarios for occupancy and ADR recovery in H2 2020 and beyond and implications for operating models and cost control.
To see all charts, time series, sector‑by‑sector indicators, survey results and detailed forecasts, download the full report MarketBeat Q2 2020.
