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. Last Updated: 07/27/2016

Central Location Augurs Well for Mosenergo

The waters flowing past the Kremlin will be lined by more class A office space come wintertime. The eight-story building on Raushskaya Naberezhnaya, with just over 7,500 square meters, is the first foray into commercial leasing for its owner and developer, Mosenergo.

So far skinless and covered with scaffolding, the building is slated to be open in December and construction is now proceeding quickly, said Irina Bondareva, a consultant at Jones Lang LaSalle, the building’s exclusive leasing and marketing contractor.

"The building will not have a specific impact" on the booming market for Class A office space, said Haik Nersessian, research director at Colliers HIB realty firm. "But it is new space and it will be in demand. That’s for sure."

As was the case with dozens of other new office and retail spaces, construction was halted following the crisis, and the original target date for opening — the second quarter of 1999 — was pushed back. The Yugoslavia-based construction company Smelt cranked construction back up in fall 1999.

While the embankment location is desirable, Mosenergo’s inexperience as a developer could deter potential tenants, real estate experts said.

"A sophisticated tenant would take into consideration that the developer does not have a good track record and therefore take a more active approach in determining the potential risks involved," said Sergei Riabokobylko, partner at Stiles & Riabokobylko.

Pre-crisis construction was held up by architectural and technical problems and was not going as quickly as scheduled, said Roumen Kalchev, a real estate consultant who drew up the marketing proposal and conducted initial negotiations for the Mosenergo building. Smoothing out problems with underground parking in wet ground next to an embankment was one technical difficulty.

"But the major problem I see is an inexperienced developer," said Kalchev, who worked for Jones Lang LaSalle at the time and is now at Colliers HIB.

"If they’re venturing into development," Riabokobylko said, "they are facing the same challenges that any new developer in Moscow faces — having to deal with approval processes, having to seal relationships with state and municipal entities."

Bondareva said that Mosenergo’s inexperience is not a factor since they hired Jones Lang LaSalle at a very early stage to assist in development.

She added that a property manager is now being sought for the building.

Views from the wide windows include the Kremlin, the Stalin skyscraper at Taganka, churches in Kitai-Gorod and Hotel Rossiya. Rent per square meter should be from $450 to $500, which is on par for this quality of office space.

Jones Lang LaSalle is in contact with potential leasees — large international and local firms.

A more active marketing campaign will begin in September, when the facade should be closer to completion, Bondareva said.

With flexible floor plans and an excellent location, she said the building could be filled quickly, but gave no target date for complete rental.

There is a cafeteria on the first floor, 15 spaces of underground parking and 35 spaces above.

Despite some public parking that will be available behind the building and on the narrow two-lane road in front, 50 spaces for this size of building is almost 40 percent below what real estate experts say is a minimum requirement — one space per 1,000 square meters, with some companies needing double that.

While it is a healthy walk from the metro, the Mosenergo building’s biggest draw is its location in the corporate hot spot of the embankment properties between the Novokuznetskaya metro station and the Kremlin. Other nearby developments containing swanky office space are also in the works.

These include the three-section, 83,500-square-meter Tsar’s Garden by Keystone construction and other tripartite buildings along Kadashevskaya Naberezhnaya. Two sections along Kadashevskaya have already been purchased by Germany’s Commerzbank and BASF. Jones Lang LaSalle is also the contractor for that complex, due to be fully completed by fall and offering more than 3,500-square-meters for lease and rent.

In addition to existing offices — tobacco firm Phillip Morris will be abandoning its 2,500 square meter building in November, for example — the demand for class A space and the building boom to meet it should continue for well over a year. Mosenergo’s lack of development expertise might become a minor factor in tenants’ decision making since supply is still under hammer and saw.

Riabokobylko said that redevelopment of a group of factory buildings close to Riverside Towers and the Paveletsky metro station will begin in earnest this fall. The development will ultimately contain 50,000 square meters of Class A space, with 8,000 meters slated for completion six to eight months after construction starts.

Another embankment development — with a 35,000-square-meter retail and office center, including 16,000 square meters of office space — broke ground in March. Turkish developer Tobtim International Business Centers Inc. halted construction for two months while a new contractor was hired but will begin again at the end of September.