Russia’s Ministry of Industry and Trade has asked the owners of shopping centers charge rents in rubles. If the owners of the shopping centers refuse to do so voluntarily, the ministry could adopt a law prohibiting the rent in foreign currency. The draft of the law is already prepared.
According to experts of the company SA Ricci, the forced transfer of the market for ruble-denominated leases would have on a negative effect on commercial real estate, lead to a reduction in the volume of new construction and a further decrease in investor confidence in the Russian commercial real estate market.
In the office segment, most class B and B+ projects have switched to ruble rents, but there would certainly be fallout from such a move for prime office buildings. According to Alexander Morozov, Director of the Department of consulting and appraisal SA Ricci, phasing out dollar-denominated rents should be handled differently for old and new contracts.
“Considering the fall in investment value, owners could be forced with the need to transfer additional funds to the lenders to cover their losses…Of course, such a development would have a negative impact on Moscow commercial real estate market,” says Morozov.
