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News Release

London, Moscow

Moscow has taken the lead over London by real estate demand

LaSalle Investment Management is presenting E-REGI 2011 Ranking

London, Moscow, 26 October 2011 – Moscow has taken first place in a Ranking “European Regional Economic Growth Index” (E-REGI) 2011. 2011 result shows the exceptional growth potential of Russian capital. E-REGI is prepared by LaSalle Investment Management and identifies cities across Europe where demand for real estate is likely to be strongest in the medium term. As such, E-REGI provides investors, developers and occupiers with a guide to the likely winners and losers in Europe in the nearest future.

After a spectacular entry into the E-REGI in 2009 and further gains in 2010, Moscow now tops the rankings for the first time. The result reflects the size and exceptional growth potential of the region, and comes in spite of serious ongoing concerns regarding its business environment E-REGI favours wealthy global cities with strong fundamentals, such as London, Paris and Munich, yet London loses its place at the top of the ranking in 2011. It scores consistently well in all measures but is unable to match the exceptional growth potential of Moscow.

Alongside Russia as a sizeable emerging economy is Turkey. Istanbul climbs into the top 5 of the rankings for the first time. The city is quickly establishing itself as a regional financial centre, whilst the rest of the country is also seeing the benefits of exceptionally high growth.

Headline Results

• The E-REGI 2011 covers 326 regions across 33 countries in Europe with a total population of approximately 780 million. Zagreb in Croatia has been added to the model to reflect its growing stature in Europe and likely accession to the European Union. The analysis within this paper focuses on a subset of 105 major cities (metros with ≥500,000 inhabitants) plus all national capitals.

• The results of the 2011 E-REGI reflects the slowdown in the region’s real economy in the first half of 2011 and the growing uncertainty surrounding sovereign debt. As a result, most of the changes in scores from 2010 to 2011 are a result of a change in growth expectations. E-REGI continues to favour large agglomerations, as well as cities that boast strong fundamentals and high levels of wealth.

• After climbing from 6th to 2nd in last year’s E-REGI rankings, Moscow continued to build on its success and is now top of the table. This demonstrates the importance of size and growth to a city’s potential, although a negative business environment score will continue to deter foreign businesses and investors.

• London lost its position at the top of the rankings, slipping to 2nd in 2011. The fall is due to a reversal of last year’s gains in GDP and employment growth. The renewed global financial concerns have also impacted London indirectly. The city’s wealth and business environment scores still far exceed those of 1st placed Moscow, only falling behind on growth potential. London is a mature, dynamic and resilient economy which continues to set the pace for the rest of western Europe.

• Munich retains its 2010 ranking of 3rd, although the gap between 3rd and 4th is narrow. Munich has a marginally higher growth and business environment score than Paris, but is less wealthy. Germany is also the country with the highest number of city regions in the top 20 (five), highlighting its relative economic strength, as well as the accelerating polarisation between strong and weak European economies.

• Paris holds on to 4th place in the E-REGI rankings. This is largely due to its high level of wealth, but it also boasts a diverse and dynamic economy. Much like London in the UK, France is dominated by Paris. However, France’s regional cities tend to outperform those in the UK in the rankings.

• Cities across Turkey all saw notable improvements this year. The most prominent of these was Istanbul, which climbed into the top 5 for the first time. The city is quickly establishing itself as a regional financial centre and, like the rest of the country, is also seeing the benefits of exceptionally high demographic and economic growth.

• Kiev (58/-2) entered E-REGI in 2010 with a slightly belowaverage ranking. This year, the Ukraine capital remains in a similar position. Similar to the Russian regions, its score is almost entirely driven by growth. Moreover, the wealth component is very low and the business environment detracts from its overall score. This pattern can be observed for all Ukrainian locations.

Moscow (Russia)

• Ranked second last year, Moscow (2011 rank is 1/Change from 2010 is +1) has now taken over from London at the top of the E-REGI 2011 rankings. London lost ground this year due to a weaker employment score, whilst Moscow’s growth potential and size stood it apart from the rest. Over one quarter of Russia’s population live and work in the Moscow region.

• Potential growth by itself is not enough to earmark a city like Moscow as a suitable investment target market. The wealth score for Moscow and the other Russian cities is clearly belowaverage, denoting its less-developed nature. Additionally, all Russian cities received a negative business environment score. This is primarily due to the lack of transparency and uncertainties around how foreign businesses can operate effectively.

• Russia is one of the few countries to have gained from high energy prices. Higher oil prices provide an upside risk to Russia’s growth, fiscal coffers and capital. However, a reliance on oil prices adds significant volatility. Private consumption is the key driver to Russia’s growth, even though rising inflation will constrain household spending. With parliamentary and presidential elections approaching, further transfers and fiscal stimuli are expected to boost household income and consumption. The crucial issue going forward is to restore confidence amongst foreign investors still wary of investing in Russia.

• Most other Russian cities featuring in this year’s E-REGI improve their positions: Yekaterinburg (49/+28), Nizhny Novgorod (50/-1) and St. Petersburg (95/+2). Only Moscow and St. Petersburg are expected to grow in terms of population. Yet despite their shrinking populations, these cities remain attractive to workers and businesses from the rural regions and can boast above-average growth rates.

• Nevertheless, their stronger growth prospects cannot entirely offset their low levels of wealth and significant operational and security risks in the trade environment. This is likely to continue to put off institutional investment.

• Strong potential of Moscow real estate market was the main topic of Jones Lang LaSalle webinar hold on October. This year will be the record year for Russian real estate investment volume. During Q1-Q3 investment in Russia is up 80% YoY, to $5.25 bn. Moscow share is 74%, or around $3.9 bn. The total sum of 2011 investment is reaching $7.0 bn, but can possibly increase to even $8.5 bn. Observing increased investors activity we revise our former forecast of $7 billion and raise it to $8.5 billion, told Tom Devonshire-Griffin, National Director, Head of Capital Markets, Jones Lang LaSalle Russia & CIS.

Andrey Postnikov, Regional Director, Executive Board Member, Jones Lang LaSalle Russia & CIS, mentioned: “Highly increased commercial real estate investment volume is the best illustration of increasing investor’s interest to the Russian market at whole and Moscow market in particular. Moscow government programs for the expansion of the city limits and replacing some of the attraction centres – for example, government offices, financial and business centre, high technologies and research – as well as the main macroeconomic factors of Russian economics that remain positive must catalyse the further growth of real estate investment attractiveness of Moscow and Moscow region.’

You can get more information about E-REGI model on request.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 167 million square meters worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $45.3 billion of assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg and Kiev. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010 and 2011 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.For further information, please visit our web site