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. Last Updated: 07/27/2016

A Fire at Work and No Place To Go

MTWorkers carrying out repairs to the Ducat Place III building on Wednesday.
Putting out the flames at the Ducat Place III offices took just an hour, but it will take weeks or months before some companies can bring back staff who have decamped as far as London or are working by laptop from home.

With ever more companies relocating to new skyscraper developments around the city, the fire could serve as a reminder of the need for contingency plans and the shortage of high-end office space.

The fire scorched the top floors of the elite 15-story office building on Ulitsa Gasheka, near the Mayakovskaya metro station, on Friday afternoon. A preliminary investigation has indicated that a defective external lighting element was to blame.

Among those affected by the fire were Goldman Sachs, Citigroup, Clifford Chance, the European Bank for Reconstruction and Development, Cushman & Wakefield and Fitch -- all of which scrambled this week to implement contingency measures.

"Everybody, since Sept. 11, has had lots of contingency plans, so I think that corporate Moscow is prepared for this sort of event," EBRD senior adviser Richard Wallace said from his Moscow apartment.

Building manager Hines said Ducat could open again by Monday, but some tenants estimated that their offices could be unusable for several weeks or even months.

"Worst case scenario, we are planning for up to two months," said Michael Cuthbert, regional managing partner for law firm Clifford Chance.

After the fire, all Clifford Chance's calls were redirected to the London office, with staff there forced to learn a few words of rudimentary Russian to cope with the sudden influx, he said. "We had a plan, but nothing ever quite happens according to plan," he said.

Goldman Sachs -- whose offices were worst affected by the fire, some employees of other tenants said -- played down the scale of the damage. "We are optimistic that the building will be operational in a matter of weeks," said a Goldman Sachs spokesman who declined to give his name.

Still, the investment bank has been forced to relocate some staff back to London while the offices are being repaired, the spokesman said, speaking from the company's London office.

Fitch, the ratings agency, said times were difficult. "Our staff is doing different things," said Dmitry Surkov, managing director of Fitch in Moscow. "Some of them are working from home, some from business centers. Many of our staff are on business trips, and they are working in business centers where they are."

The EBRD was lucky enough to be able to redeploy staff to other offices around Russia, Wallace said.

"There's an office in Vladivostok, but I think that's too far away," he added.

Some firms, including Clifford Chance, managed to find immediate replacements for their offices, but they acknowledged it was due more to good fortune than design. High office prices here, some of the world's priciest, often make the cost of finding alternative premises after such events unfeasible.

"We were incredibly fortunate in that one of our clients had some spare office space that they had just moved out of and through their generosity we relocated the vast majority of people to that office space on Monday morning," Cuthbert said.

Ducat Place III offers about the most expensive office space in the city, where Class A space leased for $770 to $1,200 per square meter last year, according Colliers International. Last year's costs rose about 15 percent from 2005, and by the end of 2006 the average vacancy rate had shrunk to just 1.2 percent.

"The vacancy rate within the Garden Ring will be very low over the next two to three years. It may even go down as result of Moscow government policy regarding office development," said Alexandre Gourganov, associate director of the office property department at Colliers International.

Even a cloud of smoke over a burning Moscow office can have a silver lining for firms able to offer quick office rentals, said an employee of a company in the Ducat building. "Put it this way, I think Regus and those sorts of companies are going to do quite well out of this," the employee said.

Spokespeople for Regus, the world's largest office provider, did not respond to requests for comment.

The damage was not confined to the immediate effects of the blaze. Problems were also caused by water from the internal sprinkler system and hoses used by firefighters that flooded the electrical systems, said Lee Timmins, senior vice president for Hines in Moscow.

"We are progressively turning on the systems on a daily basis. Because the damage was minimal to the interior of the building, effectively we are going through the process of drying things out and testing them," Timmins said.

Estimating the cost of the fire, Andrei Petrov, business development director at Knight Frank, said the amount would reach at least $10 million per tenant per month, including losses, relocation and business interruption.

While insurance policies should cover much of the costs, firms may find it difficult to claim for any lost business.

"I am not sure that they will be able to claim all of it as there should be some sort of cap on the amount," Petrov said.

Asked whether the building's managers would be held responsible for any of the costs incurred due to the fire, Timmins said that was a matter for the insurance companies to decide.

Petrov said Ducat's tenants could count themselves lucky. Considering the post-fire water damage to a skyscraper going up in the Moskva-City development, he said: "What would happen if the 35th or 50th floor in one of those buildings caught fire? God, can you imagine what would happen to the rest of the building?"