Foreign companies own about 10 million sq m in Moscow

02.02.2024 Source: Consul Group

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About 8% of commercial property in Moscow, or about 10 million sq m, was owned by foreign legal entities at the start of 2024.

The figure covers retail and office property, hotels, warehouses and consumer-service buildings. Before 2022 it reached 12.3 million sq m, so almost one square metre in ten was held through a foreign structure.

Because businesses have been redomiciled into Russian special administrative regions, the stock owned by foreigners has fallen by 2.3 million sq m over the past two years.

On Consul Group's estimates, as of January 2024 foreign legal entities registered in unfriendly states (chiefly Cyprus, about 90% of the companies, and also the Netherlands, the Virgin Islands and Panama) own about 10 million sq m in Moscow.

They own about 2 million sq m of commercial buildings and premises directly.
Through control of a Russian legal entity they own more than 8 million sq m of commercial buildings and premises.

"That is 7.7% of all commercial property in the capital," Consul Group said. The experts put the total stock of commercial property in Moscow at 130 million sq m. Property of the Russian Federation and of the city of Moscow is left out of the figures, and so are garages and underground structures.

The Moscow commercial property market before and after redomiciliation

The study covers 2022 and 2023, when companies were actively moving in the wake of sanctions. The legal possibility of such a move into Russia had existed since 2018.

The main problem for the Russian beneficiaries of the property, Sergei Pivovarchik, managing partner of Consul Group, explained, was that in 2022 the registrars of foreign companies based in unfriendly countries stopped actively assisting their clients. In particular, because of the sanctions, they stopped issuing powers of attorney to Russian citizens.

"The lack of such a power of attorney had a serious effect on running a rental business in Russia. One of our clients had a power of attorney expire, and the bank blocked the actual beneficiary's access to the foreign company's account at a Russian bank until a new power of attorney was produced. The Cypriot registrars refused to issue one. It also became more common for funds to be frozen on the accounts of foreign companies controlled by Russian citizens until a KYC (know your client) procedure had been completed," Sergei Pivovarchik said.

Without a power of attorney from a foreign company that owns property in Russia directly, the beneficiary could not register long-term leases, or take any other step in relation to the property. "In effect, a complete loss of legal control over the property," the expert said.

The problem can be solved, he said, by redomiciliation: re-registering the company in a friendly jurisdiction or in a Russian one. The Russian jurisdictions are the special administrative regions of Kaliningrad Region (Oktyabrsky Island) and Primorsky Krai (Russky Island).