With capital intensive real estate investment lagging behind most other sectors during 2010, many more investors are now actively acquiring, developing and hiring. Talk of a return to major IPOs would seem premature at best, but there is no doubting the renewed optimism.

Cobalt, as a result, has seen a distinct increase in recruitment demand. Hiring activity has been led primarily by domestic players, including the major banks such as Troika Dialog, Renaissance Group and VTB Capital, as well as private and notably state-backed development groups. The disbanding of the JER supported Marbleton Property Fund’s team is evidence of this, with those of their departed staff on the market now universally working for Russian firms. The single biggest recruitment drive in the sector this year has taken place within the real estate teams of Skolkovo Foundation, a government backed venture responsible for delivering Russia’s answer to Silicon Valley. International investor interest remains limited, if slowly improving. Clearly the levels of inward foreign direct investment into property remains a small percentage of what it was back in 2007. Nevertheless, one notable event has been the first acquisition in Russia by Heitman, who have had a presence in Moscow for some years now, of an office asset from Capital Partners.

The knock on effect of renewed market activity on salaries has been predictable. From the candidate driven market of 2007-2008, the power had previously shifted distinctly from employees into the hands of employers, due to vast redundancies (and in some cases total collapse) amongst real estate developers and consultancies and the lack of new opportunities appearing. Today, talk of “crisis-level” salaries is all but gone, with many more professionals enjoying pay at near 2008 levels. Large variances in remuneration do however exist within the market for roles at seemingly similar levels, reflecting a still emerging market and the fact that not all groups are yet “out of the woods” in terms of securing financing and active development projects. From those that are growing, there has been a return to commitments on bonuses, which in the crisis period were often included as discretionary elements in packages but paid out in just a few cases.

In Moscow, any growth has been greatly mitigated by the change in political scene since the ousting of city’s former Mayor, Yuri Luzhkov, in September 2010. Given the highly personalized nature of Moscow politics, the changing of the old guard has left some developers high and dry. Notably affected was Elena Barurina, owner of Inteko Group and Luzhkov’s wife, who had previously enjoyed access to choice development opportunities in the city. Following the relief and initial optimism felt in many quarters about Luzhkov’s departure, there soon followed the uncertainty over what the appointment of new Mayor, Sergei Sobyanin, would mean for the real estate market. Investors are playing a waiting game until the new rules of the game becomes clearer, and continue to point out that finding good investment opportunities in the city remains very difficult. Many of Cobalt’s clients are now looking instead to Moscow’s surrounding regions for business and especially retail park development opportunities.

Generally the future of the Russian real estate market combines, as is typical for Russia, a good deal of uncertainty combined with a lot of optimism. Solid GDP growth, increasing demand and the lack of quality commercial real is clear for all to see. The reality of investing into the sector, and of finding quality, experienced candidates with local market expertise, remains as challenging as ever. In such conditions, the demand for specialist recruitment services is becoming ever more acute, with Cobalt’s sector specific expertise continuing to be first choice amongst many of Russia’s leading real estate groups.

By Gergely Stewart