Taming the Parking Habits of the Capital's Wild Drivers

Andrey Makhonin / Vedomosti

Landlords struggle to overcome curb appeal  as  executives park in the street, leaving two-thirds of corporate spaces empty.

If Moscow is rarely nowadays referred to as the Wild East, its parking habits still have something of the cowboy about them. One of the quirks of Moscow executives is that they're often reluctant to use corporate parking spaces, preferring to leave their steed in the street or with at least two wheels on the sidewalk.

The expectation of being able to park for free is so ingrained that even the introduction of parking charges in parts of Moscow's central business district is unlikely to force the corporate motorist off the street and into the office underground car park; at least not straight away.

In the longer term, however, those corporate parking spaces will begin to fill up and owners of business centers who have invested in structured parking will begin to see a return. That's the conclusion of research by commercial real estate consultants CBRE into the impact on Moscow's central business district of the end of free parking.

Prepaid parking cards and systems for paying by mobile phone were introduced at the end of 2012 for a limited number of streets around the Kremlin. Paid-for parking will be extended across the whole of the Garden Ring by 2014. Within two years, it may extend as far as the Third Ring. CBRE forecasts that companies will reassess whether they even need an office in the center of town, while a range  of industries from IT, telecoms and bank back offices will simply move out.

The calculation for the canny corporate motorist will also be straightforward. "If you compare the rate for places to park in a business center and the monthly cost of parking on the street they are very comparable but when you have a space in a business center your car is protected, so it is a case of greater safety and the difference in price that you pay for it becomes quite minor," said CBRE's Director of Research in Russia, Valentin Gavrilov.

Most class A buildings in the central business district provide one parking lot per 100 square meters of office space, which is the ratio advised by the Moscow Research Forum, an association founded by the main real estate development consultants. In practice less than half the district's business centers meet this ratio. Those built in the 1980s and 1990s fail partially or totally.

Filling the lots

Senior Vice President of Hines Russia and country manager, Lee Timmins, said: "We had one building where we built quite a bit more parking than we were required to, and it took a little while before it was used because you've got people who can park on the street for free. If that changes there will probably be an incentive for people to use structured parking which is expensive to build."

Drivers park up to 40,000 cars each day within the central business district. Moscow government plans to solve traffic jams by forcing workers onto the metro or trolleybus network. It has already begun constructing multi-story car parks at metro stations that line MKAD, Moscow's outer ring road. It plans 196 such car parks to catch commuters and transfer them to public transport. Moscow government, for so long apparently dominated by road engineers, has not given up on Tarmac. It is in the process of building cordial link roads to connect the north of the city to the west, the west to south and east to north. These are assumed to lessen traffic jams.

"It may not be enough on its own but the Moscow government also has a plan to build more parallel or twin roads, called dublyor. This helps to reduce traffic jams. If you are talking about expanding the whole square meterage of the road surface in the central business district it is almost impossible given the density of buildings," CBRE's Gavrilov said.

The image of limitless, traffic-clogged streets is actually an illusion. Moscow has a very low road coefficient by comparison with European cities. Roads account for eight to nine percent of the total size of the city, compared with 20 to 25 percent in Europe.

Stalin's highways

The problem is historical. "The Stalin era made these fundamental mistakes for a city which now has a lot of cars: funneling everybody onto very major, grandiose highways and losing some of the fine grid that you have in New York or London which allows people to find alternative routes," said Timmins. "All of us have been in that situation where you are funneled into Leningradskiy Prospect on the way to the airport and you're stuck. That is some of the legacy of planning in the 1950s and 1960s that you cannot just change overnight.

The longer-term solution is density around public transport hubs or networks, he said. "Density is not bad if you serve it by public transportation and that is hopefully going to be a growing realization. They are starting to expand the metro network and we believe that if you extend out the metros beyond MKAD, you create park and rides, maybe you add a fourth rail ring and then you restrict car usage in the form of restricting parking or even access to the center you may solve some of the city's problems."

Moving out

If the added costs of parking failed to reduce the city's traffic jams, and travel-to-work time that can exceed two hours, more companies would consider moving out of the center, said Claudia Chistova, Head of Office Research for CBRE in Moscow.

High rental costs in the center have already persuaded some companies to move: Alfa-Bank and Raiffeisen Bank plan to relocate their back office operations to Technopark Nagatino i-Land, eight kilometers south of the central business district. Paid-for parking is likely to be another incentive for industries such as IT, telecoms, pharmaceuticals and cosmetics, mass media and the auto sector.

"Those who will remain are companies for which a presence in the city center is crucial for their image: investment banks, consultants and those who have a lot of clients coming to see them such as representative offices of international companies will want to stay either in Moscow City or the central business district," Chistova said.

Little rental impact

A parking space in Moscow is still relatively cheap, at less than $5,000 a year, especially as a proportion of rental expenses. "Business centers with underground parking will be much more in demand and it will definitely increase parking costs but we don't think it will influence rental rates, Chistova said.

Landlords are likely to react by increasing prices for office parking spaces. They will be happy to see improved cash flow though this will be only one or two percent, thus marginal at first according to CBRE's research.

Business centers will be under pressure to complete their on-site parking. Moscow City, a cluster of business centers within the Third Ring, already struggles to cope with the morning rush of drivers. Upon completion Moscow City will host about a quarter of a million people. In this case public transport is expected to provide the solution. A transfer terminal is under construction, to link the metro with proposed light railway lines. Ironically, Muscovites who work in the center face the option of using older metro stations and an even less popular trolleybus network.