In recent years, more and more class A business centers have been built in St. Petersburg. Their share in the total commissioning volume in 2013 was almost 80%. However, even now the share of business centers of the lowest category, class C, according to analysts, is more than 50% of the total office market. The occupancy rate in cheap business centers is higher than in office complexes of the highest price category, experts say.

Rental rates in new class A business centers exceed the average rates in existing ones
Photo: Alexander Koryakov, Kommersant

The leaders in the commissioning of class A offices were the Moscow and Central regions; the share of these territories in the total volume of new supply exceeded 70%.

However, the chairman of the board of directors of ARIN, Andrey Tetysh, believes that the idea of class A in St. Petersburg is still somewhat blurred. “There is no single gradation for classifying business centers as class A,” he asserts.

As the head of the ARIN company notes, over the past five years the culture of demand for class A business centers has changed: “The consumer is becoming more capricious, he makes demands not only on the appearance of the product, but also on its consumer properties. Tenants have already “sat” in the declarative class A, today we are seeing their integration into real class A offices."

As of May 21, 2014, 156 offers for renting premises in class A business centers are on display in St. Petersburg. The maximum volume of the current supply is in the Central District (about 50% of the total number of advertisements). A significant number of proposals were also recorded by ARIN for the Petrogradsky and Vasileostrovsky districts (15 and 12%, respectively). The most frequently offered rental options are small premises of up to 100 square meters. m, from 100 to 250 sq. m and from 250 to 500 sq. m. (25, 28 and 22%, respectively, of the total number of advertisements). Offers of large office space in class A business centers (more than 1000 sq. m in size) account for about 15% of the total number of advertisements.

The trend towards decentralization of the construction of class A business centers continues. As ARIN analysts note, this is due to the dense development of the historical center and the insufficient possibility of providing tenants with parking spaces. In addition to Moskovsky Prospekt and the Pulkovo zone in the Moskovsky district, class A office centers are being built on view embankments, in particular, in the Krasnogvardeisky and Kalininsky districts. The highest average rental rate for the current supply of office space in class A business centers was recorded in the Central and Petrogradsky districts. The weighted average rental rate for vacant space in class A business centers in St. Petersburg according to the current offer as of May 2014 is 1,560 rubles per square meter per month. Rental rates in new class A business centers exceed the average rates in existing ones. The average rental rate in business centers under construction, where the rental campaign has already begun, is about 1,700 rubles per square meter per month.

The share of vacant space in the segment of class A business centers was about 19% at the beginning of 2014. A significant share of vacant space in class A is formed due to high rates of commissioning and the share of unoccupied premises in new large facilities. The study also notes that in 2013 there was an increase in the average size of rented premises, as well as a significant increase in large (more than 1000 sq. m.) transactions.

Tenants of class A office space are often representative offices of large Russian and Moscow companies, international corporations and foreign representative offices.

Lower class without vacancies

The situation is different in class C business centers. Vladislav Fadeev, head of research at JLL in St. Petersburg, indicates that class C business centers are characterized by high occupancy, which in many cases approaches 100%. One of the factors explaining the low vacancy rate in this class is that landlords of such properties respond flexibly to changes in market rental rates, as well as to tenants' expectations regarding these rates.

“At the same time, short-term contracts are common in class C, so neither party is sufficiently protected from changes in external factors. On the other hand, there is a fairly large segment of tenants who do not want to move to higher-class business centers. This may be due to a more advantageous location, for example, in the case when location in such a facility allows the company to be in close proximity to its own production. Class C office facilities are often located near a metro station, near industrial enterprises, and residential areas. the determining choice in favor of such facilities is lower rental costs, which is especially important for companies whose type of activity requires the presence of a large staff, but does not require the involvement of a significant number of highly qualified specialists, and, accordingly, the creation of more comfortable working conditions.”

According to analysts from Leorsa Group, there are about 1.175 million sq. m. in St. Petersburg. m of office space, which can be classified as class C. Despite the record commissioning of class A facilities, class C business centers are still in the lead in terms of supply per 1000 people. On average, there are approximately 234 sq. m. per thousand St. Petersburg residents. m of offices in this category.

Olga Ponomareva, vice president of Leorsa Group of Companies, investor in the Eightedges business center, said: “At the end of the first quarter of 2014, within the framework of the All-Russian Classification of Business Centers project, the Guild of Managers and Developers (GUD) certified 452 business centers in St. Petersburg. Of these, 30 - in class A, 65 - in class B+, 138 - in class B and 219 - in class C. This is about 60 percent of the total number of business centers in the city. About 250 objects do not meet the criteria of the State Budgetary Inspectorate, so they could not be classified. commission to any of the classes. That is, about half of the classified objects are class C business centers."

Vladislav Fadeev says: “Assessing the exact volume of supply of class C business centers on the St. Petersburg market seems to be quite a difficult task due to the fact that this class is mainly represented by residential buildings in the city center, repurposed for commercial use, administrative buildings consisting of industrial enterprises, as well as buildings of former research institutes. The owners of such objects often do not want to advertise the launch of new space on the market or, using it partially for their own needs, rent out only part of the property to local tenants, as is the case with business centers as part of industrial enterprises.”

However, other experts believe that it is quite difficult to calculate even approximately the share of class C offices. Albert Kharchenko, CEO of East Real, states: “The volume of space in class C office buildings cannot be counted. If we talk about approximate figures, there are about 1.5 million sq. m of class C office space in the city.”

Tenants of class C business centers are mainly companies occupying areas from 50 to 200 sq. m. m, who need several offices in office centers with good locations, as well as new small companies. This class must be on the market so that new companies can start and develop, and later move to higher-class business centers.

Little difference

Today, rental rates in class C business centers, according to East Real, range from 500 to 1,000 rubles per square meter per month.

“In St. Petersburg, the difference in the cost of renting premises in class B and C business centers is too small, and, of course, everything depends on the location of the facility. There are many examples, in particular in the Moscow region, where tenants are willing to pay about 1,000 rubles per square meter in class C, since the main factor remains location and ease of travel,” adds Mr. Kharchenko.

Nevertheless, many developers who own class C office buildings are renovating the property, refreshing the renovation, demolishing non-load-bearing walls to make more convenient layouts, and adding a new part to the building, which initially includes ventilation and air conditioning systems.

There are examples when such buildings stand without repair, and ultimately the owner combines several buildings or adds a new one, makes changes to the engineering design, installs air conditioning and ventilation systems where possible, and subsequently positions this building as a class B+ business center .

Mr. Kharchenko notes that it is not easy to assess the return on costs for the reconstruction of such facilities. “There are protected buildings that are difficult to demolish or build on, so developers take the reconstruction route. If there is a possibility of demolishing the building, most owners choose the construction of a new high-quality facility with well-thought-out logistics for more efficient use of space, thereby reducing the payback period. Some owners “, in order not to invest a lot of money in reconstruction, they simply refresh the renovation and install split systems, after which they position themselves as class B and increase rental rates by 10-15 percent,” says Mr. Kharchenko.

Maxim Klyagin, analyst at Finam Management Management Company, adds: “Given the growing competition, the decision to update the concept and comprehensive reconstruction of the facility, I believe, looks quite appropriate. Effective implementation of the comprehensive reconstruction project may well contribute to a significant increase in the competitiveness of the facility, increased traffic and, accordingly, , increased profitability by increasing rental rates by an average of at least 15-20 percent.” According to his rough estimates, investments in such a project can vary in the range of $1-2 thousand per square meter, depending on the current technical condition of the facility and the scale of the transformation.

Examples of success

Examples of upgrading a property in the segment of class C business centers are not uncommon in St. Petersburg. Mr. Fadeev recalls that back in 2009, a complete reconstruction and restoration of the Medved office center was carried out (currently the business center belongs to class B), which has been operating as an office facility since 1995. “Another example is the Scandinavian House business center, which, as a result of reconstruction in 2011, reached class B+,” he says.

Alexey Gulevsky, head of the consulting department of Astera in alliance with BNP Paribas Real Estate, adds to the reconception projects the Victoria Plaza business center (former building of the Electronstandart Research Institute, built in 1983; area - 46.354 thousand sq. m), located at Pobeda Square, 2. “The reconstruction of the business center was carried out by the Adamant company in 2013. As a result, the class of the facility increased from class C to class B. As part of the reconstruction, work was carried out to change the layout and interior decoration of the premises. Volume of investments in reconstruction, according to my estimates, amounted to up to $1 thousand per square meter. The second example of reconstruction is the Meridian business center (Leninsky Prospekt, 160; area 21.3 thousand sq. m. The building was built in the 1970s). Reconception and reconstruction work was carried out in 2008, as a result of which the class of the property also increased from C to B. The owner of the property is JSC Leninsky 160. The volume of investment in this case also did not exceed $1 thousand per square meter. - said Mr. Gulevsky.

However, it is not always possible to improve the class of an object by simply reconstructing it. Mrs. Ponomareva says: “I know of many attempts to reformat a low-class office center into a higher category, but factors such as location, and often layout, and utility networks are quite difficult to “upgrade”.”

Recently, especially in Moscow, projects have begun to appear where low-class office premises are being reformatted for a different function, most often as apartments (which also have a functional purpose not as residential premises, but as commercial ones).

Repurposing office centers into a different format is currently quite a rare occurrence in the St. Petersburg market. However, there are such examples, and they relate mainly to iconic objects with a premium location in the central part of the city.

The most likely “candidates” for repurposing are old mansions in the center of St. Petersburg, where a premium location, a high flow of tourists, and good transport accessibility will contribute to success if the developer wants to choose a different type of use for his property than as an office building.

“If former factory workshops are protected by the state as architectural monuments, then they can be turned not only into offices, but also into so-called lofts. Also, class C business centers can often house clothing showrooms, representative offices of online stores, and order pick-up points and other shops where customers go purposefully and do not stop along the way,” says Ms. Ponomareva.

Mr. Fadeev gives other examples: “In the building of the former business center at 7-9 Nevsky Prospekt, work is currently underway to reconstruct it into a high-class hotel. An apart-hotel should also appear in the building of the Pavlovsk barracks (Pole of Mars , 1), which was previously also used as an office." He notes that the costs of repurposing a building into a hotel are very high, and therefore it is possible to recoup the investment in an adequate time frame only if a high-class hotel is opened in the building after reconstruction.

At the same time, Mr. Fadeev notes that it is necessary to note a number of restrictions that developers may encounter in the event of the proposed reconstruction of an office building. First of all, the physical characteristics of the object, since in some old buildings it is impossible to install elevator equipment and air conditioners.

Oleg Privalov

Two poles of the office market