Money Growing: A Day in the Life of the Moscow Docks

Moscow developers use various ways to find sites for the construction of their next project. They go to industrial zones and shabby five-storey buildings … But till now territories occupied by several of the capital’s river ports have remained virginal zones. In the opinion of experts, these premises could be used by their owners much more profitably.

Moscow’s river ports really are in decline if we compare them to similar constructions in European cities. And in fact ports historically were the focus of business activity in the city, and the river was one of the main transport throughfares that makes their location profitable in most cases. Taking into account the proximity to water and the success of redevelopment projects at docks in Europe, especially in the UK, Moscow’s river ports possess insane potential for redevelopment," considers Ilya Shershnev, director of development at Swiss realty Group. According to him, if we are talking about complex redevelopment then on the territory of ports it is possible to create any zone of commercial activity. "This new attractive spot for complex development is a highlight for the city," he adds.

Three river heroes

Today in Moscow there are three river ports, all of them called after sides of the world – Northern, Southern and Western. All three ports have different owners and different strategies for development. The first of them is officially owned by Severny port (Northern Port), the main shareholders of which, according to the head of the group of the financial examination department of corporate finance at Finam, Yury Eremin, owns financial companies Megatrastoil, which specializes in oil trading and the stock market. In the opinion of experts, this company is controlled by the head of Rosgosstrakh, Danil Khachaturovy. The interests of the large business in the port is due to its good cargo passability. "The structure of the port includes two cargo areas. The first area is located on the left shore of the Khimkinsky water basins and has 10 major mechanic moorings, the total length of which is 1,128 meters. The region specializes in the transportation of large cargos, containers, wood, salt, and non-metallic building materials. The second freight area, Dmitrov quay, is located on the Moscow channel. The length of the berthing front is 220 meters. This area specializes in the transportation of non-metallic building goods, retail goods, etc.," says Mikhail Gets, vice president of strategic development at Blackwood.

However transport accessibility at the two moorings is organized differently. "At the moorings of the first cargo area there are no railway tracks. The export and delivery of goods from the port are possible only by motor transport. The second area - Dmitrov quay - has a 550 meter railway line, adjoining the Dmitrov station of the Moscow railway," the expert says. In total, the port serves a 122-km area of the Moskva channel: from lock no. 7 in Shchukino to Bolshaya Volga quay inclusive, and its average long-term duration of navigation is 210 days. In addition, on the territory of the Northern Port there is a factory that produces concrete mixes and mortar.

The Southern Port is owned by Southern River Port, which, according to Eremin, is controlled by Promyshlehhoye Razbitiye group's Roman Trotsenko, owner of the Moscow River shipping company. Of the three ports, the Southern Port is the largest. The area of the land plot that the enterprise occupies is 29.6 hectares, not including 1.1 hectares of mooring.

"Cargo being transferred from water to rail and vise versa passes through the Ugreshka station. The main goods are bread, wood, coal, paper, and construction goods. The volume of cargo handled exceeds 9 million tonnes, however in connection with the limited travelling conditions only ships with a maximum load of 2,000 tonnes can moor there, says Gets.

Unlike the other two, the Western river port, located on the right bank of the Moscow river, currently has no shareholders and belongs to the state. "It has five moorings and is connected with the railway up to Fili station. The port, whose turnover of goods is almost 30 million tonnes, specializes mainly in the processing of mineral-building goods - sand, gravel, rubble, and also has five cargo sites on the Moscow river for processing sand: Volokamsky, Serebryany Bor, Hagatino, Besedy and Zaozerye," says Gets. But most importantly the port is currently being planned for reconstruction, transforming it into the supply center for Moscow-City. It is clear that Moscow construction companies are interested in the opportunities of the port.

Transport and relaxation

"If we consider ports as an element of transport infrastructure then their condition can be recognized as satisfactory - they manage their functions, especially as passenger traffic is now mainly of a touristic character. There is also no talk of decline - after the crisis in the 1990s cargo and passenger transportation has shown growth. However, the owners of ports still do not consider them as objects of commercial real estate - they rent out available areas and land plots to shops and restaurants, but the level of their use does not seem intensive enough," Eremin considers.

According to the general director of Vesco Realty, Sergei Leontyev, at the moment in Moscow there are only two high-grade river ports - the Northern and the Southern Ports, whereas the third, located in immediate proximity of Moscow-City, works exclusively for the needs of the capital's Building site No. 1.

"The main volume of logistical operations are carried out at the northern and southern river ports, which are conveniently located in the suburbs of the city and have kept the necessary infrastructure: berthing lines, portal cranes, areas for the storage of bulk cargo and warehouse complexes," says Leontyev.

In addition, the ports make money on mooring water craft. "Tariffs for parking water craft depend on the location of the mooring, the development of the infrastructure of the mooring, the length of time you moor and the time of day. On average the cost of mooring is from 1,500 to 8,500 rubles per hour for various water crafts," says Igor Luchkov, director of the valuation and analytical research department at Becar Commercial Property.

Taking a ride like the wind

The Moscow authorities have announced plans over the next several years to create a water taxi. In the opinion of experts, the creation of such a service could stimulate the development of the infrastructure of river ports. As the deputy head of the capital's department for transport and communication Alexander Vorobev promised in the middle of 2006, over the next three years about 20 catamarans with small berthings will start to transport passengers on the Moscow River. At the first stage the vessels will be an experiment.

In July, 2007, water taxis in Moscow finally appeared. At this time about 15,000 passengers took advantage of its services. The fleet of taxis included 5 open vessels for 20 and 40 people and traveled along two routes: in Stroginskoi Poime and also from Gorky Park to Novospassky bridge and back. An hour's rent of the taxi cost 250 rubles for adults and 150 rubles for children.

However the actual results of the taxi did not match the expectations of the capital's authorities. By the Moscow government's estimations, the potential market for the services of a water taxi in the Moscow region is worth almost 400 million rubles a year, and the annual demand for this type of transport exceeds 500,000 passengers a year.

"Now there are 96 coastal zones which may be involved in the realization of the water taxi program. According to tentative estimations, there is mooring for 78 small vessels, which will take three years to recover the outlay," says Luchkov. According to him, the same situation has developed in St. Petersburg. "The development of a river fleet and a river taxi - is still only words. But excursion services on the channels and the Neva are being developed. In season these services are in demand. However there was a period of decline from the middle of the 1990s. Now this business is actively developing, but rather spontaneously. There are developed routes for large capacity excursion boats - Valaam, Kizhi, etc., and there are rather chaotically developing small fleets, rowing tourists on the channels, thanks to small private companies," he says.

The majority of the most attractive moorings for small vessels are concentrated in St. Petersburg’s central area, and the city authorities actively lease them out. "In 2003 a reassessment of the quays was carried out, and now they are rented out at market cost. Now the city again carried out a reassessment as authorities consider some of the quays underestimated, especially in the central area. "As for the commercial use of ports, it is possible to talk about classic use: for mooring and parking boats. In addition, moorings can be used for entertainment purposes," says Luchkov.

Concepts and failures

On February 15, 2000, the government of Moscow passed order No. 109-RP "On work of the concept of development of river transport of the Moscow pool to 2020" in which included the main directions for activity in perfecting the work of the river ports in the territory of Moscow, and the strategy of their further development. By April, 2003, the concept had been developed and on April 1 was approved by the government of Moscow. A separate chapter of the concept was especially devoted to the development of Moscow's river ports.

Development of the infrastructure of ports was intended to be carried out by private investors and the local authorities plan to acquire a 25.5 per cent share of the Southern and Northern ports that belongs to the federal government.

"If the opportunity of purchasing the specified share holdings in the city's ports is missed, then the ports will turn over to private enterprises, the consequences of which the city will have to face," warned the authors of the concept. In addition, the capital's officials planned for the territories of ports to be used as buffer warehouses between the senders and receivers of sand and rubble during the inter navigating period. This would allow building companies to smoothly receive the necessary materials for work during the winter period.

At the Northern Port the reconstruction and modernization of the existing terminal complexes was planned. "The convenient geographical position of the port allows to use it in interaction with not only motor transport, but also with air (Sheremetyevo-Cargo)," the concept outlined.

Serious reconstruction was also needed at the Southern Port, but the largest scale plans of the capital's authorities nevertheless concerned the Western port.

"The port will be included in the system of the "North - South" international transport corridor. Reconstruction of the port will allow for it become an important part of the logistics system for servicing the Moscow-City international business center in the stages of its construction and functioning," the authors of the concept approved.

However these plans could not come true. Moreover, in September 2005, the government of Moscow temporarily suspended the privatization of state company Western River Port "in connection with the necessity to improve the situation in the collective." As the former assistant to the mayor of the capital Iosef Ordzhonikidze explained, "People have failed to trust the director of the state enterprise, who for a long time did not appear at work."

Moreover, according to him, an attempt by raiders to capture the Port was undertaken. As a result the port has still not been privatized.

At the end of May, 2007, the Moscow committee for architecture and town-planning (Moskomarkhitektura) prepared a concept of reconstruction for the Western port, which includes the organization of a tunnel connected with the central part of the Moscow-City business centre. "One of the main reasons for the reconstruction is a deficit in the throughfare capacity of the streets in the Moscow-City area. According to the conditions of the reconstruction Moscow will receive cargo transport from a tunnel and entrances for railway, river and motor transport," Gets explains.

Within the limits of this concept it is supposed to lower considerably the number of warehouse and logistical operations at the port, to leave only the most minimal volume for the services of the Moscow-City center.

As Luzhkov announced about program, it is necessary "to not extinguish the small churches of these monasteries," meaning the warehouse complexes. In order to unload roads around the business center, the Moscow authorities have allowed only the transportation of food stuffs by road. Clearly, food stuff should be fresh, and sand is not threatened with the possibility of becoming rotten.

According to Leontyev, river transportation is the most effective way to transport building materials in such a loaded megacity, as Moscow.

Market offers

Moscow's ports have become the exclusive reloading point for the delivery of cargo, and the Moscow river has unsuccessfully tried to transform into a route for a water taxi. "The results of 2006 allow to draw the conclusion that the falling volumes of transportation by river will continue to fall in the future. Cargo transportation by internal waterways has not fallen to record low levels owing to the transportation of building materials - rubble, gravel, sand, cement," Elizavet Estrina, head of the consulting department at Praedium notes.

In the opinion of market participants, despite the intentions of the capital's authorities, river ports are used with small efficiency. "Because of the seasonal prevalence of river transportation it is a low-profit business, therefore it is necessary to develop high-grade coastal infrastructure. The construction not only of moorings is necessary, but also hotels, parking places and cafes. The project is attractive to developers, considering the sharp shortage of space in Moscow. But interest in specific projects will depend on conditions and first of all on the incumbrances, set by the city authorities.

In Eremin's opinion, even existing premises at ports are used insufficiently. "First of all, ports own the buildings of river stations, which in general are practically not used for their direct purpose. As a result, it is possible to involve them in the creation of shopping and entertainment complexes. In Moscow at least ports are located conveniently enough to create a flow of consumers. Secondly, land plots belonging ports, can be used for the construction of residential and commercial real estate, creating entertainment zones. Of course, part of the areas adjoining the river, can be used for modern logistical complexes," he says.

According to Leontyev, "the most promising projects at river ports at the moment are warehouses, as river transport, despite the development of automobile, railway and aviation, keeps its competitive advantages: accessibility, the possibility to transport large-sized cargo and convenient locations for unloading."

As Gets notes, rental rates for class B warehouse in the area of the Southern Port area round $350 per sq.m a year, and in the area of the Northern Port are $350-$400. Rent in the ports' warehouses are calculated by palette place per day instead of the accepted rates in modern logistical terminals where you pay per sq.m per year. As port warehouses are calculated on the short-term storage of goods, rent rates in such premises are higher than in warehouse terminals calculated on long-term rent," explains Leontyev. The price strongly varies.

"Considering the rate of construction in Moscow, river transport is necessary for the city as it is the most accessible and effective way of delivering building materials. The only disadvantage of river transportation is its seasonal prevalence, but this can be compensated with the use of warehouses during the winter season. In this light the infrastructure of river ports has a good chance of becoming a leader in supplying logistic services to Moscow," the expert explains.

According to Gets, if the owners of river ports have the opportunity to construct real estate on this territory, to start they should understand the main direction of the activity of the port. "River ports can be used as cargo and passenger ports or can combine the two. In the port will only be for cargo it is worth developing first of all warehousing and industrial, and also office components. If the port is for passenger transportation, it is necessary to provide for multipurpose premises, including trading areas and hotels, in the concept of the development of the territory," he says.

However the prospects of each river port are different. "The river station in the north of Moscow could become a remarkable new zone for the city, for housing and any other constructions. The territory from Moscow-City to the lock at the top of the Moscow river will also be a base for various projects in the next few years. I think that the Southern port also has potential, but that it will be realized a little bit later," Shershnev considers.

So, according to experts’ estimations the prospects for Moscow's river ports are positive. "The incomes of ports will grow due to objective reasons - growth in tourism and freight traffic, and due to the more effective utilization of the areas," Eremin says. Shershnev recalls, "in London, Docklands has been built around a port area, which in the last few decades has become one of the most expensive areas of the city, and in former docks or wharfs, warehouses next to the water, lofts have been created and full redevelopment of premises right next to the water has been carried out." But, it seems, Moscow river ports meanwhile have another destiny. It was not possible to get comments from the owners of Moscow's ports on the plans for their development.