Property Market2012 The SaintPetersburg

The Property Market 2012 1

The Saint Petersburg Property Market 2012

sectors IV –Property investment market III property –Players in investment framework property for II –Institutional information I –General Preface Contents

Appendix 2 Appendix 1 Appendix Sources Sponsors

sector 4.2. sector 4.1 Office practices Market 2.3 Taxation 2.2 2.1 Legislation structure 3.1 Ownership Petersburg St. and about 1.1 facts Basic sector property warehouse and Industrial 4.3 market investment property Petersburg St. 2.4 overview 1.2 Economic sector service estate Real 3.2 market property residential Rental 4.4 4 50 48 3 3 2 52 3 4 2 2 4 2 1 1 1 31 2 4 4 1 8 8 9 8 7 9 4 8 9 2 9 4 6 0

The Saint Petersburg Property Market 2012 5

Preface of the market. market. of the and magazines view intent is of The a to the neutral journals. present report property-related reports, market players, market key with interviews including sources, various from obtained data of analysis in-depth contains It structure practices. and market property Petersburg St. comprehensive the a of provides overview report The market. property in the St. Petersburg interested of persons needs information The Saint Market Property Petersburg 2012 aims to satisfy the and analysis services can be provided. For more information, please call +358 20 7430 130 or visit www.kti.fi +358 www.kti.fi call 7430 visit 20 130 or please information, more For provided. be can benchmarking of services kinds analysis and various databases, these on Based market. property Finnish the in costs measures operating satisfaction transactions, customer rents, and returns, on databases extensive maintains KTI industry. estate real Russian and Finnish the for services research and information providing company service and organization research independent an is KTI Anastasia Nisenbaum, on behalf of KTI Finland team Finland ofKTI behalf on Nisenbaum, Anastasia hope you find this worthwhile reading. worthwhile this find you hope report. ofthe preparation during interviewed specialists KTI Corporation. support. their for sponsors the thank to wishes SATO and Management Asset BPT are companies sponsoring The markets. development and investment property Russian and Finnish the both represent The report is available in PDF format at www.kti.fi. We www.kti.fi. at format PDF in available is report The all of contribution the appreciate greatly also We that companies two by sponsored is publication This

The Saint Petersburg Property Market 2012 7 The Saint Petersburg Property Market 2012 8 separated byrelativelysmallstretchesofwater. is it fact, In Japan. Turkey,and Sweden, with along Alaska, The of state U.S. the to close also is It Poland. south. and Lithuania by the bordered to Sea Baltic the on exclave an is Region China Kaliningrad and by and Mongolia southwest; the Kazakhstan, to and Georgia the west; to Ukraine and the Belarus to , , Finland by and northwest; Norway by bounded is country The mass. Earth’sland of one-eighth to equivalent approximately Eurasia. Russia covers an area of 17,075,400 square kilometers, Rossiya) is a transcontinental country extending over northern name: short local Federatsiya; Rossiyskaya name: long local Russia; name: short (conventional Federation Russian The 1.1.1 Generalfeatures St. Petersburg and Russia 1.1 about facts Basic 4 According totheInternationalMonetary Fund. 3 AsoftheJanuary1, 2012. 2 Accordingtothefinal resultsofthepopulationcensus2010. 1 Numericaldatapresented inthissectionisobtainedbytheanalysis ofthedocumentsFederalStateStatistics Service. I –General information porting industries porting ex- Most important GRP Geography Inflation (CPI) Currency Total area Head ofState Distances Parliament Climate Population People capita GDP (PPP)per Economy city Second largest Capital city Religions Languages Machine, equipment and means of transportation Machine, equipmentandmeansoftransportation products industry Forest products Agriculture naturalgas) leum products, - andpetro (petroleum products Mining industry Russian Federation 6.1% (2011) (RUB) Russian ruble 17,075,400 sq.km Presidential elections will be on March 4,2012 electionswillbe onMarch Presidential Medvedev, electedin2008 oftheRussianFederation, Dmitry President Ca. 10,000easttowest tosouth Over 4,000north Federation Council,166members State Duma,450members Bicameral FederalAssembly: July: between+1°Cand25°C between+6°Cand-50°C January: Mean temperatures: Dominance ofthehumidcontinentalclimate 142.9 million (143 million as of January 1,2012) 142.9 million(143asofJanuary $15,837 (2010) 4,951,607inhabitants Saint Petersburg, , 11,629,116 inhabitants Islam, Buddhism,Catholicism,andJudaism 75% Russian Orthodox Some 100otherlanguagesanddialects lation Official language:Russian,nativeto92%ofpopu- 4 1 the world with 142.9 in country largest ninth the is Russia population, of terms In 1.1.2 Population eea Sae ttsis evc, h to ags cte are 4,951,607 and 11,629,116 cities with Petersburg St. and largest Moscow two the Service, Statistics State Federal the to According areas. urban in lives population the of 74% the onlyofficialstatelanguage. is Russian while languages, different 100 about speak groups ethnical 160 Russia’s Volgograd. Chelyabinsk, and Ufa, Rostov-on-Don, , Omsk, Samara, Novgorod, Nizhny of at least one million inhabitants: Novosibirsk, Yekaterinburg, population a have cities Tenother respectively. inhabitants, 1.9 trillion rubles (2011) 1.9 trillionrubles Metallurgy products Metallurgy Machine, equipmentandmeansoftransportation products Mining industry Saint Petersburg 5.9% (2011) 1,439 sq.km since August31,2011 Poltavchenko, Georgy ofSt.Petersburg, Governor tosouth-east 90 kmnorth-west members 50 Legislative AssemblyofSaintPetersburg, July: 18.5°C -5.7°C January: Mean temperatures: Humid continentalclimate 4.95 million “In terms of terms population,“In largest country in thelargest country Russia is the ninth 2 million inhabitants. It is estimated that world” 3

Russian Federation by population density density population by Federation Russian www.news-articles.org Federation, Russian Presidential elections willtakeplaceonMarch4,2012. Russia. across rallies peaceful of number a by followed were Elections to the State Duma took place in December 2011, which Judiciary:TheSupremeCourt,Constitutional Court, • Executive:Headedbythepresident • Legislative:ThebicameralFederalAssembly, madeupof • The federalgovernmentiscomprisedofthreebranches: government. the of head the is Putin) (Mr.Vladimir minister is the head of the state (Mr. Dmitry Medvedev) and the prime Russia is a federation and a presidential republic. The president andpolitics 1.1.3 Government Supreme CourtofArbitrationand lower federalcourts. the StateDumaandFederationCouncil hl fdrl itit ae lvl f diitain f the of federal government. administration of level a are districts federal while subdivisions constitute a sub-national level of the government, Federal districts. federal 8 into grouped are that subdivisions administrative federal 83 of consists Federation Russian The 1.1.4 Subdivisions into 8federal districts” subdivisions grouped administrative “83 federal

The Saint Petersburg Property Market 2012 9 10 The Saint Petersburg Property Market 2012 diversified economy give the city great potential for for potential great and city growth. the economic system give economy transportation diversified well-developed position, geopolitical advantageous An Russia. in regions developing capital ofRussiaforover200years. Peter the Great founded the city in 1703, and it remained the Emperor Russian first The Russia. of Arch” European “The as known it make countries European to proximity and location Neva River, at the head of the Gulf of the Finland on the Baltic Sea. Its on Russia northwest in located is Petersburg St. 1.1.6 BasicfactsaboutSt.Petersburg Judaism. religions Other and Catholicism Buddhism, Islam, include Russia in practiced Orthodox. Russian themselves consider the Study of Public Opinion in 2010, 75% of Russian citizens Russia. in for Center All-Russian by religion out carried poll the to dominant According the is Orthodoxy Russian 1.1.5 Religion Rosstat Districts, Federal 5 Populationdensityis calculatedusingthecity’s population(4,879,566inhabitants) accordingtothefinalresultsof population census2010. Today, St. Petersburg is one of the most actively actively most the of one is Petersburg St. Today, region and the second “St. Petersburg“St. is the largest in city the largest in city the Far Eastern FederalDistrict n FarEastern FederalDistrict n Northwestern FederalDistrict n Southern n CentralFederalDistrict country” North CaucasianFederalDistrict n North n Volga FederalDistrict n UralsFederalDistrict n SiberianFederalDistrict kilometer, with a total population of 4.9 million inhabitants. million of4.9 population atotal with kilometer, program to develop the country’s high-technology sector sector high-technology the country’s the 2007, develop to In program economic an started products. Federation Russian the of government exporting major the among are products wood and wood metals, products, petroleum and petroleum gas, Natural world. the in exporter biggest 10th the is Russia Factbook, CIA the to According exports. in theenergyanddefense-relatedsectors. exceptions notable with industries, most privatized 1990s the based and globally integrated economy. Economic reforms in market more a to economy planned centrally a from moving of the , Russia has undergone significant changes, collapse the Since metals. precious and coal, oil, gas, natural as such minerals of abundance an has Russia Fund. Monetary purchasing power parity (PPP), according to the International economy in the world by nominal value and the sixth largest by The economy of the Russian Federation is the eleventh largest 1.2.1 TheRussianeconomy 1.2 Economicoverview h pplto dniy s 3,391 is density population The kilometers. square 1,439 country, approximately the of area in an covering city largest second the and region the in city largest the is Petersburg St. Russia. of population the total of 9.5% to corresponds which inhabitants, million 13 over is district the of population the territory; Russian total Today, the Russian economy is very dependent on on dependent very is economy Russian the Today, The Northwestern Federal District occupies 9.9% of occupies the District Federal Northwestern The 5 inhabitants per square square per inhabitants 7 Final2011estimations publishedbyRosstatinJanuary2012. 6 Basedonresumeofthe social-economicdevelopmentduringJanuary–July 2011. of inflation is also noteworthy. Inflation dropped to 6.1% to in dropped Inflation noteworthy. also is inflation of of the major indicators, reduction significant macroeconomic in to In Russia. the development addition stable stabilization demand. gas natural and oil on dependent remains economy Russian The exports. on However, dependence its decreasing of intent the with 2010 Rosstat, economy, of sector by GDP Main macroeconomic indicators (growth/decrease in %, over respective period) respective over %, in (growth/decrease indicators macroeconomic Main Industrial production Industrial Consumer price index, % index, price Consumer dollar/barrel US oil, Urals price, oil Average Indicators Real wages Real income disposable Real capital fixed into Investments production Agricultural GDP Retail turnover Retail Import, billion US dollars US billion Import, dollars US billion Export, The year 2011 is regarded as a time of macroeconomic macroeconomic of time a as regarded 2011is year The no “The Russian economy“The is very dependentis very on social security; 5% and defense, compulsory Public administration significant Health andsocialservices; 3% business activities; 9.64% Real estate, rentingand personal services; 1% Other community, socialand Education; 3% exports” results Financial activities; 4% have communications; 8% Transport and been (base) 400.4 248.7 2010 -11.9 78.2 8.2 8.8 5.2 4.2 6.3 6.0 4.0 production; 14% Net taxeson reached to Hotels andrestaurant; 1% estimation date. 3% hunting, forestry; Agriculture, 340.0 527.5 2011 13.7 4.3 108 4.7 1.5 5.3 3.6 6.1 6.1 6.0 7 7 6 , Ministry of Economic Development of the Russian Federation Russian the of Development Economic of , Ministry oa ad nentoa eooit. h lbr oc is force labor The economists. international and local markets. retail the affected positively has level wage real the of increase an Moreover, consumption. retail to boost a in resulted unemployment in in decrease A volumes. increase trading an as well as industry, power the distribution, as such and production water production), gas sectors and (minerals mining in acceleration by achieved was increase for 2011 growth GDP at 4.3%. was registered economic The to hope 2018. 3% it below after keep lawmakers to 2015and by 4.5% to rate inflation program, decrease continuously the in government out set policies ongoing the Through 1991. since lowest the is level current The 2010. in 8.8% 2011,with compared 0% Fishing, fishfarming; Demographic issues are among the biggest concerns of concerns biggest the among are issues Demographic upturn, loweconomic relatively of forecasts the Despite and personalitems; 16% motorcycles, householdgoods repair ofmotorvehicles, Wholesale andretailtrade, Mining; 9% 533.1 397.4 2012 5–6 100 3.4 5.5 1.4 5.0 5.1 3.7 7.8 Construction; 5% electricity, gas, andwater; 4% Production anddistributionof 14% Manufacturing; Forecast 4.5–5.5 444.6 535.9 2013 2.2 4.8 3.9 5.8 5.3 4.0 7.1 97 565.3 486.1 2014 4–5 101 4.2 6.3 5.3 2.4 5.5 4.6 7.2 11 The Saint Petersburg Property Market 2012 12 The Saint Petersburg Property Market 2012 9 GlobalCorruptionReport 2007. 8 TheGlobalCompetitiveness Report2011–2012. provide the spillover effects in other areas.” and would economy the benefit greatly would country the across levels security judiciary,raising the and of functioning the rule of law and the protection of property rights, improving study points at low efficiency of goods market. “Strengthening the addition, In competitiveness. country’s the to constraint respect to the institutional framework is considered as a major with progress of lack The environment. business Russian the reasonable macroeconomic and stability are the major size strengths of market large the Forum, Economic World the by released Report Competitiveness Global the to According 1.2.2 Globalcompetitiveness it. approved Conference Ministerial direct 2011, the 16, December On in 1993. in capital membership WTO for applied foreign first Russia attract investments. and profile country’s the affect positively to considered is (WTO) Organization in elections presidential the March. to due instability political by amortization explained 2012is quarter first the during outflow capital quarterly further expected average The billion. $30–35 2011at in payments the assessed partly. only Experts made be could loans foreign of the Moreover, restructuring deposits. company parent to back capital moved recently have banks ofEuropean subsidiaries Russian Federation. the of the Russian from capital outflow worsened 2013. in 2011, in rubles rubles trillion billion 3.3 to up 875 from time, years’ two in triple will system pension the in deficit the term, near the in taken every are actions no people If year. 300,000–400,000 by decrease to estimated 2012 IMF, January Projections, Outlook Economic World the of Overview corruption and inefficient government bureaucracy are stated are bureaucracy government inefficient and corruption Euro Area Euro Emerging and Developing Economies Developing and Emerging Developing Asia Developing United Economies Advanced Output World Central and Eastern Europe Eastern and Central Year overyear Commonwealth of Independent States Independent of Commonwealth Accession of the Russian Federation to the World Tradethe to Federation Russian the of Accession has eurozone the in situation economic vulnerable The India China China Russia Excluding Russia Excluding 8 The high level of 2010 10.4 4.0 3.2 5.2 1.9 4.5 3.0 9.5 6.0 9.9 4.6 7.3 h ceto o a out mre-ae economy.” market-based robust, a of creation the and democracy of establishment the to threat serious a pose 1.2.3 Corruption andbureaucracy 1.2.3 Corruption in transition 2–3, Global Competitiveness Index 2011–2012 Index Competitiveness Global 2–3, countries the transition in to Federation Russian the of comparison Competitiveness to “Corruption is one of the key problems facing Russia as it seeks Perceptions Index (2011), Russia was ranked 143rd along with Corruption the In country. corrupt highly a as perceived is to 66thposition. ranks three dropped has country the year, a Within Russia. in business doing in factors problematic most the of some as grow 2011 4.1 3.8 1.8 6.2 4.5 5.5 9.2 1.6 1.6 5.1 7.9 7.4 out of its socialist 2012 past. -0.5 3.3 8.2 1.2 1.8 3.3 1.1 4.4 5.4 3.7 7.3 7.0 High Forecast levels of 2013 3.5 8.8 2.2 3.8 3.9 1.9 0.8 2.4 5.9 4.7 7.8 7.3 corruption 9 Russia in 2009, Doing Business in Russian Federation, Moscow and Moscow Federation, Russian in Business Doing 2009, in research sub-national the to According years. two next the multi-functional centers are to start operating in Russia within 800 Over services. public-sector most to practice window President Dmitry Medvedev approved a law extending single- 2011, July of As permitting. construction eased Russia years, recent in procedures land-use all for practice single-window with “Dealing for 178th and Electricity,” 183 “Getting to respect of with out 183rd ranked was country The 2012. Business Doing in poorly rated was Federation Russian development, property to regard With Index. Global the in ranking low Russian the for reason main the is bureaucracy of level high International Finance Corporation and The World Bank. The The of research joint a 2012, Business Doing report the Rica in Costa and Verde Cape with along 120th ranked was Federation Russian The bureaucracy. government complex Russia’sreforming in effort of lack the is reason claimed often One effect. much had not have legislation anti-corruption of setting up a presidential commission and adoption of a package by corruption combat to efforts Government years. few past the level of corruption in Russia has hardly improved over the Organization, International Transparency the to According out of20. 13 as classified was Russia Asia), Central and Europe (Eastern region the in Togocountries Leste, the Among Uganda. and Timor- Nigeria, Mauritania, Comoros, Belarus, Azerbaijan, 2011–2012 Index Competitiveness Global Russia, in business doing for factors problematic most The Construction Poor workethicinnationallaborforce6.1 Inefficient governmentbureaucracy13.3 Inadequate supplyofinfrastructure4.9 the key problems facing Inadequately educatedworkforce5.3 “Corruption is one“Corruption of Government instability/coups1.2 Foreign currencyregulations1.4 Restrictive laborregulations2.6 Permits.” Access tofinancing7.6 Poor publichealth1.0 Russia” Crime andtheft10.1 Policy instability1.5 Tax regulations6.2 Corruption 22.8 However, Tax rates9.1 Inflation 6.7 by implementing 0 5 a Sectors most affected by corruptions, Global Corruption Barometer Barometer Corruption Global corruptions, by 2009 affected most Sectors the firststepsinlong-termanti-corruptionbattle. just are actions these that note to important is it Nonetheless, effective, be while 52% of to the respondents actions see them as government ineffective. current consider respondents the corruption. of 26% International, of Transparency by study problem a to According the increases sector business and for theentrepreneurs. of capital environment improving fastest the the with city Tatarstan,the is Kazan, cities. Russian sampled the within performance poorest the with cities the are Petersburg St. h ecsie oe f h gvrmn i te economy the in government the of role excessive The 10 Civil Servants 63% Public Official/ Juridiciary 8% 15 Political parties9% 20 Percent ofresponses legislature 8% Parliament/ Media 3% Private sector9% Business/ 25 13 The Saint Petersburg Property Market 2012 14 The Saint Petersburg Property Market 2012 Insolvency Resolving Contracts Enforcing Borders Across Trading Taxes Paying Investors Protecting Credit Getting Property Registering Electricity Getting Permits Construction with Dealing aBusiness Starting one millionpeople)onlyachieveda43rdrank. over with (cities cities ‘Millionniki’ so-called the while 35th, ranked Petersburg St. Index, the in 31st ranked was Moscow cities. Russian between transparency in differences revealed Estate market estate real Russian the of survey Real A semi-transparent. Global is market estate real LaSalle Russian the 2010, Lang Index Transparency Jones to According semi- systems.financial/accounting and risk political as environment, business overall the characterized to applies also be same The can transparent. economy Russian The 1.2.4 Transparency 2012 Business Doing Indicators, Main Business, Doing of Ease 10 Intotal,81markets wereincludedtotheindex. estate market is semi- “The Russian real “The transparent” estate) of (% Cost (years) Time dollar) the on (cents rate Recovery (days) Time (number) Procedures (days) import to Time (number) import to Documents (days) export to Time (number) export to Documents year) per (hours Time year) per (number Payments (0-10) index protection investor of Strength (0-10) index disclosure of Extent (0-6) index information credit of Depth (0-10) index rights legal of Strength (days) Time (number) Procedures (days) Time (number) Procedures (days) Time (number) Procedures (days) Time (number) Procedures 10 Property market transparency levels across Europe, Global Real Estate Estate Real Global Europe, 2010 (JLL) Index Transparency across levels transparency market Property DB2012 41.5 423 281 281 290 2.0 4.7 43 51 30 10 10 36 36 36 9 8 9 9 6 5 3 5 6 9

DB2011 39.3 483 320 281 281 2.0 4.7 43 30 36 36 11 37 10 10 51 market. Currently, there are no independent, neutral neutral independent, no providers. are service information there Currently, the market. to newcomer a for figures particularly confusing, very Market be can produced. on This the source. depending significantly, vary reports sometimes market the affect methodologies in differences addition, In and reporting. biased subjective for core potential the their has of such, as product and, side services a as produced usually market is data Consultancies’ press. property and consultancies transparency. towards attitudes players’ Russian affect issues information. and Also, cultural tradition market of supply limited relatively young. the explains partly comparatively This are markets investment estate real Russian information. available and of transparency shortage the to due markets immature in complicated is performance various stakeholders. to performance the communicating in as well as investments, property of performance the benchmarking and managing in essential also is general both in market on the and information holdings own Reliable players. new and existing both for process decision-making information investment of the facilitates availability The market. the in operating players the all for essential is information market Property marketinformation 1.2.5 Property information market of Availability YIELDS RATE VACANCY COSTS OPERATIONAL -RESIDENTIAL RENTS -COMMERCIAL RENTS RETURNS INVESTMENT TRANSACTIONS The The main of sources market information include property investment of property and benchmarking Measurement independent, neutral information service “There are no are “There providers” SOURCES PROPERTY CONSULTANCIES PROPERTY CONSULTANCIES PROPERTY CONSULTANCIES PROPERTY CONSULTANCIES PROPERTY / AGENCIES REALTY CONSULTANCIES PROPERTY N/A PROPERTY CONSULTANCIES PROPERTY VARIED VARIES COVERAGE VARIED VARIED QUALITY OF ASSESMENT COVERAGE VARIES COVERAGE concerning the market. the concerning foreign available information reliable of their lack a and is in there that opinion unanimous Russian are professionals among Market same companies. the is market information property of availability the regarding perceptions market. the in obtain to difficult however, remains which, information, neutral for need the increases players new of types other and foreign of number the in increase the consequence, a As information. with and to practices regard business and openness disclosing mindset different have to tend also players Foreign scratch. from research start to having group latter the and market, the in “insiders” being group former the players, foreign and local between information for needs the in differences the big but naturally, are, transparency, There slow. rather be to towards seems development attitudes the change to advantage. acompetitive isconsidered information market 1.2.6 EconomicoutlookforSt.Petersburg the second biggest in Russia, after the Privolzhsky region. PetersburgwasautomobileSt. production thein2011,sector In beer. country’s the of one-fifth producing the center, brewery by headed is Russian biggest the is Petersburg industry St. beverages. of production food The industry. leading food the and volumes, shipping ofSt. Petersburg industries are terms mechanical engineering, metallurgy In economy. Petersburg production St. the determinantsofmajor Industrial the aretourism and in Russia. largest fifth the is Federal North-WestDistrict the of economy The Russia. of center gateway, financial trade and major industrial a is Petersburg St. by the unwillingness of the players to disclose financial financial disclose to details players the of unwillingness the by Despite of the differences in behavior patterns, patterns, behavior in differences the of Despite likely is market the of internationalization gradual The Furthermore, the lowFurthermore, level is of complicated transparency of their activities consultants’ market reports. market consultants’ the in found sometimes be can expenses operational the on information Some agencies. consultancies the by researched being not is segment latter The investors. professional the of than rather (individuals), investors private the of market the to referred normally is Residential” “Rental term The space. of quality by affected currencies, terms, lease definitions, in Differences COMMENTS The number of transactions is low. is transactions of number The not typically published. typically not are yields low; is transactions of number The to the public. Holding unique 15 The Saint Petersburg Property Market 2012 16 The Saint Petersburg Property Market 2012 Volume of foreign investments in St. Petersburg, billion US dollars, 2011, Rosstat 2011, dollars, US billion Petersburg, St. in investments foreign of Volume capital goes to manufacturing industry, which was over 90% 90% over was which industry, to manufacturing goes capital into foreign of share biggest The 2010. in investments period respective the foreign over 106.7% 2011,is which billion, $3.97 reached of Petersburg St. months nine first the during 2011,time, same the At October volumes. by 2010 the of 85.4% rubles billion 215.6 negative investments, to fixed totaled The for which markets. registered only labor was development stabilizing at officially indicates inhabitants), of 13,400 to decrease (totaled a unemployment registered with together increase, wages nominal (110.8%). 10.9% volumes wholesale of (121.2%), and volumes revenues companies’ shipping (130.9%), the industry in manufacturing registered was growth highest 113.8%;the reached Index Production Industrial 2011, the in Policy,Trade and Industrial Development, Economic for 13.7%.level to and crisis reached the Committee According 2011pre- in exceeded Product Regional Gross The sectors. economic different in varying rates growth with diversified, well be to considered is economy city’s The development. Investment in fixed capital (January – September 2011) –September (January capital fixed in Investment Foreign investment (January – September 2011) –September (January investment Foreign unemployment registered Officially 2011) –November (January salary average Nominal CPI Policy Trade and Industrial Development, Economic for Committee 2011, Petersburg, St. indicators, economic Main houses ofresidential Commission services Volumes ofpaid Volumes Wholesale Industry Volumes ofManufacturing Shipping Index Production Industrial Turnover Companies During 2011, St. Petersburg’s economy showed stable stable showed economy Petersburg’s St. 2011, During

billion US dollars 0 1 2 3 4 5 6 7 8 0.98 2004 1.42 2005 5.25 2006 6.28 2007 compared to the previous year. previous the to compared 1.9%, at registered growth annual The apartments. 44,737 or meters, square billion 2.70 by increased stock residential the 2011, During construction. residential of acceleration activities. estate real and construction into going capital a with positive, showing assessment an share preliminary of increased foreign turning is outlook sector’s property The investments. foreign of terms in manufacturing leader the the remains sector that indicate estimates official 2011, For 1.4%,respectively. and 3.5% only totaled construction and activities estate real into investments whereas 2010, in 5.93 2,705.7 thousand sq. m sq. thousand 2,705.7 dollars US billion 3.97 2008 the to contributed sector financing the of Stabilization people 13.4 thousand 295.1 rubles billion 215.6 rubles billion rubles 1.83 trillion rubles 2.74 trillion rubles 6.16 trillion prices nominal In 5.52 “The property sector’s property “The

2009 29,128 rubles outlook is turning 5.23 2010 positive”

January - 3.97 September 2011 the previous year previous the Index in % to %to in Index 106.7% 130.9% 103.2% 105.9% 101.9% 110.8% 110.9% 121.2% 113.8% 79.7% 85.4% T. Nikolaeva, photo contest held by St. Petersburg appraisers and the Guild of Property Managers and Developers items 3% household goodsandpersonal of motorvehicles, motorcycles, Wholesale andretailtrade, repair oeg ivsmns n t Ptrbr b sco o eooy 2010, economy, of sector by Petersburg St. Rosstat in investments Foreign Construction 1% Manufacturing 92% 3% business activities Real estateand Other 1% Foreign investments in St. Petersburg by country of origin, 2010, Rosstat 2010, origin, of country by Petersburg St. in investments Foreign Mexico 1.6% Other countries7.9% Ukraine 1.3% Austria 1.9% France 34.3% Kyrgyzstan 1.7% the Netherlands1.5% Belgium 8.4% Belarus 11.6% Switzerland 2.9% 2.5% South Korea 10.2% Cyprus 4.1% Sweden 3.8% Finland 1.7% Kazakhstan 4.4% 17 The Saint Petersburg Property Market 2012 18 The Saint Petersburg Property Market 2012 entering data in the State Land Cadastre. Buildings and and Buildings Cadastre. Land State the in data entering municipalities. and Federation Russian ofthe subdivisions and the public, i.e.,and entities, legal Federation, the Russian of rights can subjects be into divided two private, The groups: i.e., individuals groups. certain to given rights to subject and rightstofree-of-charge,short-termuseofalandplot. land plot; rights to lifetime inherited possession of a land plot; including, for example, rights to perpetual (unlimited) use of a legislation, countries’ other by recognized not are that rights certain are there servitudes), pledge, to rights lease, to rights rights, ownership (i.e., Russia, in recognized estate real rights of traditional the to addition In construct. to right or building the of ownership determines lease land existing The In Russia, the rights for the land and the building are separated. ownership 2.1.2 Property property) havenotearnedmuchpopularity. participants are liable where for the company’s obligations with their partnerships, (e.g., structures company legal Other companies. stock joint and companies liability limited are domestic companies. to applied laws same the with accordance in market Russian the in operate can company a result, a As differences. these avoid to help will entities, legal Russian the of one of form the in establishment, permanent a of Foundation such of entities. activities the to applied are rules and laws special and companies, foreign of parts as considered are company legal entities. Russian and in branches offices, activities representative forms: commercial various out carry can investors Foreign activities ofcommercial 2.1.1 Forms 2.1 Legislation investmentfor property II –Institutional framework The registration of ownership of land is performed by by performed is land of ownership of registration The of may to rights estate be real types held only by Certain Russia in entities legal of forms common most The aforeign of branches and offices representative Both liability companies and joint stock companies” forms of legal entities in Russia limited are “The most common“The non-residents and residents both speaking, Generally writing. in be rights must of transfer the of be agreement An can Cadastre sold. or Land purchased State the in registered land Only 2.1.3 Land through tenders (auctions/competitions) or granted for for granted or property. ofthe type the on depending use, designated (auctions/competitions) tenders either investors through to sold are Petersburg St. in facilities estate real or plots Land reconstruction. to constructions and buildings (c)and projects; construction (b) unfinished construction; new for plots (a) land include: in invest to assets of types Potential Petersburg. St. of territory the in located estate real owned important to beof aware of its the legislation. particularities is it While subdivision, Federation Russian acts. particular a legal in investing and Russian laws the special adopt of can subdivisions Federation administrative individual of laws federal and other codes, regulatory legal several acts. by In as addition, well the as authorities Constitution Federation activities. planning city- of objects of registration technical state for in system the registered and described additionally are constructions or maybe purchased by the investor. the by purchased maybe or the within the land for plot term, a lease may 49-year be granted agreed construction completing in succeeds investor granted are If the plots years. of six period a for lease tender open an Land through construction. further for as as well documents, design developing build, to possibility the of city planning necessary preparing determining documents, for the purposes plots granted are Land projects. investment for area Petersburg St. the in plots land state-owned leasing land. reserve and land; forest fund water land; fund objects; and territories protected specially for designations; land special other of land and land, transport, security defense and activities, sector, space maintaining for land energy informatics, industry, for radio communications, television broadcasting, broadcasting, land land; (community) settlement land; agricultural designation: its to according into categories seven be can divided Federation Russian the in Land another.” to category one from plots land or land of transfer “On law, federal the by established procedure certain a to accordance in only changed be may plot land a of category The designation. approved its with Only leaserightsarepermittedforthesetypesofland. land. agricultural or borders state the to close territories the on located plots land own not may Non-residents investors. and companies with more than 50% of equity held by foreign entities legal foreign individuals, foreign to apply restrictions A new legislative basis regulates investments into the state- the into investments regulates basis legislative new A Russian the by regulated are activities Investment t s motn t mnin smlfe poeue of procedure simplified a mention to important is It accordance in used is Federation Russian the in Land may acquire real property. However, certain Preparation of a set of documents for granting a land plot for investment purposes according to the preliminary agreement on location, Investment Investment location, on agreement preliminary the to according purposes investment for plot land a granting for documents Administration of set a of Preparation L Petersburg ofSt. citizens the inform to order in construction, future possible about www.gov.spb.ru web-portal: the on and anewspaper in A publication Construction: for Committee administration/The district city organization/The Authorized plan cadastral the in or map cadastral the on plan plot location A land Management: Land and Resources Land for Committee organization/The Authorized Petersburg ofSt. Governor ofthe commission written ofthe receipt about To investor an inform Construction for Committee 2) The of S Governor of S Governor of the commission Written development) complex oftransport Transit (in and Policy case Transport on Committee The 8. administration district 7. city The Engineering and Energy on Committee The 6. 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19 The Saint Petersburg Property Market 2012 20 The Saint Petersburg Property Market 2012 Online services of use for investment research research investment for use of services Online Petersburg St. in investments property on information containing portals Web are spent time presented inthetableAppendix1. average as well authorities as stage obtained, each with and dealing prepared be to clearances and simple documents a steps, of build sequence The to warehouse. order commercial in procedures 51 through go to average, on days, 423 takes It permits. construction of terms Russian Federation is ranked 178th in Doing Business 2012 in Development ofLand Investors for System Geo-Information The Petersburg St. of Portal Informational Petersburg St. of System Geo-information Petersburg St. in Services State name Project Administration Investment (KUGI) Management Property City for Committee The Construction for Committee The Trade and Policy Industrial Development, Economic for Committee The (CISP) Projects Strategic and Investment for Committee The (KZR) Management Land and Resources Land for Committee The Policy Housing for Committee The (KGA) Architecture and Planning City for Committee The (KGIOP) Landmarks Cultural and Historical of Protection and Utilization Control, State for Committee The Oblast Leningrad of Fund Property The Administration Oblast Leningrad Petersburg St. of Fund Property The Administration City Saint-Petersburg name Authority www.gisinvestor.ru www.st-petersburg.ru www.rgis.spb.ru www.pgu.spb.ru URL E. Bezludniy, photo contest held by St. Petersburg appraisers and the Guild of Property Managers and Developers and Managers Property of Guild the and appraisers Petersburg St. by held contest photo Bezludniy, E. St. PetersburgandLeningradOblast. in activity investment about information contain portals web following The projects. investment available on information These providing example, for by, investors with cooperate property.entities state-owned managing for responsible oa atoiis a wl a sae xctvs are executives, state as well as authorities, Local www.stateinvest.spb.ru www.commim.spb.ru www.gov.spb.ru/gov/admin/otrasl/komstroy www.cedipt.spb.ru www.cisp-spb.ru www.kzr.spb.ru www.gilkom-complex.ru www.kgainfo.spb.ru www.kgiop.ru www.leofi.ru www.lenobl.ru www.property-fund.ru www.gov.spb.ru URL Investment and Strategic Projects Strategic and Investment for Committee the of jurisdiction the within Investments,” Direct for Agency Petersburg “Saint OJSC by Guildline Investor system information of parts The Petersburg St. of Management Land and Resources Land for Committee the by System Information Regional online services the of some get to opportunity an gives as well as Petersburg, St. of bodies executive of services state the on information Provides Comments Tax Reform, Beiten Burkhardt Rechtsanwälte (German Attorneys-at-law) 2009–2010 Attorneys-at-law) (German Rechtsanwälte Burkhardt Beiten Tax Reform, stated in the list. list. the in stated tax violations: the penalties can be of imposed only for list violations precise a of establishment recent the is achievement important Another mentioned. be should rates tax reduce and otherEuropeantaxsystems. the Tax Reform also decreased the difference between Russian level, national a at advantages the all from Apart since. ever on going been has and 1998 in started was Taxreform The countries, market. the to newcomers for system tax the of particularities the American all on studies further North for need additional creates and which European Western in systems tax from markedly differs Russia in system tax The 2.2 Taxation Tax reduction Gradual raise of fiscal load on wage pool by increasing the aggregate rate of social contributions social of rate aggregate the increasing by pool wage on load fiscal of raise Gradual Tax violations control) tax exercising for rules the establishing (through Tax control concessions. of elimination the aimed from rules losses tax for of companies liberalization ageneral is compensating at there level, regional the at Partially level. regional the on preserved of been anumber have time, same the At concessions market. the in competition normal of development the to leads that Tax Concessions of Cancellation Among the most important changes, the tendency to to tendency the changes, important most the Among European tax systems” tax European difference between between difference Russian and other “The Tax“The Reform decreased thedecreased Income tax Income Corporate Profits Tax Profits Corporate VAT All ambiguities of legislation are construed by a court as being in favor of the taxpayer the of favor in being as acourt by construed are legislation of ambiguities All taxpayer the from penalties the collect to right the lose authorities tax penalties imposing of issue the considering in adelay Given charging penalty for procedure extrajudicial an of Allowance violations tax the of many for penalties of amount the of Reduction imposed be may penalties which for violations tax of list aprecise of Establishment liable tax aparty hold) to refuse (to hold to decision appealing for procedure pre-trial Mandatory activities taxpayers’ on information obtaining for Rules authorities tax by conducted audits regulating Rules subdivisions separate for (KPP) registration tax for reason of codes special indicating for Rules (INN) numbers identification taxpayer them assigning through taxpayers registering for Rules turnover Tax on dividends as received income Tax on tax income Individual dividends of form the in profits Tax on revenue most For an rm sl i txfe fr niiul wo we the owned who individuals for tax-free is sale a from gain 20%, and 0% depending ontheformofincome. between varies rate tax Corporate origin. treaties the on depend between the Russian Federation and the company’s also country of will difference The higher. be might rates tax establishment, permanent a have not does follow all the rules applied to Russian companies. If a company to it allowing thus domestic, deemed it makes company a of domestic and foreign companies. The permanent establishment for different is rate The tax. federal a is tax profit Corporate 2.2.1 CorporateProfit Tax from the individuals compared to companies. companies. to compared individuals the from received payments of tax insignificance relative the to is due This corporations. of taxation on dependent is System Tax of the current the Additionally, drawback rules. the taxation can reform lead sometimes undergoing to in and confusion understanding difficulties the system, taxation the Russian of the one of nature complex is inherent the to addition employees In downsides. the among knowledge Poor legal exist. of lack the still with together that Authorities, Tax drawbacks of organization of number a are there There is no separate capital gains tax in Russia. A capital A Russia. in tax gains capital separate no is There Despite the recent improvements of the tax system, system, tax the of improvements recent the Despite 18% (long-term goal up to 16%) to up goal (long-term 18% 15% non-residents: For 9% residents: the For 13% Residents Cancelled 15% company: aforeign and aRussian between Dividends 0% to 9% companies: Russian among Dividends 20% 21 The Saint Petersburg Property Market 2012 22 The Saint Petersburg Property Market 2012 by the purchaser are VAT on production expenses and VAT and expenses VAT production are on purchaser the by deduction a VAT,to input of subject types main VAT. The deductible and VAT turnover between on taxable difference in RussiaaresubjecttoVAT. the is investment transactions with land plots or parts thereof. estate Rental payments real to related closely exception One important capital). fixed the to (contributions nature investment an of property of transfers and currency the with transactions any mentioned: be can examples following the as considered not realization and are not the objects of taxation. Among those, are that actions of number a are There - - - - Objects oftaxationare: - - - base canbedividedintothreegroups: children; the rate for these types of products is 10%. The tax for and goods products food specific of exception an with VATstandard The system. EU the follows 18%, at set is rate (VAT)tax added system value Russian the speaking, Broadly 2.2.2 Value AddedTax to corporateprofittaxlegislation. according taxed are and income corporate as considered are companies, for regardless of As the period of 13%. ownership, capital is gains rate tax the and rules, to tax income according personal taxation to subject is gain capital shorter, is asset for more than three years. In case the ownership period Import ofgoodstothecustomsRussianFederation one’s own use for works installation and construction of Performance value isusedfortaxbasecalculation Market works. and services goods, of transfer Gratuitous and renderedservices works performed goods, of (sale) transfer Compensated Russian the of customs the Federation to goods of import An Goods andservicesusedforcompany’s ownneeds Sales revenue As a general rule, VAT to be paid is calculated as the the as calculated is paid be to VAT rule, general a As “The standard VAT standard “The rate “There is no separate “There capital gains in tax is set at 18%” Russia” determined ontheregionallevel. is and 2.2% exceed not may tax property corporate the of rate The value. book initial the from deducted is property of depreciation property.The taxable the of value book annual average the on calculated is base taxation The taxation. of objects considered not are plots Land taxation. to subject is agreement, concession under received or title by belonging and office, Federation Russian representative the in a located property immovable or branch Russian a the through in foreign Federation activities for performing As are that permanent taxation. companies to through subject are activities establishment, performing companies, foreign and Russian of property immovable and movable All Tax 2.2.3 CorporateProperty land taxgoestothelocalgovernmentbudget. the of All type. use land the on depending 1.5%, and 0.1% between is amount the Moscow in while 1.5%, and 0.004% between varies it Petersburg St. in instance, For region. each for varies but 1.5% exceed cannot tax The taxation. for base the is value Cadastral taxpayers. the are Petersburg St. of and individuals owning a land plot within the boarders of the city Companies Petersburg.” St. in taxation Petersburg “Land on St. law the and Code State the i.e., governments, local of acts legal by determined is It tax. local a is tax Land 2.2.4 LandTax payback the period ofaninvestmentproject. of duration the for provided are exemption, tax or rate tax reduced a as result might which concessions, Such project. investment specific a of implementation the for acquired or created property to relation in concessions tax stipulate federation, the of of territories laws constituent many activity, investment property support to order In of works on that andof rendering notare services charged VAT. VAT services, performance goods, of production the to pertaining expenses non-production on VAT not generally deductable: are activities of types following the on VAT time, same the At assets. fixed constructed or acquired on property tax may tax not property the local government “Land tax goes to goes tax “Land “The corporate “The exceed 2.2%“ budget” order to avoid taxation. avoid taxation. to order in employees the to wage “black” so-called pay to unusual tax-payment the improves of the population. ago, Some years Russian itculture was not and payments tax of amount the increases This employees. their of tax income personal tax rateof35%appliestolotteryandgamblingwins. This refers both to earned income and capital gains. A special Personal income tax is levied individually at a flat rate of 13%. 2.2.5 PersonalIncomeTax Taxes, Beiten Burkhardt Rechtsanwälte (German Attorneys-at-law) 2009–2010, 2011, Saint Petersburg City Administration, Pension Fund of the Russian Russian the of Fund Pension Administration, City Petersburg Saint 2011, 2009–2010, Federation Attorneys-at-law) (German Rechtsanwälte Burkhardt Beiten Taxes, 11 Unless otherwise provided by international agreements. international by provided otherwise 11 Unless medical insurance fund insurance medical mandatory aterritorial to payable insurance, medical mandatory for contributions Insurance Fund Insurance Medical Mandatory Federal the to payable insurance, medical mandatory for contributions Insurance Federation Russian the of Fund Pension the to payable insurance, pension mandatory for contributions Insurance diseases professional or accidents industrial against insurance for Charges Tax Income Personal Tax Land Tax Property Corporate Tax (VAT) Added Value Corporate Profits Tax Profits Corporate Tax /Tax Level Employers act as agents who are obliged to who with obliged the deal are act as agents Employers 3.1% 20% 15% 20% 10% 2% – 26%) 2011 (in 22% 0.2–8.5% 13% 1.5% 0.0042% 0.004% <2.2% 0% 10% 18% 15% 9% 0% Tax Rate 11 11 11 basis from the start of the calendar year. calendar the of start the from basis accrual an on rubles 512,000 exceed that individual an of favor in remuneration other and payments of sums on charged not are contributions Insurance individuals. of favor in accrued remuneration other and payments of sum the Of 01.01.2009 of as budget) regional the to 18% and budget federal the to (2% Russia in establishment a permanent create activities whose companies foreign and companies Russian of profit On exceptions) some are (there securities municipal and state from income On Russia in establishment permanent a create not do activities company’s foreign the that provided Russia, in sources from companies foreign of above) mentioned those from (aside income other On Russia in establishment apermanent create not do activities company’s foreign the that provided containers, and means transportation mobile other planes, vessels, of freight from companies foreign of income On companies foreign to companies Russian by paid dividends of form the in income On basis from the start of the calendar year. calendar the of start the from basis accrual an on rubles 512,000 exceed that individual an of favor in remuneration other and payments of sums on charged not are contributions Insurance individuals. of favor in accrued remuneration other and payment of sum the Of year. calendar the of start the from basis accrual an on rubles 512,000 exceed that individual an of favor in remuneration other and payments of sums on charged not are contributions Insurance individuals of favor in accrued remuneration other and payments of sum the Of agreements civil under payment and payroll On (35%) wins gambling and lottery to applies rate Special plots land other of value cadastral the Of estate real residential of development the for used plots land of value cadastral the Of purposes agriculture for used plots land of value cadastral the Of data accounting to according property taxable the of value residual the of 2.2% than more Not services). (works, goods other certain and transit, customs international of regime customs the under placed goods of transport or shipment the with associated directly (services) works goods, exported to relation In goods medical produced foreign and domestic and publications print periodic goods, children’s products, food certain For services and works, goods, most For Russian companies Russian to companies foreign and Russian by paid dividends of form the in income On conditions established legislatively several the with compliance given dividends of form the in organizations Russian of income On Note adds upto30%ongrosssalaries. contributions insurance of the of rate aggregate the result, a rate As the 2012, In contributions to Pension Fund was Federation. reduced from 26% to 22%. Russian the of funds insurance medical mandatory territorial and Fund Insurance Medical Mandatory Fund, Insurance Social Fund, Pension to the 2010, From Unified Social Tax has employees. been replaced the by separate contributions of wages and salaries on Social Unified paid employers the 2010, until 2001 From Tax 2.2.6 InsuranceContributions 23 The Saint Petersburg Property Market 2012 24 The Saint Petersburg Property Market 2012 the overall market situation. The shortage of high-quality high-quality of shortage The situation. market overall the on based normally are development speculative on Decisions completion. upon sold hopefully, and, leased were the properties where property-related developments the speculative in of invest to many companies for conditions the created considered. are players international when months, to several to regard investors, local with weeks of couple only from varying process, the of length in differences significant to lead can procedures decision-making in decision-making organizational Differences decisions. final to make layers and meetings various as well committee as reporting, and analysis thorough often require which procedures, decision-making certain follow to investment. the have investors, backed by for institutional typically funds, Foreign capital of type the is reason other The knowledge. of by market lack the explained partly be can invest. This to order in analysis and research thorough need and frames. time short in decisions make to it possible making experience, their on is based knowledge Market risk- investors. foreign than tolerant more as characterized be typically can investors Local one should mention the of process. length the decision-making diligence canbeperformedinternally. ofdue level therequired and sense, this in flexible more are companies Russian analysis. diligence due thorough require more important. Prior to even a deal, international advisors companies usually of role the made and has investors companies, development foreign like players, new of presence Market very much rely on their own experience and market knowledge. investors local the time, same the At processes. transaction in Consulting services are widely used by investors and developers long-term approachtopropertyinvestmentisstillrare. Institutional-like, objectives. sell” and “develop on typically based are strategies players’ Most oriented. development quite is market Russian the markets, property Western most the to peculiarities regarding property investment practices. some in Compared resulted has developed, has market the way the with deal that features specific as well as history, market short The 2.3.1 Investmentpractices 2.3 Marketpractices Prior to the economic crisis, the constantly rising market market rising constantly the crisis, economic the to Prior risk-averse more are investors international Conversely, investors, of and foreign local the Among main differences is quite development “The Russian market“The oriented” the marketsector. fees vary from 6% to 10% of the annual rent, depending on Brokerage cost. this covers who one the is commissioner Traditionally, broker’sfee. the service pay the and services broker’s the of users the mainly are landlords the market, today’sIn post-crisis sectors. property different in varied is practice The landlords; rare. The are rights brokerage by however,exclusive welcome always departments. is agents leasing of large involvement have owners the of are practices gradually established. rental of patterns develops, market the as lease participants tend to adjust to varying lease conditions, while Market practices. leasing used widely established, of lack the for reason main the is market the of immaturity The 2.3.2 Rentalpractices and avoid additional obligations. From the landlord’s point and avoid obligations. the From additional landlord’s flexibility ensure to Short-term measure a as particular, in companies, it. with deal to small- are and more attractive medium-sized to agreements wants landlord the nor registration the makes the tenant neither and, therefore, time-consuming, process bureaucracy of level high The players. the by advantage main a as considered is which up to 11 of months, the registration is contract not required, agreements For sectors. property all in found be can that contracts exist. lease long-term and short-term both today to and market, the standards international brought players international the of presence the of increase constant and market the of development The market. the in used widely was contract of type Previously,this contracts. lease short-term the are market Russian the of features distinctive most the Among Lease length strategy is typically to stay as an investor upon the best offer. best possible the developer-investor’s upon investor an as The stay to typically is strategy process. development the of stage atany performed be can and stability, financial its and strategy developer’s the on primarily depends project stage. early at an tenants made with the are anchor agreements and pre-lease started are negotiations of the characteristics, importance location high the to due however, sector, retail the In agreements. pre-lease any without processes construction starting for sign to drivers relevant are premises, unwillingness uncompleted on agreements the as in manifested developers as well premises, as commercial the for lack of trust tenants’ The leasing process is normally done in-house. Most in-house. done normally is process leasing The Short-term contracts are 11-month rental agreements agreements 11-monthrental are contracts Short-term The timing of sales of a speculative development development speculative a of sales of timing The contracts are usually subject to negotiations. However, Rental practices practices Rental 12 Fixed rent increase or indexation according to one of the indices is applied. applied. is indices the of one to according indexation or increase rent 12 Fixed contracts longer view, planning. financial for security more of provide point period. tenant’s lease from the during Likewise, flow cash in certainty landlord reasons. taxation for used be also can contracts short-term landlords, as dominate owners private where market residential rental the In intentions. lease long-term the guarantee to market property commercial the in used sometimes are agreements “side” additional Long-term terms. updated with continued and renegotiated be can they agreements, 11-month of these termination Upon markets. rising the in increases rent flexible for possibilities provide agreements short view, of Rent increase Rent Lease length Lease On the other hand, long-term contracts offer the the offer contracts long-term hand, other the On conditions Payment Payment Type of rents Type of “Short-term contracts“Short-term are 11-monthare rental 12 Fit-out agreements” Fixed increase Fixed Prepayment Short-term Long-term (months) Currency Deposit Indices (years) Electricity, IT IT Electricity, Mainly rubles Mainly Gross or Net or Gross incl. or excl.; or incl. Fixed OPEX Fixed USD/EUR: USD/EUR: RUR: 10% RUR: Landlord 3 years Office 3–6% 11 m 11 1 m 1 m Net+OPEX+VAT Anchor: 10–15 Anchor: CPI by Rosstat by CPI external works works external Tenant: fit-out fit-out Tenant: and common common and Electricity, IT IT Electricity, LIBOR/HICP LIBOR/HICP excl. or incl. or excl. Fixed OPEX; Fixed developers Other: 6–8 Other: by foreign foreign by Shopping Shopping Landlord: Landlord: Gross or or Gross centers 5–10% areas costs 2 m 2 m maintenance costs are always included in the gross rent, rent, gross the in Property included always rent.” are “gross costs a maintenance of definition strict no is there sector. market the on depending rent, month’s three and one between varies typically amount the landlords, by used widely are deposits Rental stated. be should currencies the high of volatility the market, as well as the use of different the main reasons, Among adjustment. applied for rent rarely are Indices typical. is agreement rental the in annual agreed raise fixed a and rate moderate a at increasing are rents increase. has crisis the changed Today, rent situation. financial The market drastic a market such for the possibilities in legal created agreements 11-month of prevalence The the supply. to quality of lack due the and demand agreements, growing constantly short-term in 30% reach could increase yearly the 2008, in downturn market the to Prior basis. yearly a on rent the raise to landlords for conditions euro, ortheRussianruble. dollar,US the in denominated be now can Rents an exception. not are Rents pricing. in used widely being currencies foreign to led has ruble Russian the of stability of lack The Rents Retail Both gross and net rents exist in the market. Currently, Currently, market. the in exist rents net and gross Both the created market the of development rapid The All expenses are are expenses All USD/EUR/RUR Internal areas: areas: Internal CPI by Rosstat by CPI Fixed increase Fixed Street retail Street tenant excl. 3–5 1 m 1 m Net tenant /landlord tenant areas: landlord areas: Net+OPEX+VAT expenses excl. expenses Internal areas: areas: Internal Class B: 1m B: Class Class A: 3m A: Class Fixed OPEX; Fixed Warehouse Shell&Core Communal Communal 2–3 m 2–3 3–5% 3–10 11 m 11 up to 11 months months 11 to up with the right for for right the with Demand related Demand but unfurnished unfurnished but apartments are are apartments more common, common, more expenses incl. incl. expenses also available also water supply, supply, water premises are are premises prolongation Residential Electricity, Electricity, Telephone Telephone Furnished Furnished or excl. or Rental Rental 1–2 m Gross 1 m 25 The Saint Petersburg Property Market 2012 26 The Saint Petersburg Property Market 2012 Historically, The first property valuations in Russia started in the mid-1990s. 2.3.3 Valuation report. this of section Sectors Property in described be will sector currencies. used of the VAT,or excluding including annum, in any and denominated or month per either presented be can levels Rental reports. market consultants’ the in presented is information way the affects market the in practices rental established of lack expenses. The are possible all there includes time, rent same gross the where At examples rent. base the in included not typically item another is VAT excluded. normally are services cleaning and IT electricity, for expenses the while No local certification is needed for appraiser authorization. appraiser for needed is certification local No considered is as a big advantage for an membership) appraiser to get a project. Institute certification Appraisal or RICS, international example, (for and important, more become lately have standards International ones. international the from differ considerably practices valuation property Russian Nowadays, direction. own its to it developed time, over appraisal, has, Russian the initiated appraisers international that fact the Despite origin. Petersburg St. of are companies appraisal Russian biggest ten of out three RA, Expert agency educational programs given by US professionals. According to the rating first the for location the and system appraisal Rental practices inherent to each particular market market particular each to inherent practices Rental definition of a“gross St. “There is no strict is no strict “There Petersburg rent” is the motherland of E. Bezludniy, photo contest held by St. Petersburg appraisers and the Guild of Property Managers and Developers and Managers Property of Guild the and appraisers Petersburg St. by held contest photo Bezludniy, E. the Russian oa ad oeg ivso dmn. codn t expert to exceeded Petersburg St. in volumes investment the opinions, According demand. investor foreign and local both of portion a got Petersburg St. investors, to interest of 2011. Despite the fact that Moscow remains the prime in region up pick to started Russia across markets investment The market investment property 2.4 St.Petersburg transaction and bank financing purposes. purposes. financing bank and transaction for valued be to assets the need The typically companies private (GUION). Valuation and Inventory Estate Real for Committee City the by authorized be must report valuation the involved, is property city/state-owned When purposes. leasing or investment for tax of estate as wellthe real an as for assessment transaction, prior The properties city/ state-owned the value appraisers. to appraisers property contract often of municipalities clients main the among are municipalities and state the Today portfolios. their of performance for more measuring inclined to valuations order feel owners property market, the of development the with for transaction, debt collateral as well as property property as well not as is appraisal Recurring collateral purposes. measurement performance debt transaction, for largest suchorganizations,andvalidappraisalinsurance. the of one is which Appraisals, of Society Russian the as such organizations, self-regulatory the of one in membership a are authorized be to appraiser an for requirements necessary The of Appraisals are essential in mature markets and are used used are and markets mature in essential are Appraisals high demand the Russian appraisal the motherland of “St. Petersburg“St. is in Russia system” currently. However, together E. Bezludniy, photo contest held by St. Petersburg appraisers and the Guild of Property Managers and Developers and Managers Property of Guild the and appraisers Petersburg St. by held contest photo Bezludniy, E. However, investors. foreign and local both from come is to demand anticipated investment stable 2012, In 2011. in billion $2 shopping local biggest second the from meters square 260,000 ca. area when Fort Group purchased a retail property 2011 portfolio of total March in closed was deal portfolio major The L.P. II Fund Estate Real Russian The manages which Group, Jensen by million $80 for Passage center shopping the of acquisition the was 2011 of transaction asset single important Another Outlook for the transaction volumes change during 2012, KTI St. Petersburg Property Barometer 2011 Barometer Property Petersburg St. KTI 2012, during change volumes transaction the for Outlook to be one of the biggest across all economic sectors in in sectors economic all across Russia. biggest the of one be to expected is it 2011. Moreover, in foreign Petersburg a St. in by investor done transaction significant only the is deal The Petersburg. St. in largest the of one is center shopping the to delivered meter in late market 2010 191,000 square by The a CC Briz. was center, shopping located a centrally Galeria, billion. $1.1 about for Capital, Meridian investment fund, an from VII Fund Estate Real Stanley Morgan by Galeria center shopping the of purchase a was 2011 in announced transaction single asset sector. biggest retail The increase arehigher. million. $650 at estimated is price transaction The Petersburg. St. in owner space retail local largest second the became Group Fort project, development frozen one and centers shopping an acquisition of a portfolio consisting of five income-generating Through proceedings. bankruptcy through going was The highest investment volumes are estimated in the the in estimated are volumes investment highest The centers the investment volumes are estimated in the retail Percentage of responses expectations 100 20 40 60 80 % 0 owner, “The highest “The Ofc etr ealsco Wrhue Rental Warehouse Retailsector Office sector sector” Holding for the local Macromir, investor’s which

demand earlier to Residentialsector of the warehouse property Kulon Pulkovo by purchasing purchasing 50% by Pulkovo Kulon property warehouse the of were announced to be developed in the complex. complex. the in developed be to announced were house conference a and hotel a hotel, apartment an center, 150,000–200,000 reach meters. In a square addition, class A to center, office a shopping expected is which property, the dominate will use Residential million. $100 exceeded price the that estimate Experts RGS-Nedvizhimost. from plot project land 7.8-hectare a of development purchase a through Plaza mixed-use Clover the entered has Group thirds of the KTI barometer respondents expect the the expect respondents barometer KTI the of two- Ca. thirds 2012. in volumes investment of terms in sector million. €80 to Petersburg St. in portfolio investment company’s the of value the increased purchase Hansastroi, its by owned DDC, Aurora developer a from apartments rental 43 increasing another of acquisition an investor announced SATO portfolio. residential rental professional a of example only SATOthe is company the Investment sector. in deals investment of shortage the explains investors $20–25 at closed been have to million. estimated is deal The the above slightly rubles, million 205 at closed was and buyers potential four with tender a through done was deal The 23. center to the long-term tenant of the ZAO building, Gogolya business Nights White sold (KUGI), Management Property City for Committee The by represented Petersburg, St. of city The sale. distressed a of example an is transaction The million. $50 ca. at closed to was deal According the estimations, expert Capital. Sberbank from Aeroplaza center business called PAN A class Company meter, square Investment 33,000 a total. purchased the of 6% only was Petersburg in St. sector office in the transactions investment Raven Retail sector is considered to remain the most attractive attractive most the remain to considered is sector Retail residential rental professional of number limited The of share the International, Colliers to According initially of Carliga Russia for announced over Holdings Holdings €10 price. million Limited Limited ■ decreasemarkedly ■ decreaseslightly ■ remainstable ■ increaseslightly ■ increasemarkedly Moreover, in shares became February from the Holding 2012. GC sole Espro. owner The Setl 27 The Saint Petersburg Property Market 2012 28 The Saint Petersburg Property Market 2012 Capitalization rates comparison, estimations by different consultants, 2011 2011 consultants, different by estimations comparison, rates Capitalization 2011 Barometer Property Petersburg St. KTI 2012, during change demand investors the for Outlook 2011 Barometer Property Petersburg St. KTI rate, capitalization of development the for Outlook for A class for B class and 0.6 offices – 1 percentage decrease survey Barometer significant a Petersburg 2011. represents This December in out St. carried KTI the to respectively, according offices C and B A, class for 12.6% and 11%10%, ca. at stand to property the office for expect rate capitalization professionals Market level. high at remained level. current at the the of majority the expect the volumes to respondents remain volumes in to whereas increase, the transaction other sectors, Shopping Centers Shopping properties office Prime *A class office properties *A office class properties warehouse Quality The capitalization rates across the property sectors sectors property the across rates capitalization The

Percentage of responses 100 20 40 60 80 % 12 15 0 % 0 3 6 9 fieCasA fieCasB fieCasC eal- Rti ih Quality Retail-High Retail- OfficeClassC OfficeClassB Office Class A LocalInvestors'Demand Foreign Investors'Demand Astera Group Astera 12.5–13.5% 9.5–10.5% 10–11%

Maris/CBRE Maris/CBRE 13–14% 11–12% Affiliate Cnes Centers n/a hpig tetRti Warehouse StreetRetail Shopping and 9% – 12% for offices, shopping centers and quality quality and respectively. properties centers warehouse shopping offices, for 12% – of 9% and perceptions rate Capitalization 9% – between 14.5%,vary 9% – consultancies 12% property future. near the in points, basis expected are changes 50 significant no others, than the for whereas more by decrease to expected are rates properties for only class warehouse C and quality office capitalization 2012, During percentages. 1.3 to greater, amounting even was yields center shopping for decrease the demand, investment strong the to 2011. Due spring since – International 10–11% 9–10%* Colliers Colliers 9–10% Praedium Oncor Oncor Praedium International 11.5–12% 10.5–11% 10–10.5% ■ decreasemarkedly ■ decreaseslightly ■ remainstable ■ increaseslightly ■ increasemarkedly ■ Caprate, December2012Forecast ■ Caprate, December2011 ■ Caprate, March2011

Jones Lang Lang Jones LaSalle 13.5% 10% 10% rented out. owned companies in cases when they invest in premises to be state- the among even common more becoming is income generate to ability their on based investments of profitability gradually.the rise assessing of practice the time, same the At to expected is which of value the investment, long-term safe a considered is use own company’s for property A use. own making when the property is purchased or developed for their measures are not considered as crucial parameters for decision- investment typical other or rates capitalization corporations, For owner-occupancy. of illustration an also was market the Traditionally, occupiers. in banks Russian the of involvement can corporations typically be categorized as long-term investors and/or owner- The market. out the rent in tenants also to often premises they and development, property for by national either portfolios Powerful subsidiaries establishing by or properties existing in investing their diversify to market. tend estate corporations real Petersburg St. greater the in invest companies domestic of types Different 3.1.1 Domesticinvestors 3.1 Ownershipstructure roles simultaneous within themarket. and multiple their distinguishing and players market of types different between line clear a draw to impossible often therefore is It estate. real in specializing subsidiaries established investors potential determined the of most this that Furthermore, services. property-related market the development of when there were not many stages companies providing earlier the by explained be can This investor.an as acting to services, management and brokerage to development concept from services, of range full a offer to variety of activities. It is common practice for a single company of the local companies now operating in the market perform a most development, market the of features distinctive to to Due it comes when specific distinguishing between different categories of market players. quite is market Russian The investment market III –Players property in considered asafe long- company’s own is use term investment”term “A for property Hals, Systema- Group, LSR developer-investors Property market. limited, compared to the number of companies operating in the as investorsinthemarket. Furthermore, the development companies quite often also act assets. estate with real of management deal property and development typically they investing, from Apart investors. property developmentmarket. the in active also are They owner-occupiers. of group other St. Petersburg, Bank Petrovsky and many others belong to the VTB, as such Banks market. property Petersburg St. the in investing corporation Russian a of example an are companies osss f 0 eeomn poet i cmeca and commercial in residential projects development 80 of consists urnl, h cmays eeomn prflo in portfolio development company’sSt. the Currently, development. urban integrated on specializes company The Glavstroy. holding, construction Russian a of subsidiary a is both residential and commercial development. Glavstroy SPB since 1993. The company is one of the most active players in market the in operating company Petersburg St. a is Group are some of the listed domestic property market players. LSR regional shoppingcenternamedLETO. super a market Petersburg St. the to delivered NorthWest Petersburg h nme o lse dmsi poet cmais is companies property domestic listed of number The domestic of type another are companies Property affiliated and entities business different its and Gazprom Glavstroy property reaches (a construction markets 700 hectares. in Russia. subsidiary Systema-Hals’s In 2011, of Basic Systema-Hals Element) portfolio 29 The Saint Petersburg Property Market 2012 30 The Saint Petersburg Property Market 2012 second locationafterMoscow. a as Petersburg St. choosing developer-investor foreign a of Austrian-Russian property market. Developer Avielen A.G. is an example of an Petersburg St. the in investors foreign as mentioned also be to are companies European and US Israeli, Korean, Chinese, market. the in active investors Finnish of examples are Technopolis and Investments) Property (Evli EKE Management Asset SATO, BPT Group, ICECAPITAL, Sponda, history. common a and proximity The main are geographical in particular. reasons companies, Finnish – countries Nordic the from comes area Petersburg St. the towards interest main The players. of the new foreign arrival stimulates encouraging international further investors foreign policy government from a addition, demand In new investors. regenerate to started cancellation ofmanysignificantentryplans. the in role crucial a risks played this high perceived and situation, affected drastically downturn estate real The second their option. be to used Petersburg St. and opportunities, investment better seek to investors the led market property Moscow.after investors Moscow’sthe of development Rapid international to interest of area second the is Petersburg St. investors 3.1.2 International The slow continuous recovery of the rental market has has market rental the of recovery continuous slow The comes from thecomes Nordic from St. Petersburg area “The main interest“The joint towards the countries” venture. The US Hines R. Parfenov, photo contest held by St. Petersburg appraisers and the Guild of Property Managers and Developers and Managers Property of Guild the and appraisers Petersburg St. by held contest photo Parfenov, R. is an example “institutional” Invest. Russian called company family-owned Onvest, through the of establishment an investment company and SRV company construction Plc, Sponda firm property listed the with together market, their to intentions announced Etera invest in the real estate Russian group insurance pension mutual and Ilmarinen fund 2011, In capital. September the pension Finnish institutional in the market are the only sign of the of presence international real estatemarket. two well-known insurers invested in St. Petersburg commercial only the are SOGAZ and Group RESO market. the in active very been not have insurers and companies pension Russian investors 3.1.3 Investmentfunds/institutional example, VTB Development’s development portfolio portfolio development contains projects. five real estate major Development’s commercial currently VTB example, an As market. property the to inherent risks the diminishes which decisions, managerial the over control get to banks enables structure equity the or in Participation development management. estate real in specializing subsidiaries of establishment the through achieved normally is This class. asset investment alternative an as estate real to institutions financial attract naturally markets estate real the by offered investors. high risk, preventing the further entrance of with new international associated is development property Today, development projects. in invest to tendency the determine to used Russia Raven Technopolis Plc. and Plc Sponda Stanley,Limited, Morgan Group, IMMOFINANZ usa bns n oe ntne pa te oe of role the play instances some in banks Russian At the moment, few real estate investment investing funds The lack of income-generating assets of high quality quality high of assets income-generating of lack The in the include investing market companies foreign Listed real estate investors. High-risk margins R. Parfenov, photo contest held by St. Petersburg appraisers and the Guild of Property Managers and Developers and Managers Property of Guild the and appraisers Petersburg St. by held contest photo Parfenov, R. and Marbelton Property Fund. Fund. Property Marbelton and Arista, BPT Eastern include properties Petersburg St. in invested be to planned or invested funds Among Petersburg. St. in facilities retail of of biggest one the purchase through sector and Moscow made in estate. real Petersburg St. in been have properties investments no retail Currently, Petersburg. and St. office in invest to strategy a with 2009 June in closed was II Fund Estate Real realized. partially already are which region, Leningrad and Petersburg St. in plots land two in invested was Fund Estate 2007, In Real market. Petersburg St. the in investing company properties. residential rental I investors, Fund Residential Petersburg Saint institutional ICECAPITAL established Finnish three with partnership in management. under of assets terms in Sea Baltic the of region the in manager Asset asset estate real BPT largest third the be Danish-based to BPT/Evli allowed with that Management partnership strategic a into entered has Investments 2011, Property Evli September area, Petersburg From center. St. logistics a and the properties office two including in currently properties is three fund in The invested market. property Petersburg St. on fund estate real Russian first its commenced Investments Evli Property America. private and Northern Europe from investors and institutional attracted has L.P., II Fund Real Estate Russian associated their and company, management investment existing the funds. through market the in invested are investors institutional foreign only that fact the explains market. open the in for and office property both for owner-occupancy realization an developed which is St. Petersburg, example Bank Another L.P. Morgan Stanley Real Estate fund is invested in the retail retail the in isinvested fund Estate Real Stanley Morgan management fund another is Management Asset UFG The Finnish fund management company ICECAPITAL, ICECAPITAL, company management fund Finnish The fund Petersburg St. primary the Group, Jensen The investors institutional Russian of activity low The The Property total Holdings, capital of €45 FF&P million Russian is Real fully Estate invested Fund, in akt ie ty vr lmtd Frin netr typically investors Foreign limited. very stays size market Holding local developer-investors by is dominated sector office The external an construction company. to subcontracted or subsidiary by performed either is construction Actual sectors. other to activity their real estate sector, while many of them have recently expanded the market. Local developers used to specialize in a particular in operate companies construction local of number enormous An corporations. Russian of subsidiaries development and construction and development development companies, developer-investors, and pure include players Local construction market. the in operate companies international and Local 3.2.1 Development 3.2 Realestateservicesector oe iln t hr a rfsinl rpry manager. property professional a However, hire to willing is more company the activity, core the not When is business property outsourcing. towards attitude the shifted slightly crisis financial the to prior market the of development Rapid companies. their within teams management property form to tend owners property single-asset even consequence, a of unwillingness As others. to assets their of the control hand to owners property is explanation One common. most the remains today,practice Even this management. property to construction from activities, of range whole the perform The absence of a developed market structure forced players to management 3.2.2 Property Holding most The years. recent in increased has development property of theRussianinvestmentcompanyBasicElement. part is that company holding construction a is SPb Glavstroy bank. Russian a of subsidiary development is a of example VTB-Development an owner-occupancy. for apartments the sell typically They market. residential the in operating developers local main the are Trest Stroy RBI, Group, LSR LenSpecSmu, LEC), (previously Kompaniya Stroitelnaya L1 Construction, SRV and YIT. Many of these also act as as act also these contractors. of Many YIT. and SRV Construction, The number of international companies active in the the in active companies international of number The active Imperia Adamant this “An enormous number companies operate in players of local construction cannot and is the market” include a The be market considered Management Hansastroi, leader as in Company a NCC, the mass retail Renaissance trend. Teorema. segment. The 31 The Saint Petersburg Property Market 2012 32 The Saint Petersburg Property Market 2012 investment culture, the market is difficult to compete in. compete HSG to difficult is the market of the peculiarities culture, and investment size small its to due hand, other the On market. the enter to companies new of interest the over toanexternalcompany. handed rarely are interface, client and renting e.g., business, the of side financial over Control maintenance. property and Among the most common tasks to be outsourced are cleaning do notgetmanyinternationalclients. companies management property Russian result, a As assets. their manage to companies maintenance and/or management property international well-known a commission to prefer examples of international suppliers of property maintenance property of suppliers international of examples their marketentryandlowdemandforservices. in difficulties to due Petersburg St. in activities their halted have who companies management property Finnish the are Ovenia and Group REIM services. management property of range whole the offering company management property On the one hand, high potential of the market determines The Finnish companies ARE, Tekmen and YIT Peter are Peter YIT Tekmenand ARE, companies Finnish The Zander property owners tend property management teams” is “Even single-asset“Even to form property to property form currently the only well-known international oaas a itr o dmsi rat aece ad big global companiescanbefoundinthemarket. and agencies realty domestic of mixture a Nowadays, players. new of entry and market the of liquidity increased the of because years recent in advisory in rapidly of accelerated services types activity different of well-established supply The a Petersburg. St. is advisory estate Real transaction services 3.2.3 Advisory, valuationand brokerage, expanded tothepropertymanagementmarket. Maris has that consultancy property a maintenance. of example an is Properties property on purely concentrated company local a is Sistema UK sectors. market specific only to services management their limit Some investment. development and to brokerage and consulting from activities, property-related other perform also companies mentioned above- the Group), Trust.that VMB mentioning and worthwhile is It BEST of (part MTL ICB, MC Becar, NAI Group, IB include maintenance in and management specializing property external companies Russian biggest The services. established in activity advisory isadvisory awell- St. Petersburg” “Real estate “Real Alexander Petrosyan Alexander Alexander Petrosyan offer real estate specific services to the market. the to services specific estate real offer 13 Based on the company’s earnings during 2010. during earnings company’s the on 13 Based Ernst Petersburg. St. in appraisers property three top the are Issues Enterprise for to Avers, RA, According AFK Group rating and Expert agency the Institute companies. valuation property specialized be should CB Praktis and mentioned. Estate, Real Best ARIN, Commercial companies advisory local active most the As – others. GVA and GVA Paribas – Worldwide Group, Sawyer, Astera BNP Group, Realty Becar – NAI like networks, global of parts become also have companies consulting and in the market from the Moscow office. Other local brokerage the and Cushman network. Wakefield their perform activities Maris represents Ellis,” Richard CB with Petersburg, association “in St. Properties, In player. local a with cooperation agreements through operations their organized has Ellis Richard CB companies. local the of purchase the through market the entered International while Colliers and Petersburg, Frank Knight St. in office the local a entered opening by LaSalle market Lang Jones consultancies. property of the global share of the market the growth boosted players international of entry The market. the of share biggest the held firms local the consultants, global the of expansion and entry the to Prior services. valuation and research advisory, offering to activities their expanded agencies the brokers, estate real mainly being From activity. advisory the to start Furthermore, global business consultancy firms, such as as such firms, consultancy business global Furthermore, some are there consultancies, property Besides gave agencies estate real domestic of emergence The & Young, 13 KMPG and PricewaterhouseCoopers, also loans inrublesand 7–12%forfinancinginforeign currency. 40% to 50%, whereas interest rates vary between 10–15% for as estimated currently ratio value to loan i.e., risks, inherent The lending conditions can be harsh, allowing banks to isconsidered.offset market property financial when precautions possible all take banks but available, is projects development and properties perception generating income both of Financing further. this strengthened has downturn market estate The real institutions. financing Russian among asset risky include UniCredit,Raiffeisen,Nordea,CityBankandSEB. Group purchasedpropertyportfolioMacromir. Fort and Aeroplaza, center business purchased PAN named company investment an instance, for 2011, in market the in to manage bank’s collaterals. A number of collaterals were sold Management Estate named company a up set hand, other the e.g., on North-West, situation VTB Bank existing Sberbank. by Capital the Sberbank in solution another been has companies property of establishment The debts. restructure to attempting developers the to loyalty of level high a shown developer’s inability to settle their debts. Banks have, however, distressed asset sales were expected in the market as a result of Bank St.PetersburgandNomosBank. Bank, Alfa are market estate real the crediting banks private Russian biggest The named. be to are VTB and Sberbank sector.this in players active most financing. the are banks State-owned property in players main the are banks Russian 3.2.4 Financingservices highly a as considered been always has estate Real services lending corporate offering banks International of number high a downturn, economic the During

V. Vasiliev 33 The Saint Petersburg Property Market 2012 34 The Saint Petersburg Property Market 2012 Petrodvortzoviy 2% Petrogradskiy 5% among the new developments. developments. new the among majority in are which properties, office class B and A mean normally players market space,” office “modern By meters. square million two exceeds slightly space office modern of supply whereas meters, square million eight to seven around is offices as used to space the of According stock total experts, offices. different as used space quality inferior lower and space, offices office modern groups: quality main in thelastdecades. resulting in poor supply. The situation started to change only the Soviet times explained the lack of demand for office space, Geographical distribution of commercial real estate in St. Petersburg, Petersburg, St. in estate real GUION commercial 2011, of distribution Geographical office centers. During the past few years, the Guild of Property office classes The latter and B+ B. A, also standardizes class C to refers Frank, Knight and LaSalle Lang Jones International, consultanciespropertymajorColliersthree ofproject joint a Property former,ManagersDevelopersThementioned.and ofshouldbe Guild the and Forum Research Petersburg the of St. standards classification the used, frequently most the Among market. the in classification exist Different methods of structure current the determined has history Petersburg’s St. 4.1.1 Market 4.1 Officesector IV sectors –Property Primorskiy 7% Pushkinskiy 3% the Currently, the office stock can be divided into the three three the into divided be can stock office the Currently, Frunzenskiy 5% office Nevskiy 9% Moskovskiy 8% classification methods Centralniy 10% sector. exist in the market” “Different office “Different Krasnoselskiy 3% High industrialization Kurortniy 2% Admiralteiskiy 6% Kronshtadskiy 1% St. Petersburg 92,774.8 thousand square meters square thousand 92,774.8 Petersburg St. Krasnogvardeiskiy 6% of Vasileostrovskiy 6% the Vyborgskiy 8% Kolpinskiy 5% city Kirovskiy 7% Kalininskiy 7% during the latter have more vacant space. space. vacant more have latter the existing and office properties newly commissioned, obviously in vacancies in at difference points Becar NAI time same the quite are wide: 13% experts – 25% for A and Class, the 6.5% – 13% for by B Class. At presented of rates ranges vacancy The average A. Class in than lower significantly be to rate properties in B Class office vacancy the current estimate Market slightly in consultancies 2012.and increasing rents Property decreasing answers). continue to of vacancies 60% the (ca. expect professionals rents of rise slight a as occupier well as answers), of (70% classes of B and A offices for demand increase an registered experts Market develop market rents. and to vacancies of terms continued in both 2011, market in positively office rental the survey, districts. Krasnogvardeyskiy and Moskovskiy Primorskiy, in registered was absorption net highest the consultancies, Net as well.of on property the data Based areas to decentralized center. business demand of office of 2011 expansion the modern indicates absorption large-scale its will Gazprom develop where area, Lahta in city the the to of Another emerge northwest to expected is locations. area business proximate decentralized the in developed been have centers business quality four Airport where is one example area developers. the to interest more of become have areas decentralized years recent In city. the of parts central ptnil netr o nesad h srcue f market. of structure the understand to investor potential a for difficulties the result, a of as and, heterogeneity information, market for property grounds additional creates above-mentioned This the Guild. the follow by assigned class the with agree classification and necessarily not developers classified. Classification were centers business Petersburg St. 381 Center total, In Committee. Business the by the to developed according standards Russia entire across and Petersburg St. in Managersand Developers has been classifying business centers *Educational / academic and institutions real estate provide additional office space stock. space office additional provide estate real institutions and /academic *Educational type*, use by Petersburg St. in estate GUION 2011, real commercial of Distribution Other 34% academic 5% Educational / According to the KTI St. Petersburg Property Barometer Barometer to According the Property St. KTI Petersburg Historically,

However, Institutions 14% modern

it

is office

important space Retail 8%

to is Warehouse 8%

concentrated Public catering1% note

that Industrial 30%

property in the

Geographical distribution of office space A&B classes in St. Petersburg, 2011, Jones Lang LaSalle LaSalle Lang Jones 2011, Petersburg, St. in classes A&B space office of distribution Geographical Office sector, St. Petersburg, a comparison table of final 2011 figures by different consultants different by figures 2011 final of table acomparison Petersburg, St. sector, Office meters are announced for completion in 2012. The The 2012. in completion for announced are meters square 200,000 Another source. the on depending meters, square 236,000 and 170,000 between was 2011 in market the to delivered space office total the consultants, property to According too. increase to started activity development Office space in European cities, 2011, Jones Lang LaSalle Lang Jones 2011, cities, European in space Office A class m) sq. (ml Stock Total B class (B+) B class classes between Distribution Completions A class Vacancies B class 2011 (sq. m) 2011 *GLA (sq. m) Forecast – 2012 Together with slow but steady recovery of the market, market, the of recovery steady but slow with Together (1,797,950*) 2.64 (1.67*)2.64 St. Petersburg (205,050*) (537,050*) (157,388*) 2,010,000 2,010,000 630,000 630,000 280,000 280,000 215,100 215,100 Frankfurt/M Amsterdam sq. m 23/77 Astera 13.5% Stockholm 6.6% 100 000 150 000 200 000 250 000 300 000 350 000 400 000 Budapest Hamburg Moscow 50 000 Brussels

Warsaw London Madrid Prague Berlin Paris 0 0 Central 1,657,000 546,000 200,000 210,000 25/75 13.0% 17.0% CBRE 2.2 Petrogradskiy 10,000

Primorskiy 1,182,000* 191,300* 139,000* 479,000*

Colliers Moskovskiy 29/71 24.7% 1.66* 9.8% 20,000

Vasileostrovskiy

Admiralteiskiy 30,000 1,156,000* ≈ GVA Sawyer 498,000* 194,200* European cities, St. Petersburg remains the one with the the with one lowest the remains Petersburg St. cities, European as low. perceived the main are Among volumes construction the office stock in the future. future. the in stock office the in increase an towards speaks area Petersburg St. of growth 160,000* 30/70 20.2% 1.65* 6.7% Krasnogvardeiskiy

office Vyborgskiy 40,000

supply. Nevskiy 1,502,180 200,000 523,520 170,080 23.8% 26/74 9.9% 2.03 JLL Kalininskiy 50,000 ■ ClassB ■ Class A High Frunzenskiy potential Knight Frank Knight 1,240,100* 143,800* 190,000– 190,000– 210,000* 407,900* ‘000 sq.m Kirovskiy 25/75 13.3% 1.65* 60,000 9.7%

for the 1,488,500 160,000– 160,000– NAI Becar NAI 630,400 200,000 236,000 5–40% 5–25% continuous 30/70 2.12

35 The Saint Petersburg Property Market 2012 36 The Saint Petersburg Property Market 2012 Outlook for the development of vacancy rates in January – June 2012, KTI St. Petersburg Property Barometer 2011 Barometer Property Petersburg St. KTI 2012, –June January in rates vacancy of development the for Outlook 2011 Barometer Property Petersburg St. KTI 2011, –December July in rates vacancy of Development

Percentage of responses Percentage of responses 100 100 20 40 60 80 20 40 60 80 % % 0 0 etr Retail Centers Rental Quality Retail- Residential Warehouse HighStreet Retail- Shopping ClassC Office ClassB Office Class A Office Retail Centers Rental Quality Retail- Residential Warehouse HighStreet Retail- Shopping ClassC Office ClassB Office Class A Office ■ decreasemarkedly ■ decreaseslightly ■ remainstable ■ increaseslightly ■ increasemarkedly ■ decreasedmarkedly ■ decreasedslightly ■ remainedstable ■ increasedslightly ■ increasedmarkedly

Dmitrij Karpenko Technopolis Pulkovo Technopolis str., 1) (Chaykovskogo Senator str., 37) Popova (Professora Senator VO) line (18th Senator RESO Plaza Renaissance Sky Pulkovo Oscar 38 Nevsky, Linkor LangenZipen Center Kellerman House Zinger BolloevCenter Benoit Atlantic City Atlantic Arena Hall Arena Apollo Tempora Alia Avenue Business Center Business In In 2011, real estate magazine NorthWest CRE Rating, Centers Business into three parts: location and surroundings; building: building: surroundings; and location divided was parts: three questionnaire into The facility. office the of quality the on opinion their about asked were centers center. consideration. business Bclass Aor an as classified into were centers business existing taken nominated the of that none Hence, not note to were important is classifications It rating. the in included 2007–2011,were Awards In Petersburg St. CRE & Federal CRE at winners nominations B the Petersburg. Class and A Class centers, in St. business 10 in another centers addition, business best identified 17 who – companies consulting development, management, construction, leading of managers top and executives chief – experts 43 of consisted group expert The centers. business Petersburg St. best the the market were professionals property asked to choose they where premises. centers office rent business of quality the evaluate 2011 Centers Business of results the Secondly, the tenants of the chosen business business chosen the of tenants the Secondly, of consisted two stages. Firstly, process The rating The Rating of the Best Saint-Petersburg Saint-Petersburg Best the of Rating The Moskovskiy district Moskovskiy district Centralniy district Petrogradskiy district Vasileostrovskiy district Primorskiy district Centralniy district Moskovskiy district Centralniy district Centralniy district Petrogradskiy district Petrogradskiy district Admiralteyskiy district Centralniy district Centralniy Krasnogvardeyskiy district Krasnogvardeyskiy Primorskiy district Primorskiy Petrogradskiy district Petrogradskiy district Petrogradskiy district Centralniy district Petrogradskiy Location . The study asked tenants to to tenants asked study The . CRE CRE NorthWest presented presented 2011 issue). issue). 2011 see information, of in the are the rating presented below. table For more results The score. total the the only but to centers, business given was ranking no Therefore, 95%. to 30% rate from for The varied center each response business – 0.45. contractors and company – 0.35, management climate important. indoor services, – infrastructure, 0.2, building: location follows: as more experts market property the by distributed much was part of the weight the questionnaire Consequently, became property the management, of quality the characteristics as well as Technical building, the of location. central decentralized its despite or access, transportation areas in good developed with are new the properties of office Most ago. high-quality years some than became crucial less characteristics location nowadays example, For of was to weight given the questionnaire. part each on rating 29 scale. a characteristics five-point Different by center business of the quality the to evaluate asked were tenants the total, In contractors. and companies management climate; indoor services, infrastructure, GBA (sq. m)GBA Over 250 companies participated in the rating. rating. the in participated companies 250 Over 12,544 28,484 28,300 22,000 21,000 28,401 26,328 73,862 13,307 52,325 36,316 11,670 22,782 27,219 8,454 9,623 8,871 3,676 7,839 7,150 magazine (November (November magazine NorthWest CRE GLA (sq. m) GLA 26,984 28,205 11,500 22,360 16,200 19,900 16,980 41,000 10,000 21,824 20,786 17,941 2,983 5,300 6,000 9,934 5,923 7,300 7,586 7,871 Rating 3.84 3.83 3.98 3.68 4.43 4.39 3.92 3.66 4.21 3.87 4.03 4.03 4.31 4.19 4.14 3.77 3.72 3.73 4.3 3.6 37 The Saint Petersburg Property Market 2012 38 The Saint Petersburg Property Market 2012 14 Rentalcostsinclude allexpenses(Netrent,PropertyCosts,Tenant Costs),excludingVAT. KTI St. Petersburg Property Barometer 2011 Barometer Property Petersburg St. KTI Market rental costs rental Market with portfolios property small of composed mainly is market The properties availableinthemarket. prime of lack the and projects development in investment of risks high are reasons main The minority. in remain still but of group another owner-occupiers. Foreign investors are creates becoming more active Petersburg their St. move to to headquarters companies national powerful of tendency crisis financial the resulted in higher involvement of banks asset, in the market. Recent investment an as also estate real role asowner- in interest growing banks’ local the to addition In occupiers. asignificant play Banks sector. office the in group investor largest the remain companies Development 4.1.2 Players Rubles / sq. m / month BTK Development, Development,EKE,Owental, BFA Ruric, SoloGroup, Sponda Plc, include owners property foreign and Russian significant Other respectively. properties, office biggest office portfolios in the market, with 15, 6 and 4 existing the have Development Renaissance and Teorema Company 1,000 1,500 2,000 500 i vrg max average min 0 only ■ OfficeClass A, 100sq. m■OfficeClass A, 300sq. m 1,143 a “The market is“The mainly few property portfolios property composed of small 1,039 14 properties. with only afew office, Aclass an renting for atenant of properties” 1,570 Holding 1,393 Imperia, 2,000 Management 1,680

itiuin f ead o ofc sae y rms sz, 01 GVA 2011, size, premise by space office for Sawyer demand of Distribution market, the in prevail to continue months eleven of contracts term agreements can differ notably depending on the tenant. Short- Rental practices in the office market vary. The terms of rental 4.1.3 Rentalpractices by internationalstandards. active most small the are which Group, Jensen and Evli Among are funds investment airport. the complex to proximity amultifunctional the in developing sector, office the in player ambitious new a is AG Avielen Technopolis. and and 3–6%ineuroUSdollar. ruble, in denominated rents for 10% typically currency: the on depending varies It agreement. rental the by determined and fixed normally is sector office the in increase rent Annual other words, around 1,400 rubles per square meter, monthly). (300 sq. m), the rental cost, on average, decreases by 11% (in rubles per square meter, monthly. When renting a 1,570 bigger currently office is premise office A class meter square 100 a rental cost (including all expenses, excluding VAT) for renting total the average, Barometer,on Property Petersburg St. KTI the VATin is opinions participant to According and excluded. typically excluded, or included either be can expenses cost is usually fixed and included in the rent, while communal gross in most of the multi-tenant office buildings. Maintenance typically are Rents dollar. US and euro in also denominated agreements, withtermsuptotenyears. long-term require often more spaces large occupying tenants 300-500 sq.m11% be to rents in results ruble Russian the of Instability especially 100-300 sq.m18% in >500 sq.m6% multi-tenant 50-100 sq.m27% office <50 sq.m38% centers. However, the retail sector experts, some big new retailers do not enter not do retailers new big some experts, sector retail the to According demand. growing satisfy cannot stock existing construction, retail of volumes high and market the of size big the Despite Moskovskiy. and Vyborgskiy,Primorskiy, districts: administrative three in is space center shopping of concentration highest The city. the throughout distributed Russian cities comparison by retail stock per capita, 2011, Jones Lang LaSalle Lang Jones 2011, capita, per stock retail by comparison cities Russian GUION 2011, space, retail of distribution Geographical in cities the among capita per space retail of provisions highest the of one has Petersburg St. estimates, expert to According sectors. property commercial the to of developed most considered the be is Petersburg St. in market property Retail 4.2.1 Market 4.2. Retailsector Pushkinskiy Primorskiy Petrodvortzoviy Petrogradskiy Nevskiy Moskovskiy Kurortniy Vasileostrovskiy Admiralteyskiy District City St. Petersburg St. Centralniy Frunzenskiy Kronshtadskiy Krasnoselskiy Krasnogvardeiskiy Kolpinskiy Kirovskiy Kalininskiy Vyborgskiy Russia. However, Nizhniy Novgorod St. Petersburg Ekaterinburg Chelyabinsk Novosibirsk Volgograd Moscow Samara the Rostov Kazan Omsk thousand sq. m sq. thousand Ufa supply Total area, Total area, 0 7612.5 of 118.2 126.8 540.6 655.6 226.6 723.5 551.4 515.2 151.9 305.7 237.2 797.9 317.5 1072 58.4 retail 434 730 50 space 100 Total area, % to %to Total area, is not the total the 100.0% 10.5% 14.1% 4.2% 6.8% 8.6% 3.0% 0.8% 1.6% 2.0% 4.0% evenly 9.6% 3.1% 9.5% 1.7% 5.7% 0.7% 7.2% 7.1% 200 Group’s data, there are waiting lists for the main centers and and centers main the for lists waiting are there data, Group’s and Astera to according occupied, lowvacancy: very have centers regional fully are 2011. Barometer centers shopping in regional Property decreased Super rates Petersburg vacancy that St. state KTI respondents the of 60% the market,havestartedtoexpandresidentialareas. in present already Retailers centers. shopping regional super and regional in space available of lack the to due market the (reconstruction), RIO, and Bukharestsky. and RIO, (reconstruction), Mall London Peterland, include completed be to projects new shopping 2012.during centers The biggest development of to meters is area total be in expected completed square the in space 2011.of leasable meters 300,000–500,000 Another square shopping center by stock increased 200,000–300,000 demand. ofconsumer development stable showing 2011, during insignificantly changing was drop rental is to According expected. turnover retail Rosstat, 2012 during sector retail the of development the for estimations The barometer. property KTI the in 2011 of second-half the in rates rental in rise registered professionals market of two-week a around in of change. case tenant Moreover, 80% ca. period only vacancy with occupied, always remain premises Well-located 2011. during positively developing and community also been has smaller retail Street the centers. shopping neighborhood in found are rates vacancy highest The centers. regional the in 1–2% of rate vacancy a 300 The overall outlook for retail remains positive. Over Over positive. remains retail for outlook overall The Based on information from major consultancy firms, the the firms, consultancy major from information on Based are more “The overall outlook “The neutral. for retail remains 400 positive” However, sq.m 500 neither vacancy rise nor 39 The Saint Petersburg Property Market 2012 40 The Saint Petersburg Property Market 2012 Retail turnover and income dynamics, St. Petersburg, 2011, Jones Lang Lang Rosstat LaSalle, Jones 2011, Petersburg, St. dynamics, income and turnover Retail consultants different by figures 2011 final the of table acomparison Petersburg, St. in segment centers Shopping International Colliers 2011, m, sq. 4,000 than more area with facilities retail Petersburg, St. in capita per space retail of distribution Geographical -40 -20 20 40 60 80 Vacancies sq. m sq. ml Stock, furniture centers are excluded. are centers furniture and DIY, hypermarkets analysis; the in included mis sq. 10,000 exceeding area with centers shopping quality **Modern *GLA 2011 Completions 2012 completions Forecast: % –– 0

Realincomegrowth, % YoY –– December -07 March -08 June -08

September -08 Krasnogvardeiskiy Vasileostrovskiy Petrodvortzoviy (199,900*) (294,613*) Admiralteiskiy 3.7 (2.5*) St. Petersburg Petrogradskiy 295,000 295,000 Krasnoselskiy December -08 571,065 Astera Pushkinskiy Frunzenskiy Moskovskiy 2.5% Vyborgskiy Kalininskiy Primorskiy Kolpinskiy

March -09 Kirovskiy Nevskiy Central June -09 September -09 0 Realincomegrowth, % YoY December -09 360,000 291,000

March -10 CBRE 3.69 5% June -10 September -10

December -10 300 4.51 (2.89*) (200,000*)

March -11 158,000* 320,000 320,000 Colliers June -11 2–7% September -11 600 GVA Sawyer 191,000* 270,000* 4.8 (3.2*)4.8 250,000- Distribution of retail space by type of retail facility, 2011, NAI Becar NAI 2011, facility, retail of type by space retail of Distribution 5–6% Super regional16% 900 Regional 34% 2.5 (1.58*)2.5 200,600* 228,200 L** L J 6% 1200 Knight Frank Knight Community 40% 366,000 309,000 Neighborhood 10% 4.4 4% 1500 NAI Becar NAI 470,800 247,550 8–10% 4.13 Outlook for the development of rent level in January – June 2012, KTI St. Petersburg Property Barometer 2011 Barometer Property Petersburg St. KTI 2012, –June January in level rent of development the for Outlook 2011 Barometer Property Petersburg St. KTI 2011, –December July in level rent of Development f oeg ivsos s iie t a e paes Adamant Holding, players. few a number to The limited is investors sector. foreign of retail Petersburg St. the in groups development companies, investor main the comprise owner-occupiers property and companies and investors Local 4.2.2 Players xedn 2000 qae ees n h S. Petersburg St. the in meters square 250,000 exceeding (GLA) area leasable gross total with centers shopping MEGA regional super two currently are There MEGA. chain center shopping its with market Russian the in player active an is Group IKEA market. the in player local biggest second the to its other three income-generating retail assets, and became addition in portfolio Macromir’sretail purchased Group Fort centers, dominates the St. Petersburg shopping center market. are underrepresented inare who “Institutional investors currently

the sector” Percentage of responses

100 Percentage of responses 20 40 60 80 100 % 0 20 40 60 80 owns % 0 etr Retail Centers Rental Quality Retail- Residential Warehouse HighStreet Retail- Shopping ClassC Office ClassB Office Class A Office etr Retail Centers Rental Quality Retail- Residential Warehouse HighStreet Retail- Shopping ClassC Office ClassB Office Class A Office and manages 25 shopping retail market. Anchor tenants in the shopping centers centers shopping the have tenants Other years. in fifteen to up leases have typically tenants Anchor market. retail the in applied commonly are terms Fixed market. office the in than retail the in longer normally are agreements Rental 4.2.3 Rentalpractices vary. retailers foreign the of strategies rent versus own the whereas premises, their own typically retailers local the of Most Stockmann. and Kingsfisher Group, Group, S include Auchan, Group, Metro Petersburg St. in active retailers most the Foreign among known. are O’KEY and Group Retail X5 Lenta, by private investors. owned premises the of most with announced, publicly not are retail street of owners The 2011. in Passage center shopping Russian traditional a in invested Group, Jensen by L.P.,managed II Fund Estate Real Russian The Additionally, sector. the in funds investment of presence the increase will between VII transaction Fund Estate Real Stanley Morgan announced and Capital Meridian the of the in Closing underrepresented sector. are investors Institutional area. Russian retailers are the biggest occupiers in the market: in market: the occupiers biggest the are retailers Russian ■ decreasemarkedly ■ decreaseslightly ■ remainstable ■ increaseslightly ■ increasemarkedly ■ decreasedmarkedly ■ decreasedslightly ■ remainedstable ■ increasedslightly ■ increasedmarkedly 41 The Saint Petersburg Property Market 2012 42 The Saint Petersburg Property Market 2012 15 AssociationofIndustrial ParksofRussia,2012. Quality warehouse supply by type, St. Petersburg, 2011, Jones Lang LaSalle Lang Jones 2011, Petersburg, St. type, by supply warehouse Quality demand forhigh-qualitywarehousingandlogisticsproperties. in increase an to led have infrastructure in improvements the to manufacturers international St.Petersburg, of the development of the retail market, as well as expansion The space. warehouse high-quality of lack the by The characterized is market development. of stage early the in is market property corridorsconnecting northern Europe andRussia, thelogistics transport main the of one on lies Petersburg St. though Even 4.3.1 Market sector 4.3 Industrialandwarehouse property rent indexation(CPIbyRosstat,LIBORorHICP). increase practices are common in the market, a fixed increase or rental annual of Twotypes ruble. Russian or dollar US euro, in denominated be can Rents sectors. property all in low is and they can also vary by the tenant type. OPEX transparency differences in the operational expenses levels between landlords, significant are there but amount, fixed a typically are (OPEX) expenses Operational retail. street in applied usually are rents lately. sector retail street the in observed been has length lease of increase an for tendency A relationship. landlord-tenant long-term the guarantee to order in applied is agreements side additional signing of rental practice however,the common; also are Short-term contracts years. eight to six from leases, shorter Both gross and net rents exist in the shopping centers; net net centers; shopping the in exist rents net and gross Both characterized by the lack of high-quality warehouse space” “The market is“The 100 20 40 60 80 % 0 05 06 07 08 09 00 2011 2010 2009 2008 2007 2006 2005 by aspecializedmanagingcompany. controlled conditions, legal and administrative necessary and production area provided with energy new resources, a infrastructure, accommodates that complex organized specially a is class warehouse complexes and industrial parks. A An industrial park both in developed were facilities Industrial years. Industrial real estate market has been growing rapidly in recent However, development. new of terms in for promising more bit a 2012 are Projections area. leasable of meters square 20,000 by ca. only increased stock total The 2011. in market the to delivered space warehouse new of lack the in resulted sector growth. rental 5–10% forecast consultancies Property Barometer 2012. of first-half the Property during rise to rents expect survey the Petersburg in participated St. professionals the of 50% Over KTI respondents. the of by anticipated 60% is 2012 during decline rate vacancy Further in in of a development, 2011.resulted vacancies decrease sharp new of lack the with together demand, occupier of Growth years. ensuing and crisis financial the during decline drastic high qualitywarehousespaceofAandBclass. is supply total the of one-fourth only while meters, square (GUION), the total warehouse stock amounts to 7.65 million Valuationand Inventory Estate Real for Committee City the to According space. outdated by dominated is market the downturn, financial the to prior construction active Despite stock will not meet the growing needs of the market. market. ofthe needs growing the meet not will stock Slowing activity of the developers in the warehouse warehouse the in developers the of activity Slowing in 2011 to recover started the sector after warehouse The experts “Three industrial parks industrial “Three exist in St. Petersburg and close proximity” are unanimous in ■ Owneroccupied ■ Logistic ■ Speculative the 15 opinion that the new Industrial parks in greater St. Petersburg St. greater in parks Industrial GUION 2011, Petersburg, St. of districts industrial most The Warehouse segment in St. Petersburg, a comparison table of the final 2011 figures by different property consultancies property different by figures 2011 final the of table acomparison Petersburg, St. in segment Warehouse ***Excluding specialized and owner-occupied warehouses warehouses owner-occupied and specialized ***Excluding warehouses owner-occupied **Excluding warehouses speculative *Only B class A class Vacancies m) (sq. – Forecast 2012 (sq. m)2011 Completions B class (mlm) sq. Total Stock A class Renaissance Marienburg Kirovsky Prinevskiy Fedorovskoe Trigon Maryino Verevo Doni Greenstate Logistics AKM Zavod Utkina Park Industrial the of Name Krasnogvardeiskiy Admiralteyskiy Petrogradskiy Frunzenskiy Moskovskiy Vyborgskiy Kalininskiy Kolpinskiy Kirovskiy Nevskiy ≈ 312,300* 21,000* Astera 0 1.3* 100–200 hectares 100–200 hectares 35 9.6 hectares 12.7 hectares hectares 121 57 hectares hectares 130 hectares 183 hectares 112 hectares 31.8 hectares 240 area plot Land n/a 3% 7% 500 106,000** 12,000** 998,900 512,000 1,000 1.51** CBRE 6% 3% regions Gatchinskiy and Lomonosovskiy of border the at Petersburg, St. region Gatchinskiy Obl., Leningrad region Kirovskiy Obl., Leningrad region Vsevolozhskiy Obl., Leningrad region Tosnenskiy Petersburg, St. region Tosnenskiy Petersburg, St. region Petrodvortzoviy Petersburg, St. region Gatchinskiy Obl., Leningrad Gorelovo Petersburg, St. highway Moscovskoe Petersburg, St. region Vsevolozhskiy Obl., Leningrad Location 1,500 109,000*** (1.17***) 753,000 753,000 12,600* 216,000 216,000 Colliers 0.97* 2,000 6.2% 2,500 1,075,560 112,950 681,160 43,800 3.23% 5.16% 1.76 3,000 JLL 3,500 Design stage Design operation in (5 hectares) I phase stage Design stage Design operation in I phase stage Design 2012 quarter III in To completed be 2012 in completed be to I phase operation In space m warehouse sq. 62,800 operation: in I phase operation In Development of Stage Knight Frank Knight '000 sq. m 1,098,000 103,000 744,000 16,000 3.00% 6.40% 1.84 4,000 NAI Becar NAI 215,000* 80,000 - 80,000 10–11% 12,000 1.54* 8–9% n/a 43 The Saint Petersburg Property Market 2012 44 The Saint Petersburg Property Market 2012 16 Acommunalapartment (kommunalkainRussian)isashared apartment,wheretwoormorefamiliesshare abathroomandkitchen. US dollarsandRussianrublesareusedinrentdesignation. annual 3–5% rent of increase practice has A evolved in currency. the beginning applied the of and 2010. on Euro, highly developer depend the and tenant the between agreed normally contracts of eleven months are also applied. Rental increases are short-term however, years; 10 to three from Lease normally is period annum. per meter square per $30–35 average, on are, the to According utilities. estimations the ofJones Lang LaSalle, of OPEXclass inA warehouses consumption actual the on depend typically they properties B class in fixed, usually are are typically applied. Operational expenses in class A properties needs,rental practices vary in the warehouse market. Net rents Due to the heterogeneity of both the available stock and the user 4.3.3 Rentalpractices properties. manufacturing large in common very is Owner-occupancy 4.3.2 Players has an industrial park project in its portfolio. portfolio. its in project park industrial an has Companies, among of the major warehouse Group are PNK and Russia MLP Teorema, spaceCompany Management Interterminal owners. VTB Development industrial sector. and warehouse property Petersburg St. the in invested capital institutional foreign of example an is I Russia EPI years. investors, players. foreign Ltd. has Raven Russia in active been very the market in recent and individual funds property companies, developer-investors, property occupiers, structure intheindustrialpropertymarket. the light industrial business sector will diversify the ownership Petersburg established plants in St. St. Petersburg. recently Noted recent demand have for manufacturers the car world’s the in of Most present area. are industries other and production of aluminum alloys, shipbuilding yards, aerospace, phase. Estimated volume of the market including both both including hectares. is750 parks market industrial future and the existing of volume Estimated phase. and in the design are parks Logistics industrial seven Another Greenstate. AKM Zavod, Utkina proximity: close and The ownership in the logistics sector is widespread with with is widespread sector logistics in the ownership The Currently, three industrial parks exist in St. Petersburg Petersburg St. in exist parks industrial three Currently, Heavy machinery, including military equipment, called (so- buildings communal special in or dwellings apartment regular in either residence communal A exception. an not is market Petersburg St. the and countries, European other more than2.7millionsquaremeters. of area total a with apartments 45,000 ca. by increased stock residential the 2011, During apartments. million 1.9 around be to estimated is apartments of number The in meters. square buildings residential thousand St. Petersburg, with fifty the estimated total area of some over 115 million are There 4.4.1 Market 4.4 Rentalresidential property market were exchangedsincetheprogramstartedin2007. apartments communal 10,500 over Russian), from Exchange to According apartment.” own its of one have may family each that apartments communal program “On the exchange of a communal apartment for non- target the in participation for applied apartments communal occupying families 24,357 2007–2010, period the During families. low-income to subsidies providing and programs strives to solve this problem by introducing different targeted not does Petersburg St. buildings of government the today’srequirements, meet communal in living of quality the As meters. square 1,295,500 to amounts (Obshezhitie) buildings communal the in area Residential area. residential total the are ca. 105,000 communal apartments, comprising over 5% of today.even There remained has and times Soviet the during The Russian residential market differs significantly from significantly differs market residential Russian The ) is a CIS country phenomenon country CIS a is Obshezhitie) municipal housing” in St. Petersburg is of“Half the total residential area GorZhilObmen (City 16 . It started It . Housing Target programs of the Government of St. Petersburg St. of Government the of programs Target GUION 2011, Petersburg, St. in space residential of distribution Geographical Total Centralniy Frunzenskiy Pavlovsk Pushkin, Primorskiy Petrodvortzoviy Petrogradskiy Nevskiy Moskovskiy Krasnoselskiy Kolpinskiy Kirovskiy Kurortniy Kronshtadskiy Krasnogvardeiskiy Kalininskiy Vyborgskiy Vasileostrovskiy Admiralteyskiy District Development of Long-Term Mortgages”, 2002–2017 Mortgages”, Long-Term of Development 2017 until Sectors, Services Social and Health, Public i.e., Education, Employees, Sector Public the for Housing Youngsters”, for 2011–2015 Housing Affordable Apartment Own its of One Have May Family Each Allows that Apartments communal Non- for Apartment aCommunal of Exchange The Certificates Housing Petersburg St. Number of of Number dwellings 50,097 6,544 1,088 1,235 1,408 2,549 1,482 1,282 4,391 1,831 5,215 1,237 2,314 5,166 1,678 4,670 1,706 5,976 325 Total floor space Total floor 10,248.4 12,754.0 10,414.6 10,267.0 115,414 4,546.2 Floor space, thousand sq. m sq. thousand space, Floor 5,048.5 3,993.2 2,664.2 9,103.3 3,413.0 7,246.2 3,759.0 7,328.1 1,761.0 7,553.7 7,314.0 7,150.7 849.0 obtain amortgage obtain they if apartment anew of apurchase for lists waiting the on citizens for price apartment the of 30% of Subsidies period payback loan the of year last the in granted value, apartment total the of 20% of subsidy Social –10 years period payback value, apartment total the of 60% to up loans Non-interest employees sector’s public the for apartments the for prices Cost loans interest non- getting of option an or families, young to Subsidies process the of 30% to up subsiding by investors of Attraction accommodation single-family of purpose the with Swaps improvement) conditions residence (so list called waiting the in place the on depending prices lower setting by apartment the in rooms available of purchase in Assistance etc. mortgages,” sector,” “long-term public the of employees the for “home youngsters,” for “home as such programs, other of advantages use to occupiers apartments communal the of Priority premises such occupying families, low-income the to Subsidies minimum approved than lower provision space residential with families low-income to Subsidies Living floor space floor Living 4,353.2 2,545.4 6,256.2 2,184.2 4,535.0 3,652.8 5,250.6 3,020.5 2,112.1 2,459.4 6,191.9 1,010.0 7,292.0 4,671.1 1,615.7 6,110.7 4,407.9 68,185 516.3 apartments 1,926,162 Number of of Number 138,201 196,022 161,648 180,441 131,042 132,418 135,973 187,931 217,719 68,548 40,350 26,299 45,595 49,446 59,509 75,802 16,066 63,152 Number of rooms of Number 4,368,010 288,850 360,238 400,432 184,250 145,564 332,967 122,431 451,250 146,255 105,542 295,157 405,739 287,646 201,071 131,779 410,753 65,235 32,851 45 The Saint Petersburg Property Market 2012 46 The Saint Petersburg Property Market 2012 8 ulig cmrsn 1200 qae ees r t be to completed according totheprogram. are meters square 122,000 comprising buildings 58 total, In re-construction. under are 12 another and operation in are houses renovated Currently,two employees. their for accommodation temporary seeking companies the to rent emergency for intended in are houses The renovated. properties be to are condition The houses. residential rental communal of redevelopment the of program the realizing rents areexpectedtoremainstableorincrease. result, a As slightly. increase or stable remain to residential rental for demand occupier the believe experts market the of the rental residential market outlook is positive. The majority 500 apartmentsinSt.Petersburg. some manage and own total, in which, market, the in operate players residential rental professional few Only investors. professional by asset investment long-term a as considered attractive most sectors tothedevelopers. the of one remains estate real Residential Petersburg. St. in housing for demand constant determine The lack of residential space supply and positive net migration Half GUION year, 2011, completion by space residential of Distribution was initiated. within the last twenty years when the process of privatization only possible became properties residential occupied the of Ownership owner-occupied. are half than more dwellings, residential of number of the of terms one-fourth In stock. own residential the companies and Individuals housing. n 00 te oenet f t Ptrbr started Petersburg St. of government the 2010, In According totheKTISt.PetersburgPropertyBarometer, often not is estate real residential time, same the At of 4% 2% 2% the 3% demand for housing in total 10% “There is constant “There residential St. Petersburg” total 50,097 Number ofthedwellings, 16% area 26% in 20% St. Petersburg 13% 1% 2% is 0% 1% municipal ■ after2000 ■ 1996-2000 ■ 1991-1995 ■ 1986-1990 ■ 1976-1985 ■ 1966-1975 ■ 1956-1965 ■ 1946-1955 ■ 1941-1945 ■ 1938-1940 ■ 1928-1937 ■ 1918-1927 ■ before1917 rae te an optto t poesoa residential professional investors. to competition main the creates being known as the “second-hand rent.” This group of investors process the apartments; several of consist normally portfolios a Theirinvestment own apartments. individuals, the rental of mainly part significant investors, private small The half ofthetotalresidentialareaismunicipalhousing. about GUION, of estimate the to According Petersburg. St. of government the of behalf on organizationsmanagement Communal Service” translated from Russian) act as the property rental the in residential housing. So called player major the is Petersburg St. of city The 4.4.2 Players s ,2 rbe; w-om prmn i 630 uls and rubles; three-room apartmentis8,690rubles. 6,380 is apartment two-room rubles; 4,620 is of type this in level apartments is below the market level i.e., one rent room apartment The rent. for available are and priority group. To-date, 112 apartments have been completed the improvements to their housing condition. Youngsters requiring are the renting people of to apartments program municipal built new newly a implemented Petersburg St. more attractive option since the start of the privatization privatization the of start process. Asa result, the number of the companies operating in the since option attractive more a became Owner-occupancyprofessional investors. other of types any or companies property local for target investment apartments arerentedouteveryyearinSt.Petersburg. 3% 3% n diin satn fo Jl 21, h ct of city the 2011, July from starting addition, In The rental residential market has not been a long-term long-term a been not has market residential rental The 7% According significant of the part total 115,414 Total area, thousandsq. m, 16% “The small private “The rental apartments” 18% investors own a to the Housing 21% 14% ZhilKom-Servis 13% Committee, 0% 1% agencies 1% 3% 0% ca.

(“Housing 200,000 are not subject to registration; hence, both the landlord and landlord the both hence, registration; to subject not are contracts Short-term months. eleven normally is Lease-term vary.practices rental market, residential rental private the In 4.4.3 Rentalpractices on professional concentrate who foreign SATO ICECAPITAL, as and such investors, attracted has market the of potential rental residential market is very limited. Today, the high apartments at the moment. No new professional investors investors showed interest in the market 2011. during professional new No moment. the at apartments 16 contains only portfolio Their market. residential rental in invested fund investment local a of example an is Group, under standards. currently 109 another and use international in 112apartments has SATO by and apartments, completed276 currently small has ICECAPITAL relatively remain

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the city district the apartment is located in. islocated apartment the district city the on depending respectively, month, per and rubles 31,729 38,500 – – 20,250 16,700 26,341, – 14,263 of ranges the in vary for rents the similar quality Vopros, one-, two- and three-room Kvartirny apartments currently portal Internet the to According subway the stations,theofapartmentqualitytheoffit-out,building. type to proximity location, as such characteristics apartment on dependent are levels rent Residential extension. market. for instance in Finland, has not been evident in the St. Petersburgmarket. International practice of lease “until notice,”further as rental residential professional the in practices market. rental established of Short-term lack contracts are prevailing in the avoid taxationbynotregisteringadditionalrentalincome. tenant can avoid bureaucracy issues. Property owner can also the determines players professional of number scarce The However, landlords normally offer the option for lease

Alexander Petrosyan 47 The Saint Petersburg Property Market 2012 48 The Saint Petersburg Property Market 2012 Visit us atwww.bptam.com. member ofINREVandSIPA. a is BPT employees. 100 approximately has company The Berlin, investments aremade. the where present be to is philosophy investment the of part key A clients. for mandates estate real segregated with along BPT manages both a series of own real estate investment funds in Finland,Russia,theBalticcountries,PolandandGermany. than one million square meters of prime commercial real estate more of consists portfolio The management. under assets in in Northern and Eastern Europe with approx. EUR 1.3 billion specializing manager asset estate real international an is BPT Management Asset BPT Sponsors BPT is headquartered in Copenhagen with local offices in Warsaw, Vilnius, , , Helsinki and Moscow. www.sato.fi million. OperatingprofitwasEUR86.8 52.1 EUR was taxes before profit and million 232.0 EUR was and other insurance companies. The Group’s turnover in 2011 the yearunderreviewwasEUR122.3million. in the difference in values of the investment properties during increase The million. 30 EUR roughly averaged has housing of divestment its and million, 115 EUR averaged has century Homes willalwaysbeneeded. SATO’sof business. stability the fosters housing for demand the investment properties and on rental business. Continuing regenerate. to ability the as well as methods operating of re-evaluation generating constant the requires as This shareholders. its for well value added as services customer of improvement progressive player in the market, which facilitates the constant of value fair a roughly EUR1.9billion. have assets investment Its Petersburg. in St. and rentable growth urban 23,000 of centers some largest Finland’s of in total homes a owns in SATO investors corporate housing. leading Finland’s of one is SATO SATO SATO’sinsurers pension Finnish are shareholders biggest 21st the SATO’sin of investments value new The annual of value in trend the on based is creation SATO’svalue and efficient most the being of goal the set has SATO World Economic Forum. WorldEconomic Transparency International.GlobalCorruptionBarometer2009. Transparency International.CorruptionPerceptionsIndex2010. Transparency International.CorruptionPerceptionsIndex2009. Transparency International.CorruptionPerceptionsIndex2008. Doing Business2012:inMoreTransparent World. The World BankandtheInternationalFinanceCorporation. Doing BusinessinRussia2009. The World BankandtheInternationalFinanceCorporation. Foresight Series2010:MappingtheWorld ofTransparency Jones LangLaSalle.RealEstateTransparency IndexGlobal St. Petersburg.2011 Investments inRussia.Edition2009-2010.InvestmentClimateof Beiten BurkhardtRechtsanwaltsgesellshaftMBH. Russia. Edition2009-2010. Beiten BurkhardtRechtsanwaltsgesellshaftMBH.Investmentsin Real EstateinRussia.Edition2009-2010. Beiten BurkhardtRechtsanwaltsgesellshaftMBH.Investmentsin CRE NorthWest magazine,Issue№11(46)November2011 Sources The Global Competitiveness Report 2011-2012. Report Competitiveness Global The NAI Becar Maris PropertiesinassociationwithCBRichardEllis Knight Frank Jones LangLaSalle GVA Sawyer Colliers International Astera Group Market reportsproducedbytheconsultingcompanies: 49 The Saint Petersburg Property Market 2012 50 The Saint Petersburg Property Market 2012 Doing Business 2012 for with construction dealing permits Russian in Federation, APPENDIX 1-Development of land: Summaryof procedures 30 No 12 29 20 22 26 18 11 28 23 13 15 21 19 25 14 27 10 16 24 17 1 2 3 4 5 6 7 8 9 Procedure City Planning Committee Planning City and Architecture Moscow the at plot land of plan development the obtain and Request *Request and obtain Act of Moscow Geological – Geodesic Department –Geodesic Geological Moscow of Act obtain and *Request *Request and obtain engineering ecological survey Mosgorgeorest or any other licensed entity licensed other any or Mosgorgeorest survey ecological engineering obtain and *Request *Request and obtain sanitary and epidemiological certificate -Rospotrebnadzor certificate epidemiological and sanitary obtain and *Request *Request and obtain technical conditions from water services and sewage and services water from conditions technical obtain and *Request *Request and obtain technical conditions to connect to electricity with MosEnergo with electricity to connect to conditions technical obtain and *Request Telephone Service (MGTS) Service Telephone City Moscow from line telephone to connect to conditions technical obtain and *Request *Request and obtain technical conditions for heavy shower sewage shower heavy for conditions technical obtain and *Request Network Broadcasting Moscow the from radio install to conditions technical obtain and *Request *Request and obtain approval of Sketch No. 2 Moscow Architecture Committee Architecture 2Moscow No. Sketch of approval obtain and *Request (Rospotrebnadzor) Services Sanitary with designs for conditions of approval obtain and *Request Defence Civil and Situation Emergency of Ministry the by designs for conditions of approval obtain and *Request Suggestions) (No of Approvals Project of Preparation of Department by designs for conditions of approval the obtain and *Request Construction) on (Decision Designing Construction of Inception on Prefect of Disposition obtain and Request - Moskoma design architectural of Approval of certificate the and colour) profiles, (facades, design architectural of approval on Moscow of Architect Chief the by Commission ‘Reglament’ the of Decision and Meeting of Minutes from Exctract obtain and Request facility the of supply engineering on Moscomarchitectura from approval obtain and *Request Institute Geological Moscow 2from No. Sketch obtain and *Request and Environment Protection of Moscow of Protection Environment and Management Nature of Department from design project for approval obtain and *Request City of Well-Being Comprehensive of Department from approval the obtain and *Request (GIBBD) Safety Road of Inspection State from approval the obtain and *Request Agency Transport City Moscow from routes transport on approval obtain and *Request *Request and obtain approval of conditions for designs by Prefect’s Office Prefect’s by designs for conditions of approval obtain and *Request (uprava) Government Local by designs for conditions of approval obtain and *Request Unit Geological City Moscow from passport construction the obtain and Request Institute GenPlan from “GenPlan” and Arrangement” Construction of “Outline of Volumes of approval obtain and *Request Request and obtain Permission for construction for Permission obtain and Request Expertise State Moscow by project on approval obtain and Request a copy of the work schedule work the of a copy leave and astamp get schedule, work the about Municipality District Moscow the Inform UATI from works of production of order opening an obtain and Request leave a copy of the work schedule work the of acopy leave and a stamp get schedule, work the about Management Nature of Department the Inform Time to complete to Time 120 days 120 45 days 45 45 days 45 30 days 30 30 days 30 30 days 30 30 days 30 30 days 30 30 days 30 30 days 30 30 days days 30 14 days 14 days days 30 days 30 14 days days 30 21 days 21 days 30 days 30 days 30 14 days 7 days days 30 days 30 10 days days 45 1 day 1 day 1 day Cost to complete to Cost no charge no RUB 39,000 RUB RUB 100,000 RUB no charge no RUB 21,300 RUB no charge charge no RUB 5,000 RUB RUB 10,000 RUB RUB 4,500 RUB no charge no RUB 13,800 RUB 14,728RUB 12,100 RUB charge no charge no 4,500 RUB 20,000 RUB RUB 29,455 RUB 4,600 RUB 8,837 RUB 8,837 RUB no charge no charge no 8,837 RUB 30,000 RUB no charge no 59,500 RUB no charge no 30,000 RUB 34 44 38 43 48 33 40 35 45 36 46 50 39 32 49 31 37 42 51 41 47 work schedule work the of acopy leave and astamp get schedule, work the about Police Traffic the Inform the work schedule work the of acopy leave and astamp get schedule, work the about Rospotrebnadzor the Inform schedule work the of acopy leave and astamp get schedule, work the about Department Fire the Inform foundation works during foundation Supervision Construction State of Committee Moscow the from inspection Receive during structure works structure during Supervision Construction State of Committee Moscow the from inspection *Receive the acceptance commission acceptance for the Mosgorgeotrest from pits foundation of test laboratory of results receive and *Order works engineering Supervision Construction State of Committee Moscow the from inspection *Receive built where it was planned to be to planned was it where built been has building the that sure make to Mosgorgeotrest the from inspection an *Receive *Receive inspection by Union of Administrative Technical Inspection (UATI) –II Inspection Technical Administrative of Union by inspection *Receive *Receive inspection by Union of Administrative Technical Inspection (UATI) –I Inspection Technical Administrative of Union by inspection *Receive *Receive inspection by Union of Administrative Technical Inspection (UATI) –III Inspection Technical Administrative of Union by inspection *Receive *Receive inspection by Union of Administrative Technical Inspection (UATI) –V Inspection Technical Administrative of Union by inspection *Receive *Receive inspection by Union of Administrative Technical Inspection (UATI) –IV Inspection Technical Administrative of Union by inspection *Receive Connect to water services water to Connect (UATI) –VII Inspection Technical Administrative of Union by inspection *Receive *Receive inspection by Union of Administrative Technical Inspection (UATI) –VI Inspection Technical Administrative of Union by inspection *Receive Request and receive Plans from Bureau of Technical Inventory (BTI) Inventory Technical of Bureau from Plans receive and Request Permit) (Occupancy building of operation on Disposition the receive and Request service telephone to connect and *Request *Request and convene Acceptance Commission Acceptance convene and *Request Register the building after completion after building the Register 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 30 days 30 1 day 1 day 30 days 30 10 days 10 days 60 days 60 30 days 30 no charge no no charge no charge no no charge no no charge no RUB 10,000 RUB charge no RUB 50,000 RUB no charge no no charge no no charge no no charge no no charge no no charge no charge no no charge no RUB 55,000 RUB charge no 8,640 RUB no charge no RUB 15,000 RUB 51 The Saint Petersburg Property Market 2012 52 The Saint Petersburg Property Market 2012 position Grishin Alexander Interviewed specialist APPENDIX 2-Interviewed Specialists Department of Appraisal Head Deputy Department Investment ofthe Head Starkov Andrey Shaskolsky Alexey Parshukov Alexander Kolokolova Ekaterina Evgenia Tuchkova Evgenia Rykov Georgiy Kireeva Natalia

Staffan Tast Staffan Department Marketing ofthe Head Tamara Popova Lezhneva Svetlana Lezhneva Veronika ToiVe – Property Investment and and Investment ToiVe research the in –Property participated who professionals market property Petersburg St. all We thank also Director General Consultant Senior Manager Leasing and Sales Department Consulting Consultant, Senior Director General Department Valuation and Consulting Analyst, Senior

Regional Manager Manager Regional Department Consulting Strategic manager, Project Group Research Strategic and Economic Analyst, Senior conducted by KTI Finland and Pöyry in 2010. in Pöyry and Finland KTI by conducted Russia in Management Company name Issues Enterprise for Institute Development VTB VMB TRUST VMB Astera Group Astera Jensen Group Jensen Colliers International Colliers BEST Group BEST Maris Properties in association association in Properties Maris with CBRE with SATO Becar NAI Knight Frank Knight Jones Lang LaSalle Lang Jones Fax: +358Fax: 7430 20 131 Tel: +358 7430 20 130 Helsinki 28, Eerikinkatu Finland KTI Publisher in co-operation with: co-operation in 53 The Saint Petersburg Property Market 2012 54 The Saint Petersburg Property Market 2012 KTI in co-operation with BPT Asset Management and SATO Corporation. SATO and Corporation. Management Asset BPT with co-operation in KTI