Logistics Project Feeds Market

For MTPushkino's first 70,000-square-meter stage is slated to open in September.
An extreme shortage of international-standard warehousing facilities in Moscow continues to spur developers to outdo each other in the size of their planned industrial projects.

One of the latest additions to the city's growing stock of massive warehouse development projects -- most of which are still in the pipeline -- is the $120 million, 211,000-square-meter Pushkino Logistics Park.

Located 15 kilometers northeast of Moscow, on a 35-hectare site along Yaroslavskoye Shosse, construction of the Class-A Pushkino will be divided into three stages of roughly 70,000 square meters each, said Alexei Grishko, senior consultant at Jones Lang LaSalle, the project's marketing agent.

The first stage, currently under construction, is scheduled for completion in September, and 90 percent of it has been pre-leased to DHL. The second stage is slated for completion in the end of 2005, and the rest of the project should be done by mid-2006, Grishko said.

Pushkino's developer is Lone Star Venture, a partnership launched in late 2003.

The project is being financed by Kazakhstan's Capital Partners, whose other Moscow projects include the $150 million Ritz Carlton Hotel -- currently being erected on the spot of the former Intourist hotel on Tverskaya Ulitsa -- and the $300 million, 325,000-square-meter Metropolis retail and office complex near the Voikovskaya metro station in the city's northwest, scheduled to open some time in 2007.

Capital Partners did not disclose the amount of its investment in Pushkino.

But market watchers polled by The Moscow Times estimated that it may be in the vicinity of $115 million to $120 million, with construction costs of roughly $500 per square meter, and land and communications infrastructure costing $450,000 per hectare.

Analysts said that a strong demand for quality warehouses in Moscow was going to outweigh Pushkino's less-than-perfect location on Yaroslavskoye Shosse, which was described by one market participant as a "road to nowhere."

While the development should not experience any leasing problems initially, due to the deficit of warehouse space, they may arise later on as other, better-located projects enter the market, said Darrel Stanaford, director at Noble Gibbons.

According to Colliers International's calculations, there are currently no more than 1,100,000 square meters of quality industrial space in Moscow, only 530,000 of them Class-A, while annual rental rates -- between $140 and $160 per square meter -- are among the highest in Europe.

Over one-third of Moscow's modern warehousing facilities are located along Leningradskoye Shosse, a highway connecting Moscow to Sheremetyevo Airport and St. Petersburg, said Alexei Novikov, senior consultant at Knight Frank.

Since Yaroslavskoye Shosse does not lead to an "economically developed region," it makes sense to position Pushkino as a distribution center oriented toward the Moscow market rather than toward the export market, he said.

But Grishko disagreed that the project's location was disadvantageous, saying that Yaroslavskoye Shosse was a good-quality highway with easy access, unlike the run-down roads heading east out of Moscow.

Other large-scale Class-A warehouse complexes currently in the planning stages or under construction are the 600,000-square-meter Tomilino, southeast of Moscow; National Logistics Company's 300,000-square-meter Krekshino project to the southwest; and the Belaya Dacha complex to be erected east of the city.