MONEY-GROWING: Roadside Corridor

Some Moscow-based developers try to secure construction sites on Leningradsky Prospekt, commonly referred to as Leningradka. But others no longer believe in its potential. Still, the scale of projects being implemented by developers here is impressive. Leningradka may well get its second wind once all its disadvantages are removed.

Leningradsky Prospekt runs from Tverskaya Zastava Square; at the intersection with Baltiyskaya Street it flows into Leningradskoye Shosse [motorway] that leads to the Sheremetievo international airport. In other words, Leningradka is the northern gateway to the Russian capital.

The zones allotted for commercial development are listed in the town-planning program for the North Administrative Okrug [district]. Along with the city center, the Zamoskvorechye District and the Moscow International Business Center Moscow-City, Leningradsky Prospekt and Leningradskoye Shosse, including the bank of the Khimki reservoir, are to become the site for construction of new offices and business parks meeting international standards.

Some of those projects will feature both retail and office properties as well as multifunctional facilities. Leningradskoye Shosse and the Khimki reservoir area are to be redeveloped into a public recreation area, according to the city government’s plans.

Moscow’s Northern Gate

Leningradsky Prospekt is one of the city’s four major retail corridors. The 5.5-km avenue runs from the Belorusskaya metro station to the Voikovskaya metro station almost on the outskirts of the city, through the North Administrative Okrug (district) of Moscow.

Of course, in terms of commercial property rentals Leningradsky hardly compares to Tverskaya, Novy Arbat or Kuznetsky Most where charges always range from about $4,000 to $5,000 per square meter, according to realty consultants. The maximum rental rate on Leningradka is $1,200 per square meter, comparable to the Garden Ring, Leninsky Prospekt, or Prospekt Mira.

But unlike the Leninsky or Komsomolsky thoroughfares, some analysts admit that the shops and malls along Leningradsky are situated unevenly.

There are sections of Leningradsky Prospekt with no shops at all or almost none, says Olga Yasko, retail real estate analyst at Colliers International. Nevertheless, Leningradsky Prospekt is a retail corridor that all the companies active on the real estate market reckon with and include in their market reviews.

Large shopping facilities are concentrated, for the most part, near metro stations, notes Yulia Nikulicheva, deputy head of strategic consulting and research at Jones Lang LaSalle. The stretch least saturated with shops is between the Belorusskaya and Dinamo metro stations, she says.

For the time being, there are just a handful of large shopping malls on Leningradsky Prospekt. Developers say that sites for construction are scarce. However, the maps released by market players include a number of sites already reserved for development, and in near future new buildings will be erected.

The face of Leningradsky Prospekt is slowly changing, but projects that will shape it in the future have already been included in the databases of the Moscow Committee for Architecture and the department for town-planning policy. Judging by their number and nature the corridor has a lot of potential commercially.

The competitive advantage of Leningradsky Prospekt over many other corridors is that it leads to the Sheremetievo international airport. The avenue has never been short of pedestrian visitors as well as the motorists who nearly always jam the road.

Where Offices Grow

As Russia headed towards transition to a market economy in the early 1990s, Leningradsky Prospekt continued to develop as one of the capital’s major retail areas.

Today the avenue has got its second wind as a new business zone of Moscow featuring offices and business parks, Sergei Riabokobylko, executive director at Cushman & Wakefield / Stiles & Riabokobylko told a business conference recently. Other market players agree.

For example, Yulia Nikulicheva believes that the number of projects announced by developers could transform the Leningradsky Prospekt area into a new business district. The employees who will fill those new offices may become potential buyers at the shops and malls along with local residents and those who drive along Leningradka during the day.

All along Leningradsky Prospekt there are sites where the construction of new offices has either begun or is about to begin shortly.

Six new business centers, including projects by Capital Group, Lesnaya Street and Sokol Center at 74A Leningradsky Prospekt, and new business parks: Slava on the site of the 2nd Watch Plant (a project by Stolny Grad and Globex Bank) and Siemens Business Park by Sistema-Gals at 39 Leningradsky Prospekt, are to be developed on the stretch between the Belorsuskaya and Voikovskaya metro stations alone.

The same map of commercial properties to be developed along Leningradsky Prospekt and Leningradskoye Shosse also features future retail centers.

Remaining True to Trade

Driving along Leningradsky Prospekt and farther on, along Leningradskoye Shosse, modern shopping malls and hypermarkets catch the eye every now and then as vivid proof of the high status of the thoroughfare.

Take, for instance, the 12,062-square-meter Aeroport Gallery near the metro station of the same name, built in 2003 by the Garant-Invest group.

The group has developed several shopping centers across the city. The 25,000-square-meter Palladium shopping center at 37 Leningradsky Prospekt was opened in 2001, developed to order by the company Soyuzaviatsentr. The 4,500-square-meter Start retail center at 37B Leningradsky Prospekt was launched in 2003. It was developed for Spektrum-Proekt.

The 12,000-square-meter Metromarket shopping center near the Sokol metro station was built and commissioned in 2002 by Capital Group. Other malls include a Ramstore outlet on Leningradskoye Shosse and Ramstore City near the Moscow outer ring road (MKAD), at the city exit. Khimki is the address of Moscow’s largest mall – the 230,000-square-meter Mega-2.

Within a couple of years more large retail centers will appear on this corridor. Stroiinkom-K, which is part of the Leviev Group, will develop a multifunctional underground facility at Tverskaya Zastava Square where retail properties will account for 40,000 square meters.

Further on, near the Dinamo metro station, the Dinamo shopping center is currently under construction, according to JLL. The initial plan envisages the development of a 3-storied 4,200-square-meter building with an 83-space parking lot, according to the State Architectural and Construction Inspectorate.

The project is being implemented to order for the companies Shevalye (Chevalier) and Prostarengineering. Glavbolgarstroi and Ekoproekt have been contracted for the construction work. The project is currently at the planning stage.

An 85,000-square-meter business and retail center with a multi-level 900-space parking lot is to be erected at 34 Leningradsky Prospekt by the Soyuz insurance company, ABN Realty reports.

A 15,640-square-meter specialized business and retail center, Mercedes-Benz Plaza, has already been commissioned here. The lower stories of the center house a car salon of DaimlerChrysler whose offices are situated in the same building. The property was developed by the German firm Hochtief, ABN reports.

The average base cost of retail development in this district amounts to $700 to $1,200 per square meter depending on the cost of laying engineering and communication lines.

Capital Group has several projects on Leningradsky Prospekt. Apart from Metromarket they include the 60,000-square-meter multi-functional facility Gorod Yakht (City of Yachts) in the Voikovsky district. Part of the property, currently under construction, is likely to feature retail outlets, a spokesperson for Capital Group reports.

Another project is the 371,400-square-meter Aerobus residential estate at Kochnovsky Proezd. That estate, too, may have shopping areas, but the exact size and future purpose of the non-residential properties within those projects still has to be decided on.

“Leningradsky Prospekt is an established retail corridor that is quite saturated in terms of retail properties, both detached stores and retail centers of various formats,” says Yekaterina Semikhatova, chief spokesperson for Capital Group.

Yulia Nikulicheva believes that Leningradsky Prospekt has a lot of potential commercially and the situation is, on the whole, favorable for the further development of retail here.

Considering that most of the motorway is situated beyond the Third Ring Road, Leningradsky Prospekt offers developers a real opportunity for new construction, says Antonina Lairova, an analyst at ABN Realty.

While nearly all the building sites within the city center are occupied and securing those that are still available is costly and time consuming, plots of land beyond the Third Ring Road are cheaper; there are plots available within housing estates, and securing permission for the demolition or redevelopment of buildings facing the road is easier.

The town-planning program for the development of the North Administrative Okrug up to 2020 gives the green light to build business and retail properties in the area.

The priorities set by Moscow City Hall and the city architects for real estate developers are multi-functional business centers and shopping malls along the key thoroughfares and in “areas of increased construction activity”.

Those are Leningradsky Prospekt, Leningradskoye, Dmitrovskoye and Korovinskoye motorways, the Third Ring Road, the square in front of the Savyolovsky train station, squares near the metro stations Rechnoi Vokzal, Vodny Stadion, Voikovskaya, and Petrovsko-Razumovskaya, and near the planned metro stations Seligerskaya, Yubileinaya and Degunino.

Northern Moscow is included in the city plan for hotel development. Other projects include reconstruction of the major roads, including Leningradsky Prospekt and Leningradskoye Shosse.

The town-planning program also envisages the development of a multi-functional mall on the site of the Central Frunze Aerodrome and nearby territories of Khoroshevsky District, including the Khimki reservoir area that enjoys the status of a sports and recreation area.

Building Entire Micro-Districts

The company TVK Aviapark plans the development of Khodynskoye Field where it is set to build some 500,000 square meters of retail properties and exhibition halls.

Commercial real estate investment is one of the company’s main spheres of business, the board of directors of TVK Aviapark reports. Moscow City Hall has officially endorsed the plans for a new micro-district, not far from the Third Ring Road, between the Leningradskoye and Khoroshevskoye motorways.

TVK Aviapark will act as the main constructor of the retail properties in that area. Work is likely to begin in 2006, according to the company.

Market players agree that the new shopping mall may become one of the largest in Moscow, comparable perhaps only to the $300 million Mega-2, or maybe even larger and more expensive. Yulia Nikulicheva believes that a mall on such a scale is likely to attract most consumers heading from Moscow to Khimki.

Along the Motorway

A multi-functional center featuring shops, offices and a hotel to be built near the Voikovskaya metro station is another grand project likely to rob Mega in Khimki of some of its customers should it be implemented in full. The developer is Capital Partners, who are currently involved in the construction of the Ritz Carlton hotel on the site earlier occupied by the Soviet-era Intourist hotel.

The 300,000-square-meter complex is to be built on the site of the former industrial facility Radikon at 16, Leningradskoye Shosse. Still, Khodyskoye Field, Voikovskaya and Khimki have enough potential customers for all the three shopping centers to prosper, believes Nikulicheva.

Moscow City Hall has approved a plan for the development of the Yakutsk retail, hotel and business center in Levoberezhny District. An open-air go-carting facility is to be built nearby. The complex is being developed under the Moscow government decree No.557-PP, of August 24, 2004 “On the general plan for placement of hotels in the city of Moscow till 2010.” Both projects are in the early stages of planning.

Another major complex is currently under construction in Golovinsky District, near the banks of the Khimki reservoir. The facility will include tennis courts for the National Tennis Center, offices and shopping areas. The project is being overseen and financed by the Russian Tennis Development Foundation. Another co-investor is the Word Class company.

The foundation has secured permission for development, Aleksei Selivanenko, vice-president of the foundation says. Currently, construction of open-air tennis courts is nearing completion. The entire complex, courts excluded, will have 40,000 square meters of indoor facilities, including 8,000 square meters of retail space.

Aleksei Selivanenko believes that the area between Leningradskoye Shosse and the Khimki reservoir may become one of Moscow’s largest recreation areas.

The entire section between the outer Moscow ring road (MKAD) and Leningradsky Prospekt, however, has two big drawbacks, namely, problems with energy supply and heavy congestion on the motorway. The town-planning program for that area envisages plans for the reconstruction of engineering lines. If the deadlines set for the implementation of those plans are met and coincide with the development of the new properties, those properties are bound to succeed.

Character

Olga Yasko, retail real estate analyst at Colliers International, notes that retail areas occupying ground floors of residential buildings built on Leningradsky Prospekt in the 1950s-1960s are, on the whole, of good quality.

Rental rates on Leningradka vary depending on location. Properties on the stretch between Tverskaya Zastava Square and the Dinamo metro station are leased out at $600 to 900 per square meter; between the Dinamo and Aeroport metro stations the rates stand at $500 to 800 per square meter, while in the area around Aeroport the charges climb to $600-900, and run as high as $800-1,200 near the Sokol metro station.

The average weighted rental rate here stood at $619 per square meter in April of this year, Anastasia Dovchenko, retail real estate analyst at Cushman & Wakefield / Stiles & Riabokobylko has reported. The sale price sometimes reaches $7,000 per square meter. The vacancy rate stood at 2.3% in April. The total estimated retail area rented on Leningradsky Prospekt nears 27,500 square meters.

Most analysts agree that the retail profile of Leningradsky Prospekt is ‘mixed’ while its target audience is described as “middle class”.

Retail outlets selling clothes, shoes and accessories account for 21% of all the retail profiles present here; sports goods, home appliances and stationery shops account for 14%; shops selling household goods, furniture, carpets and textiles account for 13%, as do cafes and restaurants; beauty parlors, hairdresser’s, drugstores, travel agents, banks, household repairs and dry cleaner’s account for 12 and 10%, according to a Cushman & Wakefield / Stiles & Riabokobylko survey.

Many popular brands and retail chains have outlets on Leningradsky Prospekt. Some of them have found homes in retail centers. For example, the Aeroport Gallery features the clothes shops Morgan, Sela, Collins, the sports store Sportmaster, a Belle Postel outlet, a 36.6 drug store, and a Mu-mu caf?.

Metromarket houses Sash, OGGI, Bustier, Krasny Kub, Tvoye, the cafes and restaurants Yakitoria, Kroshka-kartoshka, Rostiks, etc.

Leningradsky Prospekt is one of the largest retail corridors in Moscow thanks to the high car and pedestrian flows, ABN’s Antonina Lairova says. But it not as prestigious as the central retail streets, and rental rates – 2 to 3 times lower than those in the city center – prove that. The composition of tenants is also a tell-tale sign, with jeweler’s stores, home appliances and souvenirs being gradually pushed out by sports goods, travel agents and household goods.

The avenue hosts a variety of catering outlets that are also attracted by large car and pedestrian flows. Lairova says that developers should remember that each new large commercial property erected here will only further increase the congestion.

The town-planning program for the North Administrative Okrug includes a plan for the reconstruction of Leningradsky Prospekt.

In the year 2005 City Hall plans to launch road repairs on the section between Begovaya Street and the Sokol metro station, where the tramlines will be removed. 3.8 kilometers of the motorway are to be repaired at the expense of the city’s target-oriented territorial budget road fund.

The work is to be overseen by Moskapstroi and UKS. Judging by the town-planning program for the North Administrative Okrug these are not the only changes Leningradsky Prospekt will undergo in the near future.