This question was repeatedly raised at the closed Investors Club meeting at the 14th Economic Forum in Saint Petersburg. The main theme of the meeting was urban investment strategies in real estate after the crisis and the role of investors in such strategies.
The meeting was focused on the following issues:
• competition for investments among cities: new development trends;
• promoting cities and regions in the Russian and international markets with increased interregional competition: effective strategies, regional experience, developing regional competitive advantages;
• cooperation between authorities and developers: development projects forming the city image.
Defining and realizing mutual interests;
• strategies for attracting and working with investors.
Mr. Aleksandr Olkhovsky, Vice-President, Management Director of VTB Bank, the moderator of the meeting suggested discussing a key issue – who is responsible for the city development in twenty-thirty years. Only after answering this question, it is possible to talk about hi-rise development, market saturation, private-public partnership and its mechanisms, etc.
These issues reflect contradictions in current urban development. On the one hand, a particularly tough policy of city administration may push away potential investors, reduce profitability of their projects and city appeal for new investments. On the other hand, unrestricted investments into uncontrolled commercial, residential and industrial construction may have a negative effect on the transport and planning city development.
Mr. Vladislav Myagkov, Head of the Real Estate Consulting Department of Ernst and Young (Saint Petersburg), says that Russian million cities have no defined strategy for correlating urban development and investment activity. There are several exceptions such as St. Petersburg which has applied the current General Layout and the Land Use and Development Rules to regulating development, and Tomsk with an original strategy of city development as an international educational center.

Mr. Cameron Sawyer, Chairman of Board of Directors, GVA Sawyer, says that Russia is an urbanized country and its development is primarily focused on large cities. “The main challenge in urban development is investment. Without financial support, plans remain on paper. Russia has long had advanced institutes for urban planning and city development. They have minimum results without investments. The biggest challenge is making the urban development system appealing to investors”.
Mr. Dmitry Abramov, General Director of BTK Development, thinks that the urban development strategy of St. Petersburg should be based on demand and requirements of major commercial real estate consumers who look for prestigious locations, convenient access and quality conditions for running their business. “The city lacks areas satisfying the requirements of potential lessees and suitable for prime real estate. Good areas for quality offices of international and Russian companies are the Apraskin Dvor and Novo-Admiralteysky Island (on condition industrial production is removed). The area outlined by Antonenko Pereulok, Grivtsov Pereulok and Voznesensky Prospekt may be developed after committees and other city administration authorities outside Smolny are moved to a building in the Novgorodsky Street – Degtyarny Pereulok, with further development of vacated buildings and areas”.
Mr. Mikhail Semenov, General Director of RENOVA StroyGroup, told about a large-scale integrated urban development project in Yekaterinburg and cooperation with municipal administration in creating the social infrastructure. “Integrated urban development projects are the most prospective tool for investments in economy class housing. Investors finance only the commercial part of the projects and get profits, with the burden of social, engineering and transport infrastructure on the government".
According to Mr. Sergey Igonin, a managing partner of IB Group, Vice-President of the Guild of Managers and Developers, housing quality, amount and location should be determined jointly by authorities, investors and public. This is the only way to create urban environment promoting city development, increasing useful life of facilities and added value of projects. All issues cannot be left to investors, who often think about short-term profit. Authorities should provide for an effective dialog in developing urban planning strategies.
The civil and social responsibility of investors and their participation in urban development is reflected in their projects. Investors should create quality projects satisfying current requirements and demand.
In conclusion Mr. Aleksandr Olkhovsky noted that the market is at a stage when useful life of real estate is becoming longer. “We must ask ourselves what will be in demand in ten or even twenty years. The answer to this question may be found only through understanding of how our consumer will be in ten or twenty years. What will the future generation be like? Cities need to define certain development parameters, and business needs to put them in life. However, does any major Russian city have an understanding of what its population will be like in twenty years? How will the generation change? What is was like at 40? How did people affect the product offered by investors? What were people like in the 1980’s? What are they like now? What will our children be like? They will be the consumers of our shopping centers, offices, entertainment facilities, etc. We as investors understand this issue and can explain it to those who define urban development, city policies and their future. Without our participation in urban planning and development strategy, no one will do that”, concluded the moderator of the Investors Club meeting.

The Investors Club meeting was attended by Mr. Aleksandr Olkhovsky, Vice-President, Managing Director of VTB Bank, Mr. Mikhail Semenov, General Director of RENOVA StroyGroup, Cameron Sawyer, Chairman of the Board of Directors, GVA Sawyer, Mr. Dmitry Abramov, General Director of BTK Development, Mr. Danat Bulavko, General Director of Aditum, Mr. Sergey Igonin, Managing Partner of IB Group, Vice-President of the Guild of Managers and Developers, Mr. Stanaford Darrell, Managing Director of CB Richard Ellis in Russia and Ukraine, Mr. Vladislava Myagkov, Head of the Real Estate Consulting Department, Ernst and Young (Saint Petersburg), Mr. Aleksandr Shabasov, Forum, etc.

For reference:
The Investors Club is a forum for communication of investment funds, developers, local and regional authorities created on the initiative of the Guild of Managers and Developers in 2008.



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