Experts Say Multiuse Not So Handy

MTThe 108-meter-tall multiuse MonArkh Center on Leningradsky Prospekt
Multiuse complexes have become popular in the city's expensive, land-starved real estate market, but many participants at a recent conference said the downsides to such projects often outweighed their advantages.

"It's very rare here that a developer can build very well in different segments because they all specialize," said Vladimir Pantyushin, head of the economic and strategic research at Jones Lang LaSalle.

"Single-use projects … have fewer variables. With a multiuse project, you have to have a really solid business plan," he said. "They allow you to take the top of the market through the synergy, but [without] a good plan and good marketing, the whole system will collapse."

Defined by the Urban Land Institute as a structure with three areas being used for different purposes, such as offices, housing and recreation, multiuse centers nonetheless found a few supporters at the sixth annual Adam Smith Russian Real Estate Summit last week.

Marianna Romanovskaya, deputy general director at TriGranit Development Corporation, said they were easier to fund because they can be refinanced as each phase is completed.

"With a proper business plan, multiuse projects are the best idea for today, particularly because land is scarcer and more expensive," Romanovskaya said. "There is not going to be more street retail in the center of Moscow. You can't put more shops on Tverskaya," she said.

Analysts at CB Richard Ellis, a real estate firm that participated in the conference, cautioned that the format could prove problematic for the Moscow market, where the trend only caught on a year ago.

The company's strategic consulting and valuation department said in e-mailed answers to questions that organization was a major problem and that space was not used efficiently in such projects.

The complexes do have the benefit, however, of "synergy between tenants and location," said Pantyushin, of Jones Lang LaSalle.

"You can take the best 10 percent of office and retail tenants and attract affluent people to live there, and in simple terms, you could charge higher rents," he said.

But despite the apparent benefits of this synergy and the need to deal with high land costs, the complexity of organizing a successful multiuse complex is reason for caution, analysts said.

Christian Cuhls, director of Strategic Development Services, brought the point home during his presentation on financing and improving a multiuse center. Though his talk was outlined into just five topics, Cuhls ran over his time after getting bogged down in the complexity of creating and then running such a center.

A developer of a multiuse facility must not only know what paint will catch a shopper's eye, but also how many parking spaces are needed, he said. If the complex includes offices, then those tenants' needs must be taken into consideration. The problems are multiplied when a hotel is thrown in the mix, in which case the developer has to learn about everything from bedsheets to bellhops.

"You have to be very clever, a little bit skillful, and have the right people to do this," Cuhls said.