The Russian real estate market is currently experiencing complex dynamics. In the first half of 2025, overall demand for apartments declined by approximately 15%. However, within this broader trend, a clearly growing segment – serviced apartments – has emerged. Sales in this segment have risen, with its share of total demand surpassing 65% and continuing to expand.
A new generation investment format
Sustainable demand for serviced apartments is driven by several factors: strong investment appeal, a boom in domestic tourism, and a shortage of high-quality hotel inventory. While the supply of traditional apartments has declined by 16%, serviced apartments have shown greater resilience, decreasing by only 5%. As a result, their share of total supply is steadily increasing. This format is particularly in demand in Moscow, where a number of new serviced apartment projects are expected to launch. Sales data from ongoing developments indicate that serviced apartments stand out from conventional residential complexes with their high sell-out rates.
Profitability as a key driver
The primary reason for their growing popularity is clear economic advantage. Serviced apartments are proving to be one of the most attractive investment instruments for investors, combining strong demand with promising returns. They offer an average annual operating yield of 8-15%, which sets them apart from residential and standard apartments. In premium locations, such as city centers and resort areas, returns can reach 15% or more. The average investment payback period is 6-8 years, and with strategic project selection during the construction phase, it can be reduced to 4-6 years, a significant improvement compared to the 12-15 years typically required for conventional apartments.
Location and management: Key success factors
Investment success in serviced apartments hinges on two critical factors. The first one is choosing prime location. Properties located in urban centers, tourist hubs, or resort destinations with robust infrastructure and excellent transport links consistently deliver the highest returns. For instance, apartments situated within a five-minute walk of a metro station often achieve occupancy rates of 85-90%. The second aspect, which is equally vital, is professional and experienced management company. Network operators like VALO and InREIT use strategic marketing and efficient service delivery to boost profitability by 20-25%. Emerging hybrid models that combine residential living with coworking spaces (Bleisure: business + leisure) are also gaining popularity, showing a 10-15% increase in returns while helping to offset seasonal fluctuations.
Balanced risks and growth outlook
While the advantages are clear, investors should also be mindful of risks. The non-residential classification of serviced apartments means utility costs are typically 10-30% higher, and property tax is 0.5%. Moreover, profitability is highly dependent on management quality: an incompetent management company can lead to a 30% reduction in returns. Additionally, high loan costs continue to challenge the broader market.
Despite these factors, the ongoing growth of domestic tourism is set to fuel market expansion. By 2027, the Russian serviced apartment sector is expected to evolve from scattered developments into a more structured market, with network operators accounting for over 60% of the segment. The introduction of tougher standards and unified requirements for safety, design, and sustainability, including PET-friendly features, will enhance market transparency and appeal – especially to conservative investors seeking stable passive income in an unpredictable economic environment.
By Alexei Bravin, CEO of G5 Architects