RCA Insights

Russia Invades Ukraine: The Picture for Commercial Property

By on February 24th, 2022

The grim news of Russia’s invasion of Ukraine means Western-backed sanctions on Russia are poised to reach unprecedented levels. For global real estate, the immediate and direct impact from these measures will likely be negligible.

Russian capital has very little presence in global commercial property markets: outbound flows have averaged just $330 million per year in the last five years and known Russian ownership of commercial assets in the world’s largest property markets is sparse. Additionally, Ukraine’s institutional property market is small and domestic, therefore, international exposure is minimal. 

The impact on commercial real estate will likely be indirect, as the effects of the conflict feed through into commodity prices, inflation, bond yields and ultimately perhaps economic growth. The main mechanism is likely to be through higher energy prices, which add to the inflationary forces already being felt across most European economies. Brent crude prices breached $100 a barrel for the first time since 2014 and European natural gas prices spiked in the hours immediately after the invasion of February 24th 

Furthermore, some of Europe’s largest economies, Germany and Italy in particular, have a high reliance on Russian exports of natural gas and this may have more acute consequences for these countries than others such as the U.K. and France, which are less reliant. However, Russia accounts for 38% of all the European Union’s gas imports, so the effect will potentially be widely felt.

The gap between European property yields and bond yields is above the long-term average. However, the spread is already being squeezed by rising rates and an inflationary shock will likely impact property yields, which remain at record lows in many of Europe’s core markets.   

Looking further out, property is a long-term investment and a secure income stream from core assets can act as a buffer against volatility in other asset classes and the outside world. But Russia’s invasion is another fracture in the post-Cold War settlement and may prove be a harbinger of even more uncertain times to come.


© 2022 MSCI Inc. All rights reserved.

Tom Leahy

Tom Leahy

Executive Director, MSCI Research

Tom leads European commercial property real estate research, focusing on capital markets. A regular speaker at industry and client events, he is the chief author of quarterly reports on European and global market trends and capital market liquidity. He joined MSCI in 2021 through its acquisition of Real Capital Analytics. Based in London, he previously he worked in research at two U.K. property consultancies. He holds a bachelor’s degree from Durham University.