News

21/10/13

First-line-from-the-center

Many want to live in the center of Moscow. Despite well-known issues related to the center being excessively busy, living downtown offers considerable advantages: proximity to the main infrastructure of the city, the most famous sightseeings, work places, and, which is quite important for most buyers, the prestige of the area. The latter will set them back a nice premium: even the ordinary property is several times more expensive in the center than the average price across the city.


Areas outside the city’s central district, which actually form the “first line from the center” could become an alternative to the overvalued center of Moscow. These areas are located as close as can be to the Garden Ring, at the boundary between the Central Administrative District and the Third Transport Ring. They include those parts of a number of districts (such as Dorogomilovo, Begovoy, Maryina Roshcha, Lefortovo, Nizhegorodsky, Yuzhnoportovy, Danilovsky, and Donskoy) that are close to the center. Actually, each of these areas is a continuation of one of Moscow’s central districts.


So what are these areas? What are their advantages and drawbacks? Can they really compete against the center for the property buyer in terms of quality and offer price?


Let us have a closer look at them.


Dorogomilovo District combines the business vibrancy of the present (located along the major transport artery of the capital, with a large railroad station and the business area of Moscow International Business Center "Moscow-City" nearby), and the robustness of the past (the residential stock here is mostly represented by the so-called “Stalin-style” buildings). Its important advantages include a prestigious location (along Kutuzovsky Prospect, a high-profile government route) and Victory Park, a large park area located within the district. At present, no residential projects are offered in the primary property market of Moscow in Dorogomilovo District. The last residential projects that were offered in the primary market of this district included such premium developments as Kutuzovsky (Dokhturovsky Lane and Reservny Lane) and Kutuzovsky 23 (Studencheskaya 20). Today, the offer prices in these houses in the secondary market stay high at $7,800 – $20,000 per square meter. As of late, this district mostly builds suite projects. None of them has entered the market yet: suite projects on Kulneva and at Poklonnaya 3A. The district’s outlooks are driven by the plans to develop the territories of former factories on Berezhkovskaya Embankment and Tarasa Shevchenko Embankment (Sacco and Vanzetti Pencil Factory and Berezhkovskaya Embankment’s industrial area).


Begovoy District area has actually never built by residential property developers before. The key constraint consisted in a large territory occupied by the Moscow Hippodrome and industrial businesses: Industrial Zone No. 9 Ulitsa Pravdy (measuring 36 hectares). No residential projects are being currently implemented in Begovoy District. The closest large business class suite project, Arena Park, is being built at the boundaries of this area in Aeroport District. There are some projects currently under construction in this area, including a multifunctional shopping and office property in the territory of Slava Factory, which will probably include suites. Additionally, Vnesheconombank’s entities announced this year their plans to acquire the building of (BAT)-Yava factory from British American Tobacco (BAT) on 3rd Yamskogo Polya Street. Later on, the district is likely to be developed through the renovation of the entire territory of the industrial zone.


Maryina Roshcha District is a typical old commuter district that is mostly represented by old prefab houses. Modern residential business class developments Diamant, Tikhvinsky dvorik, Novosushchevsky, etc. built in 2005 – 2007 are offered already in the secondary market. Selling prices range from $6,500 to $19,700 per square meter. No new projects in the primary market. Key advantages of the district include its proximity to Yekaterininsky and Festivalny Parks, and theaters (the Russian Army Theater and the Satirikon). There are almost no sites for further development of the area between Maryina Roshcha and the Third Transport Ring.


About one half of the territory of Lefortovo District within the Third Transport Ring is occupied by an industrial zone: Serp i Molot Plant, Kristall Plant, Tramway Repair Plant, OAO Zolotorozhskiy khleb, 101 Central Motor Vehicle Repair Plant, etc. The residential development of the district is mainly represented by old residential property of various types: 5 to 16 storey serial prefab houses built in the 1960-90s, 5 to 8 storey brick houses built in 1958-61. No new residential projects. This area’s key outlooks are associated with industrial zone reorganization. Among other things, reorganization is expected to cover the territories of Serp i molot plant and the Motor Vehicle Repair Plant. Indicatively, these territories would host comfort business class residential developments. More accurate details about the quality level and scope of planned residential development are currently unavailable. This area has actually no residential developments.


Comfort and business class residential projects are currently underway in Yuzhnoportovy District . The primary market offers apartments in Dubrovskaya sloboda residential development and in the comfort class property on Melnikova Street. The first development has already been officially commissioned, with the apartment selling prices ranging from $5,000 to $9,800 per square meter. The residential development on Melnikova is at an active construction stage. Apartments in it are offered at prices ranging from $4,250 to $5,870 per square meter. All buildings are planned to be completed and commissioned in 2014.


A particularity of Yuzhnoportovy District consists in the larger number of high potential sites for redevelopment, such as the territory of the 1st State Bearing Plant, historical territory of KIMMZMAAZLK Motor Works, territory of the Russian State Research Center CNIIT, JSC Corporation Kometa, etc.


The largest part of Danilovsky District within the Third Transport Ring can rather be called industrial and business than residential. Its territory accommodates multiple business centers, industrial zones, including a part of Industrial Zone No. 27 ZIL and Industrial Zone No. 1 Paveletskaya, with the track facilities of Paveletsky Railroad Station. The residential area of the district is closer to Lyusinovskaya and adjacent lanes and streets. Relatively new developments include business class residential projects Lira, Krutitskaya naberezhnaya, Vostochnaya 9 and a comfort class residence at Velozavodskaya 2. Apartments in these residential houses are already offered in the secondary market at prices ranging from $5,500 to $12,500 per square meter. No new projects were launched in the market over the last three years.


The advantages of Donskoy District include a developed infrastructure, the status of the district as one of Moscow’s academic centers, sightseeings present in the district (Donskoy Monastery, Shukhov Tower; proximity to large parks (Neskuchny Sad, Gorky Park), and the historical prestige of the place. In recent years, new projects in the district mostly included infills (such business class properties as Donskoye Podvorye and Neskuchny Sad). The only project offered until recently in the primary market of Donskoy District was The Loft, a suite development that currently offers the remnants of loft suites at prices ranging from $6,050 to 6,400 per square meter


A new premium residential project, Barkli Residence, entered the district’s market this summer. The project offers finished apartments at prices from $9,750 to $21,700 per square meter. The construction is planned to be completed in 2015.


A new residential business class project, Donskoy olimp, is expected to be launched in this district before the year’s end. The promising sites of Donskoy District include the territory of the Krasny proletariy plant (measuring around 13 hectares) and the 3rd Taxi Park (measuring 1.5 hectares). These sites are planned to developed with residential business class projects.


An analysis of the offer in the residential property market in the above areas shows that the bulk of property is offered in the secondary market. New construction projects offered in the primary market cover only Donskoy and Yuzhnoportovy Districts. There were only two new projects that offered a wide choice of apartments as of late August 2013: a comfort class residential property at Melnikova and Barkli Residence.


The list of residential and suite developments in the “first-line-from-the-center” areas, under construction, completed and prospect, is given in the table below.


Advantages and drawbacks

The districts in question are undoubtedly differ a lot, but most of them have several common advantages: good transport accessibility; proximity to the center; sophisticated infrastructure; a relatively low development density as compared to the center; and a relatively low offering price in the residential property market as compared to the center.


The price difference between these areas and adjacent central districts In the secondary market is estimated by Barkli Corporation’s research team to reach 35%.


Secondary market prices for residential property in the “first-line-from-the-center” areas and adjacent districts of the city

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Table. Secondary market prices for residential property

Experts from leading brokerage and consulting companies interviewed by us, Blackwood, Metrium Group and Welhome, confirm that these areas do have advantages over the city’s center.

Mariya Litinetskaya, Metrium Group’s CEO, says: “The districts at the boundary between the Central Administrative District and the Third Transport Ring can be viewed as the “happy mean” of Moscow. It is not the center with its high prices, high development density and the overwhelming and endless heavy traffic, which adversely affects the environmental situation. On the other hand, they can’t be viewed as commuter areas. This is an excellent intermediate option for affluent people who are unwilling to live in the very heart of the capital for some reasons.” “The key advantage of these areas consists in their superb transport accessibility, with their residents able to get to the city’s center in a matter of minutes. Most of them feature numerous large roads that have already been renovated, or are expected to be renovated in the nearest future. Moreover, most of these areas enjoy sophisticated and established infrastructure: numerous childcare centers, schools, healthcare and sports institutions, top-end shopping malls and business centers, and so forth,” adds Mariya Litinetskaya.


At the same time, the market players highlight a number of drawbacks for these territories: poor quality development; industrial zones; underdeveloped surrounding territories (when it comes to projects for integrated development of larger zones, including decommissioned industrial businesses).


According to Mariya Litinetskaya, “for historical reasons, the territory between the center and the current Third Transport Ring host many industrial businesses. Some of them are still operating, which certainly affects the environmental situation.” We would highlight that these drawbacks are characteristic to some extent of all areas in question, but are most critical for specific zones.


Tatyana Sharovaya, Head of Welhome’s Project Consulting and Research Service, says: “Some districts, such as Nizhegorodskiy, Yuzhnoportovy, Lefortovo, and Danilovsky, require comprehensive efforts seeking to withdraw industrial businesses and renovate the territories so that buyers could view them as an alternative to adjacent central districts. Given the scale of industrial territories in these districts, they are unlikely to become more competitive earlier than in five to seven years.”


On the one hand, industrial territories undermine the image of the areas on the whole. On the other, this renders the “first-line-from-the-center” quite promising from the development standpoint.


According to Mariya Litinetskaya, “the authorities are currently implementing a program to withdraw industrial businesses from the city’s boundaries and reorganize the former industrial zones. For this reason, all these areas can potentially be viewed as extremely attractive for building new commercial and residential projects. Especially, given that the number of construction sites available in Moscow is currently extremely limited.”


Comfort districts

Given the above disadvantages and the lack of high quality offer in these areas, not all “first-line-from-the-center” districts are currently able to compete against the center for the buyer.


Experts believe that Dorogomilovo, Donskoy and Begovoy Districts are leading in terms of comfortable living conditions.


“In our view”, says Mariya Litinetskaya, “Dorogomilovo, Donskoy and Begovoy Districts are the most attractive ones in terms of living experience. They have almost no operating industrial businesses, but enjoy a well-developed social and municipal infrastructure. Moreover, Dorogomilovo and Donskoy can boast large park areas located within their territory or in the vicinities, which is crucial today for the capital with its challenging environmental situation.”


Oksana Diveyeva, Blackwood’s Residential Sales Director, notes: “While Begovoy and Dorogomilovo, sited near Moscow International Business Center “Moscow City”, are most popular among business buyers, Donskoy District is more eagerly sought by family buyers with children due to its proximity to the park area.”


Apart from the above advantages indicated by other experts, Tatiana Sharova points out the historical prestige of two areas: Dorogomilovo and Donskoy, based on their proximity to high-profile transport arteries of the city, Kutuzovsky and Leninsky Prospects.


Thus, among all the above districts, only Dorogomilovo and Donskoy are the actual continuation of the center. These districts are high profile and do not require large-scale redevelopment of their territories to accommodate upscale residential projects. Moreover, these districts already have a successful track record of similar projects. Apart from the absence of large industrial zones, these districts stand out due to the high quality of their existing residential properties and proximity to park areas.


Donskoy District is currently leading in terms of new upscale project commissioning.


”The district combines a number of unique parameters at a time. Firstly, a rich history: it hosts quite a few architectural monuments, both ancient (Danilovsky and Donskoy Monasteries), and more recent (Shukhov Television Tower). Secondly, the district’s high profile status is driven by its high transport accessibility: the proximity to the Garden Ring and the Third Transport Ring and to major transport arteries. Thirdly, a quite important feature of the district consists in its infrastructure, with its plethora of shopping malls, convenience stores, restaurants, cafes, fitness centers, healthcare and educational institutions. Fourthly, the district lies near Gorky Park,” says Mariya Litinetskaya.


Oksana Diveyeva believes that “among all the above areas, Donskoy District, perhaps, suits the most for premium residential development. Moreover, the only new premium project in these areas, Barkli Residence, is being built in this very district. We estimate, however, that in the coming years the number of such projects will grow.”


Market experts estimate the outlooks of this project as quite strong. “Barkli Residence has enhanced the real upscale offer, which is so rare today. Barkli Corporation has extended its range of branded products by offering buyers finished apartments designed by an internationally recognized architect firm. The successful track record of the developer in implementing finished premium residential property built involving world-level professionals shows that similar products are very popular today,” says Mariya Litinetskaya.

Table. Residential and suite developments in the “first-line-from-the-center” areas

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