Commercial property in Russia looks set to remain subdued according to a Capital Economics report because of the depressed level of economic activity in the country.

Gross Domestic Product (GDP) growth is forecast to increase from 1% to 4% in 2010 but would most likely slow again in 2011, down to 1.5%, with it unlikely to return to pre-crisis levels until 2013.

The report stated: ‘With economic activity and employment in Russia likely to remain at depressed levels over the next few years, the level of office occupier demand is also likely to remain subdued. Therefore, the chances of a rapid return to positive rates of rental value growth seem slim to us.’

Office vacancy rates in Russia have fallen by over -50% since their peak in Q2 2008, which is worse than any other EU country, according to Capital Economics. In comparison, other countries in emerging Europe such as Hungary, saw a -8% fall and Poland a -28% drop.

Moscow vacancy rates fell from 19% to 17% in Q3 2009 as developers scaled back the pipeline of speculative office space due to complete in 2010, with occupiers sensing the bottom of the rental cycle taking advantage of rent reductions to move to better locations with higher quality space.