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. Last Updated: 07/27/2016

Krylatsky Hills to Get City's First Business Park

For MTThe 12-hectare site on Krylatskaya Ulitsa will have a private hospital, office buildings and possibly shops.
Work on Moscow's first class-A Western-style business park is expected to start this year at Krylatsky Hills in the west of the city overlooking the Moscow River.

Sergei Riabokobylko, a partner at Stiles & Riabokobylko, the local affiliate of Healey & Baker Cushman & Wakefield, said the 40,000-square-meter development should herald the beginning of a wave of such developments outside the city center.

Stiles & Riabokobylko advised the developer, CMI Development, during the preplanning phase of the project and provided valuation and development consultancy services. It based its advice on the experience of its partner Cushman & Wakefield constructing similar business parks in other developed European markets.

Speaking at a seminar organized by GVA Sawyer and The Moscow Times, Riabokobylko said the park was on a prime site and would provide an ecologically friendly and comfortable workplace.

"This is really the last land site that can be developed on Krylatskaya Ulitsa," he said, adding that the site is just 15 minutes drive from the Garden Ring and only 20 minutes from Sheremetyevo Airport. "Employees will have less stress and therefore greater productivity."

Business parks have sprouted in suburban areas throughout the West. Compared to centrally located offices they offer tenants lower rental rates, more flexible floor plans, a green environment, an ability to create a corporate image, lots of parking and the opportunity to expand their rental space, Riabokobylko said.

The most likely tenants for business parks are information technology companies. Business parks also offer companies the opportunity to "identify" their own building in a way that is not possible in high-rise developments in central Moscow, he said.

"As soon as the project is under construction, tenants will be positioning themselves to lock in the best expansion options and identity," he said. "You can expect competition that doesn't exist in high-rises in the city."

In Moscow, companies have generally sought prime office space in the center of the city because of transport concerns. However, surveys have shown that in Moscow's top offices, 95 percent of employees own cars, and this percentage is expected to grow, Riabokobylko said.

Six office buildings, each of about 7,000 square meters, are planned with rentals of about $380 to $400 per square meter per year envisaged. Parking spaces would be provided at a ration of 1:25 or 1:30 square meters, about two times the ratio available in the center of city.

The first building could be completed by the end of 2004, he added.

Developer CMI is headed by Michael Belton, an American with eight years experience on the Moscow market, and Boris Kiperman, who founded Alfa Development, the Alfa financial holding's real estate arm.

Belton, director of real estate development, said construction costs would be 30 percent lower than class-A office space in downtown locations. The standard cost of class A office space in the center is $2,000 per square meter.

He declined to comment on rental rates, saying it was too early and they depend on the timing of tenants' commitments and the amount of space they want to lease.

Krylatsky Hills is to be built on a 12-hectare site.

What is expected to be the nation's first fully equipped private hospital, aimed at serving the middle class, is to be built on 3.5 hectares of the site.

CMI declined to give any more details on the hospital, how the land was obtained or how much it cost or on the source of funding.

The remaining 8.5 hectares is to be used for the office development, car parking and possibly some shops to serve the staff of firms working there.

Riabokobylko said existing Moscow business parks -- the Meridian tower, Westbridge Business Center and Kulon -- are small and do not offer all the benefits of a typical Western business park.

Other business park developments mentioned at the seminar were the Aurora Business Park, to be built on an island in the Moscow River downstream of the Kremlin, in which Ernst & Young will lease 10,000 square meters for 10 years. The Aurora complex, at 82 Sadovnicheskaya Ulitsa, is to eventually cover 80,000 square meters in 13 planned buildings.

Heiko Davids, associate director at Jones Lang LaSalle, said German-based electronics and communications company Siemens is planning to construct an office park in western Moscow in the second half of the decade. Siemens has several subsidiaries scattered throughout the city and wants to bring them all under one roof, but may also consider leasing some space, he said.

Riabokobylko said the Moscow Gates business park planned for near Vodny Stadion metro station had been put on hold by British developer Chelverton, but he said he was still hopeful it might develop.

Cameron Sawyer, president of GVA Sawyer, questioned whether business parks were viable in Moscow, saying transport and living conditions in the capital are different to those that give incentives to business parks in the West.

"In Moscow the great bulk of the community takes the metro," Sawyer said. "Office workers in any company tend to live all over the city."

Muscovites are unlikely to change homes to save themselves travel to work, he added.

Sawyer predicted that the amount of office space in the center will grow by 10 times in the next few years and that there is plenty of room for expansion through high-rise developments.