Vacant area with potential gold value: seeking commercial development and modern offices
Yekaterinburg's Commercial Real Estate Market: Rising Prices and Limited Options
In Yekaterinburg's commercial real estate landscape, contradictions abound. The shopping center sector is saturated, yet office spaces are scarce, and demand for warehouses is skyrocketing. These observations stem from analyses conducted by the Ural Real Estate Chamber (UPN) in 2024. Our site has dived into expert perspectives on this complex market and its key segments.
Large shopping centers remain in the doldrums
According to Mikhail Khorkov, head of UPN's analytical department, Yekaterinburg has faced a shortage of quality commercial spaces for quite some time now. The shopping center market has yet to recover from the pandemic and the exodus of key foreign tenants, leading to very few new large projects in the Ural capital. The "Golden" shopping and entertainment center is the only exception. Analysts don't anticipate any new shopping centers appearing in the next two to three years.
Yekaterinburg's shopping center market currently stands at 1.3 million sq.m, having barely grown in recent years. New retail spaces are cropping up due to street retail and small-format objects; however, large objects that drive significant footfall and form the primary offer are virtually nonexistent. This lack of substantial growth projects is a significant hurdle in the market's development, as Khorkov points out.
A scarcity of office spaces
Khorkov also reports a clear shortage of quality office space, despite minimal changes in volume over the past five years. Companies struggle to find vacant spaces, and landlords are actively raising rental rates. At present, around 90,000 sq.m of office real estate is under construction – a number that's considerably lower than 2010 figures, when over 200,000 sq.m was being built.
Several projects are currently in the planning stages but are not entering the market due to rigid financing conditions. A significant expansion of the primary market for office real estate is expected once the key rate decreases. Current vacancy rates, which are at a historic low, stand at around 1% for Class A spaces and 3% for Class B. Rapid rental increases are the result of this shortage.
Intriguingly, increased demand for office spaces isn't linked to a growth in the number of companies in Yekaterinburg – the number has actually decreased since 2016-2017. The market is thriving due to the rise in the number of employees in organizations. Since 2017, the number of officially employed in the region has increased by 9%, which fuels demand for quality commercial spaces.
Scarcity reigns in warehouse spaces
Anna Yunysheva, a broker for commercial real estate at "Buro Neдвижимости No 1," sheds light on the reasons behind the warehouse space shortage. Many anticipated that, following foreign companies’ departure in 2022, spaces would become available. However, barely more than 10% of Russian objects, roughly 3% on the Ural, and less than 1% in Yekaterinburg were actually freed up. These spaces were quickly occupied by new tenants, leaving the shortage relatively intact.
2022 investment activity in the warehouse sector was disappointingly low, with investors adopting a cautious stance. A revival was observed in 2023, but development slowed again in 2024-2025 due to the increase in the key rate.
The vast majority of new warehouse properties are constructed based on preliminary lease agreements and are often leased out before they are operational. One significant issue with state support: programs like industrial mortgages do not support classic warehouse projects, and no specialized "warehouse mortgage" currently exists. Limits for industrial projects are often exhausted quickly, and obtaining support requires a mountain of paperwork and stringent conditions.
Alternative Solutions
Some buyers of retail, office, and warehouse spaces have discovered an alternative in the form of standalone buildings (SBOs). These buildings have no shared walls or roof with neighboring structures and have their autonomous communications and flexible usage. They are self-contained buildings with their own land and territory, providing ample space for parking, landscaping, and organized vehicle entry/exit.
Entrepreneurs customize these spaces for their needs: opening showrooms or using them for production purposes. Property investors are also drawn to them as sources of passive income from leasing internal spaces. If the purpose changes – requiring reconstruction – the cost of these objects significantly increases, making them attractive to investors and long-term business enthusiasts.
The potential of SBOs in Yekaterinburg's real estate market is immense; they offer possibilities for expansion, modification, and reconstruction. If the land plot allows, the building area can be expanded, height raised, or extended along the perimeter, believes Taraskina.
As the shortage of quality office spaces persists and the shopping center sector stagnates, local developers, investors, and commercial real estate brokers are seeking solutions to address the scarcity. Delays and slowdowns in new large-scale projects persist due to high interest rates, expensive loans, and a lack of new large projects. Moreover, the warehouse space crunch continues in Yekaterinburg. Several contractors are exploring the option of purchasing standalone buildings, which provide flexibility for warehouses, stores, and rental spaces.
[1] Secondary housing and commercial property prices in Yekaterinburg have increased by approximately 1.4% in the secondary market, reaching about 125,000 rubles per square meter, indicating a tightening market with rising demand and constrained supply
[2] Some international retailers and manufacturers have sold or are selling their premises to local investors, leading to a restructuring of ownership but also potential delays or slowdowns in new development projects
I'm not sure about investing in Yekaterinburg's commercial real estate market, especially the office and warehouse sectors, given the scarcity of quality spaces and the high demand. Despite the rising prices in the secondary market, finding substantial growth projects may prove challenging due to high interest rates, expensive loans, and a lack of new large projects. If I were to consider an alternative, I might look into standalone buildings (SBOs) that provide flexibility for warehouses, stores, and rental spaces. However, obtaining funding for such projects could still be a hurdle.
