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. Last Updated: 07/27/2016

Too Much Office Space? Donate and Benefit




Don't know what to do with that 1,000 square meters of international quality office space you put up for sublease six months ago?


Sergey Riabokobylko has a money-saving, publicity pleasing solution: donate or lease it to a worthy cause at cut-rate prices.


Riabokobylko, a partner at Stiles & Riabokobylko real estate agency, is setting up a program under which multinationals with vacant space can hand some of their prime real estate over to a nonprofit organization and not only feel good about doing a good deed but also save on taxes.


"It could be a solution for a wide range of companies that went through downsizing or restructuring," Riabokobylko said Monday.


With some 22,000 to 30,000 square meters of unoccupied top-quality office space on the sublease market, the opportunities for partnerships between multinational giants and nonprofit organizations are enormous.


The idea is simple: If a U.S. company offers space to a U.S.-registered nonprofit organization, it is entitled to take a tax write-off. Corporations from other countries with similar tax legislation could also win financial concessions.


"This way they can recover some of the cost for the space," Riabokobylko said.


Financial considerations aside, the benevolent company would receive good publicity and be able to put to good use space that would otherwise be gathering dustballs, he added.


First in line for such a deal is Junior Achievement, an 80-year-old U.S. nonprofit organization that teaches the principles of the free market economy to Russian youth, for which Stiles & Riabokobylko is soliciting space.


Junior Achievement Russia, which provides hands-on training in Russian schools, is currently operating out of a run-down institute near Domodedovo airport in the southern outskirts of Moscow.


"The issue of needing donated office space is definitely real," said Douglas Davidson, the chairman of Junior Achievement Russia and also general director of Boeing operations in Russia. "We would certainly appreciate a low or no cost centrally located office of about 80 square meters."


Talks are being held with several interested companies, Riabokobylko said.


Finding a company with subleased space available is the least of Riabokobylko's problems - almost every major international company has some space it is trying to sublease, experts said.


The names read off like a list of who's who among multinational giants: Caterpillar has 400 square meters with an asking price of $500 to $600 per square meter; Lucent Technologies is offering 2,000 meters for $450 per square meter; and Merrill Lynch has 1,000 meters at $600, according to Stiles & Riabokobylko.


"There are quite a few big subleases on the market right now and I don't think very many of them are going to [get rented]," said Darrell Stanaford, managing partner at The Western Group-ONCOR International. "It is going to be difficult to sublease space in excess of 500 square meters this year."


As the financial turmoil following last August's ruble devaluation forced companies to rethink operations, rents for top quality space dived from about $700 per square meter a year to $450 to $600. But with Russia's economic depression now showing no signs of recovery and the uncertainty of parliament and presidential elections looming, it does not appear that the space will be filled any time soon.


Moreover, the options for companies with extra space are rather limited.


"You can't really put a casino in there and a swimming pool [is out of the question]," said Michael Lange, managing director at Jones Lang LaSalle in Moscow.


Other than trying to sublease the space, companies are left with the choices of either surrendering it to the landlord or creating an assignment with another company, in which the rent contract is transferred to the new tenant, who then directly pays the landlord.


This is the first time in Russia that thousands of square meters of international quality office space are lying vacant, real estate experts said.


"Traditionally there was very little subleased space available," Lange said.


"Because the market was undersupplied, subleased space never stayed on the market long enough to be a factor," agreed Riabokobylko. "Almost all space put on the market was absorbed that same year."


Sublease space usually came from rapidly expanding companies that leased out office space that they planned to eventually grow into.


Despite the uncertainty of Russia's future, the market for subleased space appears to be slowly stabilizing and experts do not expect any more huge rent swings.


"Over the past several weeks we have seen a resumption of normality in the brokerage community - some are even starting to hire people," Riabokobylko said.