Construction Industry

An Expert's View about Building Products and Construction in Russia

Posted on: 15 Mar 2012

The Russian construction industry has resumed growth in 2011 posting 4.5% output increase.

Construction Industry in Russia ? In 2011 construction activity in Russia has grown by 4.5%; ? In 2012 the Russian economy and its construction industry are expected to perform better than the global average, and substantially better than those of Western Europe; ? In 2012 the investment volumes into Russian real estate will reach £4 bn exceeding pre- crisis levels (£3.2 bn in 2008); ? In the next 5 years the volume of housing construction in Russia is to grow by 1.5 times, from 58 to 90 million square metres; ? Over the next decade Russia will spend £173 bn to double the rate of road building. Market overview 2011 saw record investment volumes into Russian real estate with growth of over 170% above the level reached in 2010 and exceeding £5.3bn. The Russian construction industry has resumed growth in 2011 posting 4.5% output increase. Only in July 2011 construction was up 17.6% year on year, it?s strongest for two years. Such vibrant growth was last seen more than three years ago during the construction boom. The growth is attributed not only to increased private investment in commercial, industrial, infrastructural and residential construction projects, but also to a series of upcoming events during which Russia will play host to the world including the Asia-Pacific Economic Cooperation (APEC) Summit 2012, the Winter Olympic Games 2014 and the FIFA World Cup 2018. Key opportunities ? Moscow Expansion The Moscow city government have announced an ambitious plan to annex 144,000 hectares (395,000 acre) to the city's current territory and build 60 million square meters of housing and 45 million square meters of commercial real estate on new lands in the next 20 years. In effect, the Moscow area will more than double its size. The Moscow authorities will seek international expertise in order to develop a scheme for the first major expansion of the Russian capital in 50 years. The Moscow expansion plan will create opportunities for UK experts in urban planning, architectural and engineering design, environmental planning, project management, cost consultancy and transport planning. ? Skolkovo Innovation Centre In 2010 the Russian Government announced its plans to establish the Skolkovo Innovation Centre ? the modern centre for research and development. The construction commenced in the second half of 2011.The plan is to develop the Russian Silicone Valley for 25,000-30,000 people on the territory of 380 hectares. The construction is planned to conform to international green- construction standards making it a flagship for Russia. The project paves way for both energy- efficient building designs and a "green" waste-processing programme. The cost of construction of the Skolkovo innovation city is estimated at £2 - 2.4bn by 2015. ? Hospitality The Russian hospitality market saw robust growth in 2011 with Moscow city government announcing ambitious plans to build 40 new hotels by 2012 and over 300 by 2025. These trends are also demonstrated by regions outside Moscow and Saint Petersburg, where both domestic and foreign investors are gradually exploring the potential of other major Russian cities, such as Krasnodar, Kazan, Yekateringburg, Samara, Kaluga. ? Sochi-2014 Russia will host the XXII Olympic and XI Paralympics Winter Games in February ? March 2014 in Sochi. The potential opportunities for UK companies are enormous. The official delivery plan records some 218 projects to be constructed in Sochi. More than £ 20 bn will be spent on the preparation for the 2014 Winter Olympic Games. There has been particular interest identified in UK companies offering innovative products and services in the area of architectural design, civil engineering and construction. While the construction of sport facilities is nearing completion ample opportunities for construction companies still exist in the hospitality sector. ? World Cup 2018 Russia?s FIFA World Cup 2018 will generate large opportunities for UK business in the sector of construction. The plan suggests construction of 13 new stadiums in cities across the country, as well as renovation of three existing ones. The Russia?s federal budget will provide over £6 bn of funding for the FIFA World Cup 2018 sports infrastructure. The biggest spending is planned after the year 2013. ? Retail The Russian retail market remains rather unsaturated. However, steady sales growth and rising competition for consumers have piqued retailers? interest in new mall formats. In 2011 Russia remained in the top league of Central and Eastern European countries with the highest level of retail space development. Out of 146 shopping centres under construction in Europe in July 2011, Russia accounted for 19. Nearly one fifth of the first half of 2011?s European development total, just over 400,000 sq m, was completed in Russia. Moscow accounted for 36% of that new space with the opening of AFIMALL City and two other shopping centres. Industry experts estimate that the Russian shopping centre pipeline for 2012 is about 3 mn sq m, of which 25% will be constructed in Moscow and the surrounding region. Large cities outside the Moscow and Saint-Petersburg Regions attract increasing interest of developers and retailers due to reasonable rents in sought-after locations and the level of deficit in terms of shopping centre space. ? Residential Residential real estate is set to grow as well with the Russian government?s agenda to increase the volume of housing construction in Russia up to 90 m sq m per annum by 2015. Latest export opportunities - Construction Latest export opportunities - Russia Getting into the market A new system of so called Self-Regulating Organizations (SRO) has been introduced in 2010 replacing the issuance of licenses for construction and designing in Russia. SROs are the unions/ associations of builders and designers. SROs issue permits to their members, enabling them to proceed with their business activities namely with works in engineering survey, preparation of project documentation, construction, reconstruction, major repairs of capital construction facilities, which have impact on safety of capital construction facilities. Federal environment and technology organization Rostechnadzor has given SROs a right to issue Competency Certificates to a specific type of work. The Competency Certificates can be granted without time limitations for work/activity for both domestic and foreign companies. The list of SROs can be found at: (in Russian). More about doing business in Russia Contacts Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS). To commission research or for general advice about the market, get in touch with our specialists in country - or contact your local international trade team. ? Anna Medvedeva, British Embassy Moscow. Tel: +7 495 956 74 69 or email: ? Taissia Zelenkova, British Consulate General Saint Petersburg. Tel: +7 812 320 3221 or email: Contact your local international trade team Events BUILDEX Exhibition Website: Date: April 2012 MosBuild Website: Date: April 2012 Arch Moscow Website: Date: May 2012 ProEstate Forum Website: Date: September 2012 City Build Contact: Anna Medvedeva Website: Date: October 2012 HI-TECH Building Website: Date: November 2012 Moscow Urban Forum Website: Date: December 2012 Latest events - Construction Useful links More about OMIS and other UKTI services for exporters
Posted: 15 March 2012

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