Two mega-projects intended to modify the St. Petersburg office market will be launched in 2008. The process is underway for the selection of concessionaires for the construction of the Western Speedway Diameter (WSD) and Orlovsky tunnel. In contrast to the KAD (Ring Road), financed from the government funds with all ensuing consequences, WSD and Orlovsky tunnel will probably exemplify a new approach. This is why the districts alongside the future routes are already rousing the keen interest of those who build class A business centers.
A long Way
Construction of the ring road lasted seven long years. The cost was repeatedly revised upward, and eventually soared to 60 billion rubles. And the delivery times for different sections were repeatedly delayed. It’s no wonder that when the Eastern semicircle had finally been commissioned, nobody was building anything alongside St. Petersburg’s future main road. However, the land in the KAD vicinity was in great demand. “No office facilities have so far been developed alongside any exit from KAD. There is a cluster of business centers in the area of Pulkovo motorway but its generation is related to close proximity to the airport rather then to KAD,” points out professional activity director at Knight Frank St. Petersburg, Nikolai Pashkov.
A logistics cluster is being more actively generated in the KAD area. Office districts must spring up along the approach ways to the industrial and warehouse zones or in the area of direct transport access, the experts assume. Such a turn of events is very likely in Predportovaya zone, where large multimodal distribution facilities are being developed, and in Shushary where a number of car-making and car parts production facilities were constructed in addition to a multitude of warehouse terminals. “Even if logisticians do not need extra office space, different service and allied firms catering to a logistics complex may need class A and B offices in close proximity to their clients,” points out Nikolai Vecher, CEO of Vecher. “Plots along Pulkovo and Moskow motorways as well as Kultury and Engels prospekts in the north might be most popular in the nearest future,” says investment department director at Colliers International, Nikolai Kazansky.
Diameter for Island
The mechanism of public-private partnership to be used in the realization of WSD and Orlovsky tunnel projects will supposedly help avoid the state production overheads. The investment in WSD, which will link the northern and southern districts of the city by 2010 and provide for transport communication with the new district Morskoy Fasad planned in the western part of Vasilyevsky Island, amounts to 82.7 billion rubles, of which 28 billion will be allocated by the Russian Investment Fund. The remaining amount will reportedly be attracted at the expense of the concession participants who will be determined till this year’s end. In 2010, WSD will presumably have the throughput capacity of more than 100,000 cars a day.
“The aggregate investment in the in-fill of new territories and creation of the marine passenger terminal on Vasilyevsky Island, which would have been impossible in the lack of the WSD project, comes to around $1 billion, with $10-billion worth of real estate to be developed on this territory,” saysLev Pukshansky, vice president of the management company Morskoy Fasad, illustrating the effect of WSD on the development of the northern part of Vasilyevsky Island. By 2012 a “business” district will be formed near the reclaimed land where more than half a million sqm of office space will supposedly be put into operation.
Mr. Pukshansky points to the fact that one of the main factors raising the attractiveness of hydraulically in-filled territory for the developers of class A office facilities is easy access to the airport. “It is only in the area of the ‘gold triangle’ that a class A business center closest to the airport can be found; other properties are located on the Petrograd side. In other words, it takes more than an hour, at best, to get to the nearest quality office from the airport. After the WSD construction has been completed it will take only 15-20 minutes to get from the airport to Morskoy Fasad. This route will thereby allow the creation of a very attractive territory in the western part of Vasilyevsky Island for here three types of transport will meet, namely aircraft, motorways (WSD as part of the Eurasian transport corridor) and waterways,” says Mr. Pukshansky.
In this situation the management company will face the challenge of generating a homogenous territory on the office island from the perspectives of the functional purpose and class of new developments. Morskoy Fasad intends to accomplish this strategy at the stage of land sale by adding a respective clause to the terms of land allotment. According to Mr. Pukshansky, the priority partners may pay 20-25% less for the land as compared to the average price of plots used for the development of class A real estate elsewhere in the city.
“The KAD experience revealed that as the construction on the ring road was coming to a close, the prices of land alongside this road began skyrocketing. The same thing will happen alongside the WSD when it comes down to real launch times. The process of development will also accelerate by many times. So far the interest in this territory has only been potential,” says Nikolai Pashkov, professional activity director at Knight Frank St. Petersburg.
“WSD will break the isolation of Vasilyevsky Island by making it more accessible and attractive for the business audience, which will give a serious impulse to the office real estate development,” points out managing partner of LCMC, Dmitry Zolin. However, in the middle-range outlook the Vasilyevsky Island business area will most likely keep within the bounds of reclaimed land — the resettlement of people residing in shared flats is a longer and harder process than relocation of the production facilities stationed here. “In this sense new territory generation is much simpler than redevelopment of the old territories,” says Lev Pukshansky.