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analysed by bne IntelliNews, given its large market share, analysts saw Russian national air carrier Aeroflot as the main beneficiary of the subsidies worth a total of RUB23bn ($360mn). Reportedly, the mechanism of distribution proposed by the ministry would be proportionate to the fuel spending on passenger transportation in 2018, which would benefit the troubled carrier UTAir the most given it has the highest share of domestic routes among the large airlines. Likewise, Aeroflot, Urals airlines, and Nordwind, with the share of international flights at over 50%, would be disadvantaged.
9.1.4 Construction & Real estate sector news
Construction has been in the basement for several years, but in September it grew +0.8 y/y after +0.3% y/y in August. Construction was contracting for all the crisis years of 2014-2017, but picked up sharply in 2018, only to fade away to next to nothing in 2019. The growth rate of construction in September was a welcome relief, but still remains well below what would constitute a “recovery” in the sector. However, Alexander Isakov, chief economist at VTB Capital, believes there is something wrong with the reporting and the headline construction expansion rate is not consistent with the observed average growth in construction materials (i.e. non-metallic mineral products were up +5.5% y/y). Construction statistics have already provided some surprises as it was a sharp revision of construction statistics last year from near zero to over 5% that lead to Rosstat reporting the surprisingly strong 2.8% GDP growth in 2018. Now Isakov is expecting a similar upwards revision. “Thus, we expect a considerable upward revision to the value of construction works completed for 2019 as a whole,” he said.
Russia is opening more new floor space in shopping malls than any other country in Europe , real estate firm Cushman & Wakefield has found. In the first half of 2019, around 200,000 square meters of new mall space was opened in Russia — equivalent to 27 football fields and accounting for nearly one-quarter of all new retail complexes in Europe. Moscow alone accounted for around 12% of all Europe’s new developments opened during the first six months of the year. Russia is home to Europe’s largest mega-mall, Aviapark in Moscow, which has 230,000 square meters of retail space, while a typical mall comes in somewhere between 30,000 and 100,000 square meters. The splurge on shopping malls is set to continue, Cushman & Wakefield said, with another 1.4 million square metres set to open in the second half of 2019 and 2020 — placing Russia behind only Turkey in the European rankings over the next 18 months.
The city of Moscow has budgeted 3.4mn sqm housing volumes in next three years . The renovation programme is to account for 2.8mn sqm, implying blended annual volumes of 0.9mn sqm and covering total budget costs of RUB 417bn. In 2018, Moscow housing completions reached 3.5mn sqm, while the renovation programme was 0.25mn sqm (7% of the total). The announced targets imply a sizable acceleration, while the aforementioned state completions could account for 25% of total, putting upward pressure on supply and downward pressure on prices for the commercial segment in the medium-term. The announced budgets imply an average cost of some RUB 150,000 per sqm, which is sufficient for the construction of quality real estate and compares with RUB 80-90,000 per sqm on the mass market. The renovation programme was launched in 2017 and targets 16mn sqm of new housing by 2032 for 1mn people. The programme has been undertaken at a modest pace so far, but the announced volumes suggest a significant
105 RUSSIA Country Report November 2019 www.intellinews.o