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. Last Updated: 07/27/2016

Raiffeisen Opens Elite Office Center

Raiffeisen Property Invest, part owned by Raiffeisenbank Austria, has made its first foray into Moscow's class A office space market with the recent opening of the 3,000-square-meter Ambassador Building on Prechistensky Pereulok in downtown Moscow.

However, according to real estate insiders, the entry of the top class A office space onto the market comes as the result of post-crisis rearranging of plans, rather than a conscious bid to gain a foothold in Moscow property business.

The historical eight-story building situated at the heart of Moscow's embassy district was originally intended to house the employees of Raiffeisenbank. But last year's financial crisis put paid to Raiffeisen's expansion plans and saw the bank decide to lease the property instead, insiders say.

Office space in the building is available at $495 per square meter - again a considerable drop in expectations due to the post-crisis office space rent slash, which is now around 40 percent.

The leasing agent for the offices, Jones Lang LaSalle, said the building is designed to fill a niche for smaller top class A offices.

"A high portion of new class A office buildings here were constructed to house large companies requiring over 1,000 square meters of space," Michel Pascalis, managing director of Jones Lang LaSalle, said.

"There is a real lack of buildings around that cater to smaller companies that nevertheless require top quality facilities."

Pascalis said the building is the first that can genuinely claim to be totally Western managed. "The landlord and property manager is Western - Raiffeisen Property Invest - and the constructor is the Western company AMR."

The first tenants are due to sign this month and are set to occupy 30 percent of the building, Pascalis said. He declined to name the tenants.

Despite the quality of the building, there seems to be little opportunity to raise rents for the office space in the near future.

"I don't expect the market to grow until after the presidential elections. If they go well then there could be an upsurge in 2001," Pascalis said.

"Demand is not expected to outstrip supply until after the election," agreed Jack Kelleher of real estate consultants Noble Gibbons/CB Richard Ellis. "Prices are unlikely to pick up, and the release of another 100,000 square meters of office space onto the market planned next year could once again bring it under pressure."

However, Kelleher said the location of the new Ambassador Building was "compelling."

"The building has historical import, it's very central, but situated on a very quiet street. There's quick access to Tverskaya, government buildings and the embassies surrounding," he said.