Guiding Lines: Facelift for Industrial Facilities

The consequences are on the whole positive as the ecological situation is improving and at the same time new businesses get extra office properties. Industrial installations are, for the most part, open plan facilities with high ceilings and high floor load capacity, which makes it possible to use those buildings as storage areas, as well as offices.

Redevelopment of plants and factories into business parks is a profitable business. Former industrial estates with buildings dating back to the beginning or middle of the 20th century can cost $250 to $400 per square meter depending on location.

Investors say that most enterprises whose facilities were bought out for redevelopment had already gone bankrupt and when they were taken over by new owners their properties were, at best, being let out.

The cost of redeveloping old facilities into class B and C office parks stands at $200 to $400 per square meter depending on the initial condition and the desired end result. Redevelopment work takes only 6-12 months. Developers report that most class C projects have paid back within 2-3 years while class B projects pay back within 4-5 years.

Class A business centers built on the premises of former industrial facilities are rare. Among the few examples are Aurora Business Park on Sadovnicheskaya Embankment or a class A business park – still on the drawing board – to be developed on the premises of the Krasnaya Roza factory on Timur Frunze Street.

Tenants benefit, too, as lower rental rates at business parks attract both major firms with large numbers of personnel and small businesses.

Rental rates at modern class B and C business parks fluctuate between $200 to $500 per square meter per year, while class A properties are let at up to $700 per square meter, VAT and operating costs excluded.

The size of rent depends largely on the location, the interior, engineering systems, availability of parking facilities and the composition of tenants. Prime properties are occupied by telecommunications companies, insurance, auditing and consulting firms and media organizations.

Design and aesthetics, too, play an important role. Shabby factory walls are given a new look after their walls have been plastered and painted.

Factories and plants are remarkable for their history. Taken over by new owners, the old buildings undergo a sort of plastic surgery: some of them get new facades; others preserve their historic appearance, their facades being restored on the basis of old drawings.

The fact that a business center occupies a building that used to house production workshops adds a special charm to the property, tenants say. While the exterior design is reminiscent of an industrial past, the interior fully meets modern office standards.

Admittedly, office employees whose companies move from the city center to industrial areas often find it difficult to adjust. An employee of a company that rents offices at a business park in the northern part of Moscow reports that after the company moved to a new location nearly half of its staff of over 200 quit. Offices in industrial areas definitely lose out to central locations where numerous amenities are close at hand.

But tenancies at class B and C office parks make it possible to save 20 and 30% respectively of the annual rental charges payable at a conventional business center of the same quality.

The arguments in favor of business parks are weighty. As a rule, offices located there are rented by companies who are expanding their businesses, or willing to provide their employees with more comfortable working conditions.

An employee at one such ‘new settler’ says before an entire department was squeezed into a cramped small room; now their new office reminds them of a football pitch. High-ceilinged rooms are filled with light and air, which is an advantage shared by all former industrial facilities.

A nice surprise is the availability of guarded parking facilities at business parks. Practically every employee is likely to get a parking space, while in the city center many were forced to leave their cars unattended, anywhere they could find a space.

Nowadays, there are business parks in almost every part of Moscow. By the end of 2005 their number will have exceeded 15. New commercial zones are being formed in the city where these facilities appear.

The most attractive areas in terms of office and warehouse development are eastern and southeastern areas of the city, areas along the Third Ring Road. Proximity to the rapidly growing Domodedovo airport is an additional advantage.

Experts believe that business parks in northern Moscow, too, are bound to succeed – given their proximity to Sheremetievo airport – as well as any other area with good transport links.

The demand for properties in business parks is growing. Many companies welcome the opportunity of renting offices and warehouses on the same territory, which means that the redevelopment of industrial estates will continue.

That is why it is quite likely that industrial enterprises, especially those subject to withdrawal from the city, will more enthusiastically join in the fight for survival. Those who redesign their properties faster and better will have a better chance of attracting prime tenants at higher rates.