For REQ

Marr Plaza keeping its parking out of view. The business center has three underground parking levels.

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In the late 1950s, the French capital began to be paralyzed by a grave new affliction: the mass-market automobile. Parisian roads built for far fewer cars became parking lots — in part, ironically, because of a lack of garages and other spaces devoted to parking. Sometimes, backups stretched so far that they lasted more than 24 hours.

The Paris city government of the 1960s took some action. It passed a raft of reforms that included an ambitious plan of highway construction, expansion of public transportation, and, crucially, parking restrictions in the downtown.

There is evidence that Moscow authorities will attempt a similar approach. In a recent interview on radio station Vesti FM, Moscow Mayor Sergei Sobyanin hinted that street parking in the city's center will no longer be gratis, saying parking near housing and on the city outskirts should be "free," while parking in the city's center should be "regulated." And this past summer, the State Duma finally passed the requisite federal legislation for allowing municipalities to restrict parking on city streets.

Whatever solutions are handed down by local or federal authorities, the capital's office real estate market will feel the effects. Adequate parking for employees and visitors is a major selling point for office properties in Moscow and especially in its jammed central business district. Already, it is more difficult to sell or lease a building with limited parking, and developers are shelling out money for costly underground parking lots because of the return on investment they receive.

There is no question that finding a legal parking spot in downtown Moscow is a nightmare, and the situation will not resolve itself.

"When Moscow begins to have jams that last for days like they had in Paris, then they'll make changes," said Mikhail Blinkin, a transport expert and the scientific director at the Moscow-based Scientific Research Institute of Transport and Road Maintenance. "Traffic will not begin to move until free [parking] is banned," he said.

'You'll Never Find a Space'

Blinkin believes that although the Moscow government is unlikely to pass a measure before this winter's federal elections — because of the concept's unpopularity among voters — the city will introduce new regulations come spring.

While some welcome the idea of parking police and pristine sidewalks, others envision a new kind of pandemonium. On the heels of Sobyanin's comments in September, Penny Lane Realty published an analysis of potential consequences that a street-parking ban would have on office properties, stating in its report that one possible outcome would be a "collapse" of the public transit system. The main consequence, however, will be a closer connection between how quickly office properties sell — regardless of their price — and what parking options those offices have, the report said.

Even in the current market, buildings with fewer parking spaces tend to sit empty longer, complicating the equation for developers seeking to pack in profitable square meterage.

"There have been projects where the owners, trying to maximize profits, cut down on the expense of building a parking garage and at the same time made more rentable area," said Mikhail Ioannesyants, associate director of the corporate client group at Knight Frank Russia. "Those properties generally take a lot longer to fill," he said. "Building underground parking does not provide an immediate windfall to the developer, since it's very expensive to construct such facilities, but they win in the end by having it."

Evidence of this new paradigm can be seen in the success of the recently opened Marr Plaza business center in the Krasnaya Presnya neighborhood just west of the Garden Ring. The project had leased 95 percent of its space by the time construction ended in February, Alexei Bogdanov, director of office real estate at S.A. Ricci, which handled marketing for Marr Plaza, said in a press release earlier this year.

The lessees include such prominent multinationals as Unilever, Philips and Mars, whose employees likely never need to fight for a parking spot: Below the building's 21,000 square meters of rentable space is a three-level garage with spots for 395 cars, making for one of the best ratios of parking space to square meters of rentable space in the city.

"It was worth it for us to build a lot of parking, without a doubt," said Pavel Patrin, general director of Marr Capital, the project's developer. "A garage was essential in this case — you would never find parking on the street in the area where Marr Plaza is located."

Patrin would not reveal the construction cost for the project, but he noted that 1 square meter of space below ground cost twice as much to build as 1 square meter above ground. Such a difference makes an underground lot a huge ancillary cost.

The Golden Ratio

Regardless of whether potential tenants actually consider a garage to be essential, city regulations require a ratio of almost 1:50, or one parking space per 50 square meters of rentable space, for new office projects, Patrin said.

Many developers find a way around the official norms, however, and there are scores of older developments without as high a ratio as Marr Plaza's. In fact, a 1:100 ratio of parking space to rentable space for an office site within the Garden Ring is considered sufficient for a Class A property, Ioannesyants said.

The figure varies widely from building to building. The properties in the city center with the best ratios include the Voyentorg business complex in the Arbat neighborhood, with close to 30,000 square meters of rentable space and 540 parking spaces, and the Akvamarin-3 business center along Ozerkovskaya Naberezhnaya, with 33,000 square meters and 643 parking spaces.

The number of centrally located projects with parking is actually expected to stall for the foreseeable future, despite Muscovites' growing passion for the motorized life. Given Sobyanin's stringent restrictions on development announced in May — partly a bid to control traffic problems — the construction of new offices has been banned within the Third Ring Road, leading some analysts to estimate that construction will continue to be pushed outside the Third Ring and even beyond the MKAD highway that encircles the city.

"There are office parks beginning to be built around MKAD, and many companies are starting to say that they prefer to rent offices not in the center but on the outskirts," said Ioannesyants of Knight Frank. "I personally think that decentralizing the city and moving businesses outside the Third Ring will do more to solve the parking problem than building garages."

Indeed, few are optimistic that enough parking garages could be constructed in central Moscow to actually accommodate demand. Part of the problem lies in the sheer number of motor vehicles already accumulated by city residents and businesses: More than 4 million cars and trucks had been registered by GIBDD, the Moscow traffic police, as of October. Just weeks after that number was reached, Sobyanin boasted of the city's efforts during his first year as mayor to increase the number of parking spaces in the city by 50 percent to 1.5 million.

For Blinkin, this discrepancy is not necessarily a problem. He subscribes to the approach taken by cities such as New York and London, where the city not only severely restricts street parking, but limits the number of parking lots in central districts — an effort to drive home the idea that downtown is not a place for cars. As a result, commercial garages charge high prices, ranging typically from $20 to $50 per day or $400 to $800 per month in parts of Manhattan and in central London.

If free parking is eventually banned, then expensive rates could become standard in central Moscow, both Blinkin and real estate analysts said. That change would curtail the number of people who can afford to drive into the city rather than use public transit.

Such a shift could make Moscow's commercial garages profitable, which they currently are not, some market players insisted. Part of the problem is low demand: Despite the city's 4 million cars, you can almost always find a free parking spot on the street — or sidewalk. Local developer Capital Group considered investing in garage projects earlier this year but tabled the idea because of what it considered uncertainty in the city's development plans and the difficulty of making the business profitable, said Capital Group spokeswoman Dinara Lizunova.

The city has been aggressively courting investment in the sector, holding negotiations with developers interested in erecting garages and beginning a series of special land auctions for use by garage builders.

An Underground Solution

At least one company that is willing to work with the city to edge the number of parking spaces higher has emerged: the developer Inkonika, whose sole activity is building underground lots. The company is partly owned by Natalya Kobzon, daughter of well-known singer and federal Duma Deputy Iosif Kobzon, reported to be a close friend of former Moscow Mayor Yury Luzhkov.

Inkonika has eight underground garage projects under development in Moscow, including a 300-car lot under Turgenevskaya Ploshchad that is expected to open this month and another under Khokhlovskaya Ploshchad in the Kitai Gorod neighborhood.

Inkonika claims to be looking to the long-term, expecting that there will be a shortage of parking in the city for some time to come.

"Our garages will be there indefinitely, and it will only become more difficult to park in the center," Yelena Ponomaryova, associate general director of Inkonika, told REQ in an interview at the company's Moscow office. "We're playing the long money," Ponomaryova said, noting that Inkonika plans to operate the garages itself after construction is complete.

Inkonika will be well-positioned if the city does eventually clear the streets of parked autos, but such a ban will not fill up their garages instantly. Drivers in other European cities certainly did not obediently file onto buses and metro trains when curbs were declared off-limits for cars there. A Paris reporter for the New York Times wrote in 1970 that double-parking "is often inevitable, because both curbs are completely occupied by cars parked in defiance of regulations."