As the Russian economy shrinks, commodities consultant Alexander Prosviryakov is living larger than ever in Moscow.
Prosviryakov, who works at a Big Four accounting firm, got a bargain in April on an apartment two blocks from Pushkin Square -- Moscow’s most popular meeting place. He said he’s paying about half as much in rent as the 120-square-meter apartment (1,300 square feet) went for last year.
“As a single guy, at first it didn’t even occur to me to look for such a big place,” Prosviryakov, 34, said. “But when I started testing the market, I realized there’s a new reality and figured, why not live large.”
Rents in Moscow’s most coveted neighborhoods are plunging as demand withers with the exodus of U.S. and European executives. Foreign corporations are cutting costs as profits drop after oil prices crashed and western nations imposed sanctions to punish Russia for annexing Crimea from Ukraine.
“We’ve seen some industries that demanded top-notch apartments pull out of Russia, like the oil and gas sector, and so far they haven’t been replaced,” said Elena Kulikova, head of realtor IntermarkSavills’ property department in Moscow. “On the plus side, it’s a great time to find a new place.”
Schlumberger Ltd., the biggest oilfield services provider, pulled all employees who are U.S. or European Union citizens from Russia last year due to the sanctions, according to two people familiar with the matter. A Schlumberger spokesman declined to comment.
In March, General Motors Co. idled a plant in St. Petersburg and halted sales of its Opel brand and most Chevrolet models. Societe Generale SA, which expects to lose as much as 300 million euros ($340 million) in its Russian unit this year, is planning an additional 1,000 job cuts following staff reductions in the first quarter.
Luc Jones, commercial director at recruiter Antal Russia, said more foreign executives are departing than at any time since the 2008 financial crisis.
“Expats are leaving as companies realize that in the current economic climate there’s no need to pay someone a big salary, a generous housing allowance and fly them home a couple of times a year,” Jones said.
As foreign employees exit the expensive neighborhoods they favor, rents have fallen by about 40 percent on average in dollar terms over the last year, according to David Gilmartin, owner of Troika Relocations, which specializes in placing expatriates in homes.
“The rental market is being hit by two things,” Gilmartin said. “It was overpriced to begin with, and the number of people looking has fallen dramatically.”
The owner of a 220-square-meter apartment in the prestigious Arbat region rented the unit to an international oil company for $14,000 a month until December. The landlord had to drop the price to the equivalent of $4,500 before finding a tenant this year, Kulikova of IntermarkSavills said.
Alex Shifrin, who headed Saatchi and Saatchi’s Russia office until it was folded into another advertising agency in March, left the country in early May. Today’s economic downturn is the third he has experienced in Russia since arriving in 1998.
“Russia isn’t a long-term play. Whatever gains you make get erased when the next crisis rolls around,” Shifrin said days before returning to his native Canada. “It’s time to go someplace where I can feel secure about my family’s financial future.”
The ruble has strengthened 21 percent against the dollar this year after losing almost half of its value in 2014. The currency slid 1.4 percent to 49.97 by 4:13 p.m. in Moscow.
Foreign executives filled neighborhoods such as Patriarch’s Pond, with its cafes, boutiques and hair salons, and the Tverskaya area prior to start of the hostilities in Ukraine. They made up as many as 70 percent of renters of apartments in Moscow’s most exclusive areas, according to IntermarkSavills. Apartments in these neighborhoods currently rent for an average of about $5,600 a month, the lowest since 2009.
Fewer expatriates are walking through the doors at Chicago Prime, a steak house near Tverskaya, manager Ken Frost said.
“The only people who are still here are the ones that really want to be in Russia,” Frost said on a slow Tuesday night, with only a few foreigners watching a hockey game at the bar. “You don’t get the hired guns anymore.”
As the Russian economy sinks into its first recession in six years, foreign managers won’t be returning to Moscow anytime soon. PageGroup, the U.K.-based financial services recruitment company, closed its Moscow office. SThree, which focuses on hiring for the energy industry, reduced its operations this month to a skeleton staff of one from 35 last year
“It will be at least one to three years before most expat managers return,” said Nick Rees, who was country director for SThree until May 1. “If the sanctions are lifted in July, oil companies may bring back some foreigners as they restart technically challenging projects, but other sectors will have a much longer wait.”
Prosviryakov, the consultant, has a floor-to-ceiling painting of an elephant in his apartment -- a metaphor for his situation.
“Some people don’t want to talk about the elephant in the room,” said Prosviryakov about how some Russians benefit from the country’s downturn. “Obviously Russia’s economic problems hurt everyone. Still, I’m loving my new place.”