2009 - CRE

100
South Region:
Author:­Natalia­Aleksandrova Krasnodar Yesterday and Today
Hard­to­cope­without­outsiders
Until­recently­big­local­players­have­prevailedamong­the­city’s­commercial­real­estate­developers.­The­construction­and­investment­corporation,­Development-Yug,­
undertaking­ aboutten­different­projects­in­Krasnodar­was,­and­stillis,­the­indisputable­leader.­Among­its­projectsis­the­logistics­A-class­chain­ProLogica­Park,their­own­B-class­office­center,­an­A-class­business­center,­Symphony­neighborhood­comprising­of­10­apartment­buildings,­an­entertainment­and­leisure­center,­a­sports­center­and­amultipurpose­community­complex.­Other­bigplayers­in­the­local­commercial­real­estate­construction­market­include­investment­company­
TPS,­investment­company­SBS­Group,­Southern­
Investment­ Construction,­ investment­ construction­company­Kuban-Invest­and­investment­company­Business-Invest.Large­federal­players­and­foreign­companies­began­entering­the­local­market­in­2004including­Ru­Development­incorporated­intothe­RAINCO­holding,­Inprom-Estate,­Renova-
Stroy­ Group,­ Gazprombank-Invest,­ a­ development­division­of­Uralsib,­Peresvet-region,­
Europe-Invest,­ Kesko­ Ltd­ from­ Atek­ Group,­
Rostov-based­ ADM­ Group,­ GVA­ Sawyer,­ ADG­
Group,­ ST­ Group­ Region,­ Raven­ Russia­ and­
Avalon,­ Conti­ Group,­ the­ development­ company­
Parkridge­ Holdings,­ where­ British­ millionaire­John­Cutts­holds­a­controlling­stake,­
DVI­ Group,­ AIM­ Property­ Development,­ thatdeveloped­the­regional­chain­OZ­Mall,­Eastfield­
Logistics­incorporated­into­the­international­
EASTFIELD­ GROUP­ and­ Vestrusdevelopment­
(VRD).­ All­ these­ companies­ have­ their­ divisions­and­representatives­in­Krasnodar­and­arerealizing­big­projects­in­the­city­and­in­theregion.Since­2007­plans­have­been­announced­tobuild­seven­office­and­business­centers­(four­B-class­and­three­A-class­office­facilities),­fourhotels­
(three­ five-star­ hotels­ and­ one­ fourstar),­
five­ A-class­ logistics­ parks­ and­ warehousing­complexes,­four­retail-entertainmentcenters­and­three­trade­centers­and­one­carcompound.­Yet­the­greatest­number­of­projects­(15!)­was­announced­in­the­mixed-use­format;however­most­of­them­are­doomed­to­failure.
Nimble­retail
Retail­real­estate­sprang­up­in­the­city­earlierthan­other­properties.­Robust­construction­oncommercial­properties­–­shopping­complexes,retail-entertainment­
and­ business­ centers,hypermarkets,­technology­centers­and­autoshows­–­has­been­going­on­since­the­early­2000s.­The­following­hypermarkets­and­mallshave­opened­their­doors­of­late:­Metro,­SBS,­
City-Center,­Krasnaya­Ploschad­(Red­Square),­
Gorbushka,­Meridian,­Baucenter,­Okay,­in­addition­
to­ Auchan­ and­ Leroy­ Merlin­ hypermarkets,­the­third­phase­of­Krasnaya­Ploschad­and­
Mega-Ikea.­The­first­phase­of­SC­Gallery­–­a­
94,000-sq­ m­ mall­ –­ also­ opened­ in­ 2008.­
The­largest­shopping­malls­are­the­150,000sq­m­Mega-Ikea,­the­100,000-sq­m­Krasnaya­
Ploschad,­ the­ 22,000-sq­ m­ City-Center,­ the­
67,366-sq­m­Kavkaz,­the­28,500-sq­m­Meridian­
­ Krasnodar­has­long­been­considered­an­ideal­place­for­the­constructionof­modern­commercial­properties.­Just­a­short­time­ago­the­demand­for­quality­premises­in­any­segment­of­the­Krasnodar­market­remarkably­exceededthe­supply­and­the­investment­climate­was­positioned­as­one­of­the­best­in­Russia.­But­today­when­the­recession­has­become­a­reality­all­these­recentlyannounced­projects­may­not­reach­the­stage­of­commissioning­and­marketing.
and­20,000-sq­m­Media-Plaza.­Construction­onsome­large­properties­has­been­frozen:­amongthem­is­the­207,570-sq­m­Oz­mall­and­150,000sq­m­Krasnodar-City.
As­ reported­ by­ Macon­ Realty­ Group,­ theaverage­rent­rate­for­anchor­tenants­in­theexisting­
shopping­ centers­ is­ currently­ 750rubles/sq­m/month­while­for­the­rest­of­thetenants­it­is­2,960­rubles/sq­m.­The­cumulative­
area­ of­ shopping­ centers­ including­ allprojects­now­under­construction­amounts­to­476,000­sq­m­and­the­per­capita­retail­spaceequals­670­sq­m­of­quality­shopping­premisesper­1,000­residents.­However­the­retail­spacemarket­will­hardly­reach­the­point­of­saturationin­
the­ nearest­ future­ despite­ previous­ forecasts,­according­to­Ilya­Volodko,­CEO­of­Macon­Realty­Group.­Most­of­the­earlier­planned­projects­won’t­be­completed­by­2011­because­ofthe­crisis.­
Homeless­business
According­to­various­forecasts,­the­aggregateoffice­
space­ in­ Krasnodar­ now­ ranges­ from­
400,000­to­500,000­sq­m.­For­all­that,­threefourths­of­the­total­space­is­low-quality­andrefurbished­
administration­ and­ industrialbuildings.­Half­of­them­can­be­ranked­amongclasses­C,­D­and­E­with­strain,­whereas­the­second­half­altogether­defies­any­taxonomy.­Theaverage­
rent­ at­ such­ office­ facilities­is­ currently­700­rubles/sq­m.
There­ are­ several­ recently­ built­ B-classproperties­–­the­7,400-sq­m­Viennese­House,the­15,000-sq­m­Kuban-Credit,­the­5,000-sqm­business­center­on­Olympic­Ulitsa­and­a­5,000-sq­m­office­center­at­the­intersectionof­Krasnoarmeiskaya­and­Kuznechnaya­Ulitsa.­There­are­no­A-class­office­facilities­on­thelocal­market.­Three­large­A-class­business­centers­were­slated­for­opening­in­Krasnodar­bythe­end­of­2008;­among­them­is­the­6,655-sqm­office­complex­Green­House­(4,000­sq­m­asoffice­space),­the­20,000-sq­m­internationalcommercial­center­Crystal­(5,177­sq­m­as­officespace)­and­the­18,000-sq­m­BC­Olympic-Plaza.­However,­Green­House­and­Crystal­have­so­farnot­been­commissioned,­although­they­are­thefinal­stage­of­construction.The­average­rental­rate­in­existing­Class­Boffice­properties­is­1,050/sq­m/month,­whilein­Class­A­it­is­as­high­as­1,430­rubles/sq­m/month.­The­average­selling­price­of­officesin­Class­A­and­B­business­centers­now­underconstruction­is­around­110,000­rubles/sq­m.­These­prices­are­much­higher­than­in­Rostovon-Don­–­the­avowed­capital­of­the­Russian­South.­According­to­a­survey­made­by­Moscow-
based­consultancies­in­the­southern­region,­Krasnodar­has­the­highest­demand­for­commercial­real­estate.
Problems­with­hospitality
Krasnodar’s­hospitality­segment­is­representedby­63­properties­with­a­total­accommodationstock­of­nearly­2,000­rooms.­However,­according­to­Krasnodarstat,­the­city­has­26­hotels.­This­wide­spread­can­be­explained­by­the­factthat­the­government­agency­does­not­takeaccount­of­small­private­hotels.­But­even­theoverstated­reports­of­some­analysts­reveal­thefact­that­the­hospitality­segment­in­Krasnodaris­far­from­saturated,­given­the­population,­theurban­area­and­a­robust­sprawl.­Analysts,­statisticians­and­participants­agree­that­the­city­isshort­of­top-class­certified­hotels.­Accordingto­Rostourism,­there­are­11­certified­hotels­inthe­city­with­an­accommodation­stock­of­319rooms.­Of­this­number­only­one­hotel­ranksin­the­five-star­segment­(19­suites)­in­Aton­
Hotel,­certified­last­July.­Five­properties­with­
180­ rooms­ in­ the­ aggregate­ are­ graded­ asfour-­star,­three­properties­with­73­rooms­areclassified­as­three-star­and­two­hotels­with­66rooms­as­two-star.­Furthermore­the­city­doesnot­have­a­single­branded­hotel­belonging­tosome­Russian­or­international­hotel­chain.The­average­annual­occupancy­rate­hassteadily­
risen­ in­ recent­ years,­ according­ to­
Macon­Realty­Group.­(44%­in­2006,­65-70%in­2007.)­It­should­be­borne­in­mind­that­wellknown­large­three-­and­four-star­hotels­showan­annual­occupancy­rate­of­90%.­Mini­hotelsand­two-star­hotels­have­an­rate­of­only­50%.­In­times­of­high­business­activity,­when­exhibitions,­forums­and­other­business­events­areheld­in­the­city,­the­dearth­of­accommodationspace­is­rather­acute­which­is­quite­explicablegiven­that­business­trips­account­for­70-80%of­the­total­demand.­
Three­ properties­ are­ presently­ underconstruction.­
This­ is­ a­ five-star,­ 331-suitehotel­
managed­ by­ the­ Marriott­ brand­ andconstructed­
by­ Europe-Invest­ for­ 45.1­ million­euro,­a­five-star­200-suite­hotel­in­themixed-use­Development­Plaza­and­the­threestar­
Pangra­ Hotel.­ Construction­ on­ a­ threestar­Ibis­Hotel­(now­renamed­Mercure)­wasfrozen­for­an­uncertain­period­due­to­the­crisis.­Construction­on­the­Catherina-City­Hotel­hasalso­been­halted.
Logistic­breakthrough
The­warehousing­sector­is­far­from­developedin­the­city.­There­are­no­warehouses­at­all­ina­
modern­ sense­ and­ there­ are­ certainly­ no­
logistics­parks.­In­the­middle­of­2008­the­totalsupply­was­estimated­at­the­level­of­350,000­sqm­andall­storage­facilities­were­former­production­and­industrial­facilities.­The­investmentactivity­in­this­sector­was­also­very­low­and­thenumber­of­announced­projects­was­not­enoughto­satisfy­at­least­half­of­the­existing­demand.The­low­supply­is­partly­explained­by­thefact­that,­in­comparison­to­other­real­estatesegments,­warehouses­are­less­profitable­andtake­longer­to­recoup.­Experts­foretold­thatuntil­
more­ attractive­ real­ estate­ segmentsreach­
the­ point­ of­ saturation­ developerswon’t­turn­their­eyes­to­industrial­real­estateespecially­because,­in­terms­of­infrastructure,­
Krasnodar­ is­ not­ a­ big­ logistics­ hub­ in­ the­
Russian­South­(like­Rostov­or­Novorossiysk).
Nothing­seemed­to­forebode­a­boom­anduntil­2008­the­warehousing­sector­had­shownno­signs­of­upcoming­turbulent­development.­Yet­some­factors­were­still­pushing­thissegment­
ahead.­ High­ demand­ for­ quality­warehouses­is­coming­from­large­retailersin­
Krasnodar­ itself­ and­ in­ the­ neighboring­
Caucasian­ republics­ where­ they­ are­ slowlystarting­to­expand.­The­rent­rates­at­all­typesof­storage­facilities­have­shown­stable­growthof­late­and,­even­despite­their­present­deplorable­conditions,­they­had­soared­by­more­than­30%­by­the­middle­of­2008­in­both­heatedand­unheated­premises.­As­a­result,­last­yeara­number­of­large­industrial­and­logistics­projects­were­announced­and­at­the­given­time­thesituation­in­this­market­has­radically­changed.­
In­particular,­M-Industria­began­preparing­a­
60-ha­site­for­the­construction­of­a­300,000-sqm­A-class­logistics­park­(in­the­realms­of­the­Russian­South­target­program).­However­theproject­
was­ frozen­ after­ the­ crisis­ started.­
Construction­on­the­first­100,500-sq­m­phaseof­a­Megalogix­project­was­announced­but­hasnot­been­launched­so­far.­The­project­is­set­outalong­M4­Don­Highway,­north­of­Krasnodar,­andcovers­an­area­of­26­hectares.­Logopark-Kuban­(co-founded­by­Raven­Russia­and­Avalon)­wasreported­
to­ tackle­ this­ construction­ projectand­the­total­level­of­investment­was­to­exceed­
$80­million.­In­view­of­the­crisis­Development­
Yug­Corp.­suspended­construction­of­the­firstphase­of­an­A-class­Krasnodar­logistics­network,­ProLogicaPark.­These­were­planned­as­
600,000-sq­ m­ A-class­ storage­ facilities­ withoffice­and­industrial­functions­for­the­accommodation­of­light­production­lines­based­onenvironmentally-friendly­technologies­whichare­
similar­ to­ the­ Coca-Cola,­ Wrigley­ and­
Gillette­works­in­the­area­of­Pulkovo­3­in­Saint­
Petersburg.­