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Commercial real estate market amid changing borders of Moscow

This article examines the commercial real estate market of Moscow in the wake of changes to the city borders. It highlights the growth of construction and investment activities over the past two years. In particular, the focus is on industrial and agricultural land, which have attracted significant new investment, and the transformation of the Moscow city centre into a business and financial hub. The article also looks at the effect of the changes on rental prices and potential challenges for the market. It concludes by examining the opportunities presented by the new megaregions created and the role of the government in regulating the new market.

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At the beginning of July 2011. The Moscow Regional Duma signed an agreement on changing the borders of Moscow and the Moscow region. This document is intended to legislatively fix the borders, which have changed greatly over the past few decades, but have not been officially formalized before.

Commercial real estate rental market
Sergei Ivanovich Smirnov. Fair on the patronal day. 2007

The joining of new territories to Moscow will undoubtedly have an impact on the capital’s real estate market. As many experts note, the prospects for the development of the commercial real estate market in the capital are not as bright as they were at the beginning of the year. The revival of this market segment, noted in the first half of the year, after such serious changes may slow down. Developers are not sure how events will develop further, as there are no clear plans for the development of new territories. The redistribution of land plots will in any case affect the structure of the market, this applies to all types of commercial real estate: offices, shopping malls, warehouses and other objects.

Developers at a crossroads

As you know, according to the signed agreement, 102 new land plots with a total area of ​​723 hectares are joining Moscow, including the Lyubertsy aeration fields (578 hectares). The Moscow region will also receive new land – 328 hectares, including 216 hectares of the village of Tolstopaltsevo.

These are rather large territories that require the authorities to draw up a comprehensive urban planning plan, which will provide for administrative construction, social construction (educational and scientific centers, housing), as well as the construction of new business centers. And the solution of these tasks may take more than one year..

Redistribution of territories directly affects the construction of commercial real estate.

Due to this uncertainty, many developers were confused. This segment of the real estate market has just begun to recover from the consequences of the global crisis and is gaining momentum, and here the capital’s authorities presented them with a new “surprise”. The fact is that the redistribution of territories directly affects the construction of commercial real estate. In addition, domestic developers are highly dependent on the internal political situation in the country, and often success is determined by the ability to guess the direction of further actions of the authorities..

Of course, for capital developers, new undeveloped territories are the prospect of starting the construction of new projects, increasing work and, accordingly, income. However, this still requires winning a construction tender, which is not always easy and may cause some new problems..

Now the builders are at a crossroads, they are faced with the task of trying to guess which new districts will now move (if, of course, they do) federal and regional authorities; how many office space will be required for companies that want to be in the vicinity of the authorities; whether the International Financial Center will be built from scratch. Developers have a lot of questions, but there are no answers yet.

What to say about commercial real estate, which refers to social infrastructure, if the authorities have not yet decided on the housing program in the annexed territories.

General market conditions

In total, in the first half of 2011, about 330,000 sq. M. Entered the market. m of new office space (the figure fell by 15% compared to last year), and 165,000 square meters. m. of new warehouse space (the indicator grew by almost three compared to the first half of 2010, due to the commissioning of previously frozen facilities).


Mikhalchuk Natalia. Construction. 2008

The total supply of high-quality office space in the capital at the end of the second quarter of this year amounted to about 13 million square meters. m.

The completion of the construction of some large projects influenced an increase in the share of vacant office space during this period by 17%. Free premises are mainly represented by new projects that simply have not yet had time to find their tenants, as well as buildings that are not very attractive (with inconvenient location, some technical difficulties and other features that reduce the competitiveness of objects).

It should also be noted that according to the results of the first half of 2011, there was an increase in demand for high-quality premises in the office and warehouse real estate market, which affected the reduction in the share of vacant premises. Many experts point out the moderate positive dynamics of market indicators.

Developers are moving to other functional segments

The changed situation in the capital, new borders and annexed territories, are forcing construction companies to look for new development options. Some developers, who were previously focused exclusively on the commercial real estate market, are now making open statements about the change in the functional purpose of their projects under construction..

For example, instead of some planned office buildings, Promsvyaznedvizhimost is going to build residential buildings. The company is also currently exploring the potential for converting to residential properties and some of its other sites..

Representatives of Coalco Development announced a change in the functional purpose of the Crystal Towers project, within the framework of which it was planned to build about 160,000 sq. M. m of office space for apartments. While such examples in the capital’s commercial real estate market are sporadic, however, if such statements continue to sound further, it will be possible to talk about the formation of a new market trend. And this can already lead to a shortage of offices.

New projects enter the market

Despite the recent changes, some developers still take risks and declare the resumption of their projects frozen during the crisis. Thus, the Sistema-Hals company announced the resumption of construction of a class A business center SkyLight, the total area of ​​which is approximately 111,000 sq. M. m. The company plans to complete the work in the II quarter of 2012.

Also note that some companies have expressed interest in the construction of office centers for their own placement. For example, the World Wildlife Fund (WWF) recently presented a project for its new office, which will appear in the Taganskaya metro area, presumably next year. It was also announced about the start of construction of an office building for the company “Robert Bosch” in Khimki near Moscow with a total area of ​​about 57,000 square meters. m. The building is expected to be completed by the end of 2013 and will house offices, warehouses and a training center for the company..

“Hypercube” will become the country’s first office center-transformer.

Recently, an agreement was signed between the management of the Skolkovo Foundation and the construction company Aurora Group on the construction of the first facility in the Russian innovation city. “Hypercube” – this is the name given to the object, will represent the Center for Urban Development of the innovative complex “Skolkovo”. It will be the country’s first transforming office center.

The uniqueness of the project is that the building will provide for the possibility of independent replacement of functions and will have the ability to increase the total area of ​​the premises by 1.5 times. The developer is going to start the construction of the innovation center this summer, and the commissioning of the “Hypercube” is scheduled for February next year.

On the whole, the commercial real estate market in Moscow may undergo serious changes as a result of these innovations. Construction companies do not want to take risks and are not in a hurry to implement projects, which means that in the near future there may be a shortage of commercial, mostly office, real estate in the capital.

Since the authorities have not yet decided on plans for the development of new metropolitan areas, the developers act at their own peril and risk, trying to guess what will be more profitable as a result..

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Comments: 2
  1. Hadley

    How have the changing borders of Moscow affected the commercial real estate market in the city? Have there been any noticeable shifts in property prices or demand for commercial spaces?

    Reply
  2. Piper Griffin

    What impact do the changing borders of Moscow have on the commercial real estate market?

    Reply
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