Photo: St. Petersburg is not only one of the most beautiful cities in Europe; it is also the largest economic centre in the Western Russian Federation. One focus of the economy is automotive manufacturing. For example, Ford already settled here in 2002. Toyota and DaimlerChrysler plan on taking up production in the coming year.

Yet, not only is St. Petersburg the largest cultural center in the Russian Federation but it is also a prospering business location. In contrast to numerous other locations, the production in the city on the Neva River—characterized by a high level of overall research intensity and qualification—has weathered the crisis at the turn of the millennium largely unscathed. Mechanical engineering and vehicle construction are dominating, followed by ship building, aircraft construction, the chemical industry and increasingly also the IT sector. Not least the geographical location at the mouth of the Neva River into the Baltic Sea and the growing integration of the city into the Scandinavian industrial area contribute to its economic dynamism.

No distinct office locations
While information on the real estate market in the capital of the Russian Federation is relatively easy to get from international consulting companies, information about St. Petersburg is much harder to find and in many cases also not as qualified. On top of this is the fact that especially office markets are strongly segmented and no classic A, B or peripheral location has evolved in St. Petersburg.

According to a research study of the DEGI Deutsche Gesellschaft für Immobilienfonds the Nevsky Prospect and both embankments of the Neva River are probably the best office locations that will develop and establish themselves. “The concentration is particularly noticeable on the Nevsky Prospect between the Gostiny Dvor and the Admiralty. Here, the criteria of a ‘central business district’ are principally met,” confirms Dr Thomas Beyerle, head of the Research & Strategy department at DEGI. Also the embankments of the Moika River crossing the Nevsky Prospect are popular. Furthermore, this downtown area has the advantage of being easily accessible by public transport. A further focal point is developing around the subway stations “Petrogradskaya“ on the Petrograd side and “Bolshaya Nevka” on the Vasilyevsky Island. The area of Moskovsky also has the potential to develop into a sought-after office location—the international airport can be reached easily from here—especially because of its good traffic connection and its geographical location. The vast majority of modern office space is located in socalled business centers. Of the total of three million square meters of office space in the city, merely 700.000 square meters meet western requirements. In relation to the size of the city this is markedly little. Accordingly, demand is much higher than supply; a state of affairs which will not change very much in the foreseeable future despite busy building activities. Especially in Class A business centers rents are between 480 and 700 US dollars per square meter and year. Thus, St. Petersburg ranks fourth on the list of the most expensive European office locations after London, Paris and Moscow. Vacancies in the business centers vary between one and six percent, while it is not the location but the quality of the spaces that determines the quantity of vacancies: the more high-quality the office space, the lower the vacancies. Generally, the investment market in St. Petersburg is still very much dominated by Russian companies. The yields are estimated to be between 15 and 18 percent—depending on the individual consulting company—but can also exceed the 30 percent mark.

Photo: A central business district is slowly developing around the Newskij Prospekt and on the banks of the Moika River, and thus, one of the primary locations in St. Petersburg.