Building quality over quantity is the best way to protect investments in Moscow real estate, say experts. The old adage rings particularly true in the wake of the recent sub-prime mortgage crisis in the US, which has knocked the wind out of the world's stock markets. 'The time of cutting corners, building quick and making a fast buck is coming to an end for many people,' says Darren Gorodkin, head of the Moscow office of Swanke Hayden Connell Architects. A decade ago, office space was at such a premium and Class A buildings so hard to find that developers could flog poor quality buildings in no time. 'You would find blue-chip companies paying top dollars for offices with diabolical column grids and floor plates. The wasted space was phenomenal,' says Gorodkin.
Building quality over quantity is the best way to protect investments in Moscow real estate, say experts. The old adage rings particularly true in the wake of the recent sub-prime mortgage crisis in the US, which has knocked the wind out of the world's stock markets. 'The time of cutting corners, building quick and making a fast buck is coming to an end for many people,' says Darren Gorodkin, head of the Moscow office of Swanke Hayden Connell Architects. A decade ago, office space was at such a premium and Class A buildings so hard to find that developers could flog poor quality buildings in no time. 'You would find blue-chip companies paying top dollars for offices with diabolical column grids and floor plates. The wasted space was phenomenal,' says Gorodkin.
No surprise, then, that the little prime real estate built since then remains in consistently high demand. 'Current vacancy in Class A offices is around 2% - far below that in most western cities - and is likely to stay at this rate for the medium term,' says Aaron Block, head of office agency at Cushman & Wakefield Stiles & Riabokobylko, the Moscow branch of the real estate services firm.
Developers with buildings coming on the market now are not likely to have trouble filling space. And while the stock market crash may be causing people to pull out of projects in other countries, the sheer lack of supply in Russia's capital has reassured most investors.
But the fast-maturing market is heading towards equilibrium, says Gorodkin. Thanks to favourable economic conditions over the past few years and the rise of oil billionaires, a glut of prime real estate is entering the market. In 2007 alone, more than one million m2 of office space alone was completed, according to Cushman & Wakefield. And with millions more square metres planned for completion over the next two years, Moscow's real estate market risks being flooded by 2010. To avoid owning un-let space in the coming years, Gorodkin says his clients are prepared to pay for the highest quality builds. 'I only work with developers who want to create buildings that wouldn't look out of place in London, for example. The sort of choice set to become available soon will leave the lower quality buildings empty in a few years,' he warns.
