The Committee for Property Management intends to change the method for calculating rent for premises that the St. Petersburg administration leases out, Dmitry Kurakin, Chairman of the Committee for Property Management, said at the end of last week. The Committee is preparing amendments to the city law on the procedure for determining rent for non-residential premises that will allow moving away from the mass method for calculating rental rates for city premises to an individual assessment. In this case, city rates will approach market rates, Kurakin expects.

We are talking about premises located on 22 main thoroughfares, specifies Olga Barashkina, press secretary of the KUGI. Currently, city rates on the most popular streets can be 50% lower than market rates, and in some cases, for example on Bolshoy Prospekt of the Petrograd Side, the underestimation reaches 70%, says Kurakin. Now the rental rate will also be affected by the presence of a subtenant. There is a whole layer of tenants who live by renting out premises that the city administration provided them with at much lower rates at a higher price, Kurakin believes. "We will introduce serious restrictions on subletting, they will not be prohibitive, but before subletting, the tenant will have to amend the agreement regarding the rate," says the chairman of the KUGI. According to him, rentiers should not take away part of the city's income.

These innovations will not affect lease agreements on investment terms and those tenants who already use an individual rental rate, Kurakin clarifies. According to him, independent experts will conduct the market assessment, and the GUION will approve it.

According to KUGI, out of 11,000 city property lease agreements, 7,500 are commercial leases. These are mainly premises with an area of 120–190 sq. m., only 256 objects are larger than 500 sq. m., says Kurakin.

Subletting city premises is a common practice; the city owns premises on central streets with excellent locations, says Sergey Fedorov, development director at Jones Lang LaSalle in St. Petersburg. The rate for tenants of state property is 30–50% lower than the market rate, and for subtenants it is close to the market average, estimates Yana Borovitskaya, a representative of the Soyuz Association of Trade Enterprises.

"Our landlords did not reduce the rate even during the crisis, knowing that we would not go anywhere - there would be too many technical restrictions and approvals for business in the new location, and the location is iconic," complains a top manager of a company that subleased a space on Nevsky Prospekt. There are not many decent premises in the center, and this is an old fund with rotten floors, so in addition to the rent, we also spent money on repairs, he explains. Increasing rates can seriously reduce the profitability of subleasing premises, says a city property tenant who asked to remain anonymous. According to him, city premises are often rented by socially oriented companies.

If KUGI changes the rates, rentiers will hardly be able to raise them significantly above market rates, because subtenants will start going to private owners, Fedorov notes. It would be more expedient to sell the premises than to change the rental rates, he believes.

The KUGI should act as a market regulator and, instead of raising rates, prescribe, for example, collecting from the tenant a portion of the income from sublease in favor of the city, believes Borovitskaya.

KUGI will take on the rentiers