Green Building and Technologies

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

Last updated: 28 Feb 2011


Russia’s construction market, though having suffered during the global economic crisis, is on
the rebound and is expected to grow in 2011 year-on-year. As a result, more projects will be
available for implementing green-building techniques, technologies, and materials. Building
on the opportunity of overall construction market growth, greater end-user interest in and
desire for energy efficiency and government pushes for more stringent environmental
regulations increases the motivation for contractors and builders to pursue green building.

The existing LEED standard and certifications and experience in the area of green and clean
building are distinct advantages for U.S. firms over some of their competitors. However, the
BREEAM standard is more popular in the Russian market at present, and Europe enjoys a more
environmentally friendly reputation. At the same time, efforts are underway to establish a
Russian standards system more suited to the country’s particular environmental and climate
conditions, which would to some degree undermine the value of LEED and BREEAM standards,
but would also increase green building interest and market potential.

Market Overview

Overall construction market

Opportunities for green construction in Russia are dependent on overall construction
nationwide. In the wake of the global financial crisis, construction spending in Russia in 2009
plummeted to 84% of 2008 spending at constant prices, from 4528.1 billion to 3869.1 billion
rubles, according to Goskomstat, the Russian statistical agency. Though spending for the first
half of 2010 has continued to drop compared to the same period in 2009, the fall has slowed
down significantly: 1H10 spending (1549.5bn RUR) was 96.9% of 1H09 figures (1558.8bn RUR)
at constant prices.

In terms of area, 31.8 million sq. meters of floor space were constructed in 1H10 compared
with 32.0 million in 1H09. Until the global financial crisis struck, Russia was seeing
construction spending increase by double-digit percentages year after year, and according to
a recent article in the New York Times, Russia’s capital “remains the largest commercial property construction market in Europe.”

Construction is expected to see real growth again in 2011 as the economy improves after two
years of contraction, the country prepares for the 2012 APEC Summit in Vladivostok, the 2014
Olympic Games in Sochi, and the 2018 FIFA World Cup. In addition, President Dmitri
Medvedev’s Skolkovo technology park project recently attracted a number of U.S. venture capital groups and California Governor Arnold Schwarzenegger to Russia to investigate
investment opportunities, which will include construction of facilities.

Russia’s construction sector is still in the process recovering from the economic crisis, which
saw some companies lay off as many as 75% of their workers in 2008 after experiencing
record-setting growth between 2004 and 2007. This challenge presents an opportunity to stillsolvent, well-backed construction companies: experts estimate that the crisis has reduced
material and labor costs by up to 30%.

Retail construction has shown the strongest growth emerging from the crisis, though industrial
construction is supposed to have the strongest growth over the next five years, with almost
20% growth predicted1. Due to Russia’s extreme winter climates, demand for new
construction is seasonal.

Green Building and the Regulatory Environment

Green building in all of its facets – from green architecture to energy-conserving materials
and fixtures (toilets, light bulbs, appliances) – is a nascent sector of the Russian economy,
though it is increasing in popularity as domestic consumer energy prices rise and people and
organizations become more conscious of spending. The upcoming deregulation of energy
prices in Russia is expected to increase costs for end-users by up to 200% in 2011.

In addition, the government has initiated efforts to stem domestic energy consumption, as its
export is significantly more beneficial to the country’s economy. It has been estimated that
simply modernizing Russia’s energy efficiency could increase GDP by 3-4%. To that end, the
government has begun to pass and enforce legislation regulating efficiency standards of new
construction, and offers incentives to companies meeting further recommendations on

One example of such green measures is bill No. 111730-5, “On energy saving and energy
efficiency improvement.” Because heating is centralized in many of Russia’s older buildings,
consumers often resort to opening windows to moderate temperatures in winter. The bill will
require the installation of energy-monitoring meters in new residences, which representatives
hope will encourage residents to monitor and regulate consumption when possible and reduce
domestic energy consumption by as much as 20%. Another example is the “New Light”
program, which has budgeted 100 billion rubles ($3.3 billion) for replacing energy-wasting
incandescent light bulbs.

In May 2010, President Medvedev issued a decree holding all municipal governments
responsible for reporting measures they have taken to ensure energy efficiency, stating that
less energy waste in government and school buildings would free up money for public benefit.

The government is also encouraging energy efficiency through changes in zoning laws: St.
Petersburg and other cities encourage new construction to meet environmentally-friendly
standards, and many of these local recommendations are expected to become mandatory
over the next few years.

Read the full market research report

Posted: 18 February 2011, last updated 28 February 2011

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