We are now months along in Russia's painful readjustment to a new economic reality. This is courtesy of the global economic meltdown, lower commodity prices and the credit market liquidity crunch.Russia appears to be in the middle innings of this humbling downsizing. The country's core metropolitan commercial real estate markets have already been significantly repriced and are about to be restructured.
Property developers' pre-crash boom stories were suspiciously uniform. All were based on severe supply shortages, endless growth in demand and high barriers to entry. These points have now been turned on their heads. The investment story lost its underpinnings to market fundamentals when commercial rents effectively doubled over 18 months in 2007 and 2008, far outstripping growth in underlying demand measured by a host of proxies including growth in per capita gross domestic product, household consumption and investment.
