Moscow investment digest

June 2018

Dear colleagues!

The Moscow Department for Economic Policy and Development, in cooperation with the Moscow City Investment Agency, presents a new issue of the Moscow Investment Digest.

NEWS

A hospital in the International Medical Cluster will be opened by the best medical institution of the Republic of Korea

Sergei Sobyanin and President of the Seoul National University Bundang Hospital John Sang-hun have signed a memorandum of understanding between the Moscow Government and the South Korean clinic. The signing ceremony was attended by President of Russia Vladimir Putin and President of the Republic of Korea Moon Jae-in, during his state visit in Russia.

According to this document, Korean specialists supported by the Moscow Government are going to create «the Smart Hospital of the Future», which will be part of the International Medical Cluster in the Skolkovo Innovation Center.

The construction of a modern clinic with an area of 48,000 sq. m., specialized in cardiology, oncology, rehabilitation, traumatology and orthopedics, diagnostics and complex medical examinations, will be funded by an investor. It will accommodate 260 beds and 8 operating rooms.

The number of medical personnel will exceed 500 people (by 2024), 20 percent of which will be foreign specialists. The new clinic is designed to treat over 26 thousand patients a year.

Bundang is one of the largest medical centers in South Korea. The hospital of the Seoul National University was opened in 2003. This is the best medical institution in the Republic of Korea, according to the Korea Brand Power Index rating.

The International Medical Cluster Fund is currently attracting foreign clinics and Russian investors. 25 foreign clinics and 5 investors have made a preliminary statement of their readiness to participate in the project.

Entrepreneurship development in Moscow stimulates demand for office lease

«The economy growth and the active entrepreneurship development have revived the office lease market in Moscow. In the first quarter of 2018, a decrease in the vacant premises was accompanied by a simultaneous increase in rental rates for all office categories. This indicates a noticeably increased demand,» Deputy Mayor of Moscow for Economic Policy and Property and Land Relations Natalya Sergunina said.

The demand for office lease is growing due to the increasing number of entrepreneurs and higher incomes.  «In the first quarter of 2018, the profitability of the Moscow organizations grew by 12.2 percent, and the total number of individual entrepreneurs increased by 11.2 percent,» Natalia Sergunina added.

Patent taxation system is gaining popularity

More and more Individual entrepreneurs in Moscow are choosing patent taxation in the sphere of public catering. In the first quarter of 2018, 1,600 patents were acquired, which is 107 percent higher than the previous year.

Such growth became possible due to the policy of small business support. Also, the catering industry has become more popular due to the World Cup events held in the city.

«We are investing a lot in development, changing and improving the city infrastructure. This leads to higher entrepreneurial activity and a steady increase in the small business share in the city's economy. In total, in the first quarter of 2018, The Moscow entrepreneurs purchased more than 51 thousand patents for almost 4.5 billion rubles. Against the same period of the last year, the growth made 22 percent and 19 percent, respectively,» Moscow Government Minister, Head of the Moscow Department for Economic Policy and Development Vladimir Efimov said.

The city annually records an increase in the number of entrepreneurs choosing socially oriented industries. In total, in the first quarter of 2018, they brought about 40 million rubles to the Moscow budget, which is 90 percent more than in the same period of the last year

An architectural monument was leased on preferential terms to an investor having fulfilled investment obligations

As part of the program «1 RUB a year per 1 sq. m.», the Moscow Department of City Property determined a preferential rental rate for the cultural heritage site «Garden Pavilion with a Garden, 1911, by architect Konstantin Burov».

It took the leaseholder less than a year to conduct a full range of repair and restoration works and to restore the building's historical appearance in compliance with the lease agreement. The investor can now rent a restored garden pavilion at a rate of 1 ruble per 1 sq. m. until 2066.

The detailed information regarding the auctioned non-residential facilities, participation procedure and operation conditions is published at the Moscow City Investment Portal, the official website of the Mayor of Moscow and the official website of the Russian Federation for bidding information.

Up to 6 m sq. m. of real estate can be built in MCC area

Up to 6 m sq. m. of real estate for various purposes can be built in the Moscow Central Circle (MCC) area, including about 2 m sq. m. of residential premises.

«Today, housing construction zones directly depend on transport accessibility. The developers and potential buyers are mostly attracted by the sites located near major highways, railway stations and metro lines under construction,» Deputy Mayor of Moscow for Urban Planning Policy and Construction Marat Khusnullin said.

We remind that the Moscow Central Circle is in fact the new surface metro line launched on September 10, 2016. The 54 km long line covers 26 districts of Moscow.

Investors annually invest 150 bn RUB in New Moscow construction

«According to our forecasts, the private investment share will grow in the coming years. This is caused by the territories growing attractiveness, as well as the systematic transport infrastructure development,» Head of the Moscow Department of New Territories Development Vladimir Zhidkin said.

He noted that, over the last six years, ca.850 bn rubles have been invested in the Troitsky and Novomoskovsky Districts development.

«Investments always come along with the transport, and in recent years, New Moscow has been actively building both roads and metro lines. It is planned to restore the railways, and also arrange a tram line in the future,» Mr. Zhidkin added.

Ten technoparks might be built in New Moscow

At least 10 technoparks might be built in the Troitsky and Novomoskovsky Districts, as Head of the Moscow Department of New Territories Development Vladimir Zhidkin said.

«The technopark creation proposals have been coming from almost all major developers. At least ten of them are currently processed by the Moscow City Architecture Committee. One of the investors has suggested creating a technopark in the Vnukovskoye settlement,» Mr. Zhidkin said.

According to Mr. Zhidkin, investors have begun actively looking for options to create new facilities offering work places.

MACROECONOMICS

Moscow export of goods and services exceeded 3 tn RUB in early 2018

During the first three months of this year, the Moscow export of goods and services amounted to RUR 3.1 tn. This is 24.6 percent more than in the same period of the previous year, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations Natalya Sergunina said.

The export of goods increased by 27.8% in from January to March, and the export of services grew by 11.2%.

«It is significant that the most consistent and noticeable growth is seen in high-tech City production areas, namely IT, automotive engineering and aerospace industry, with leading enterprises participating in the city industry support program,» Moscow Government Minister, Head of the Moscow Department for Economic Policy and Development Vladimir Efimov said. Moreover, the largest IT companies increased their exports by 22.5 percent in 2017, and by 33.6 percent in the first quarter of 2018 against the same period of the last year.

An export goods catalog presented in Moscow

Over 1,2 thousand products by 447 Moscow manufacturers were included into a single Moscow export catalog. The goods were divided into 12 categories, such as «Research and Development», «Information Technologies and Communications», «Machinery and Equipment», etc. The user can select a company to read a general description, learn about its competitive advantages and the items produced.

«The work on the Moscow export catalog is being continued, and by the end of 2018 it will include 3 thousand categories of goods by over a thousand Moscow export companies,» Head of the Department of Science, Industrial Policy and Entrepreneurship Aleksei Fursin said.

The catalog is currently available at the iMoscow portal. In the near future, it will be published at the Moscow Government and Moscow Export Center (MEC) websites. The catalog will be available during the events held by MEC and the Department of Science, Industrial Policy and Entrepreneurship. It will also be mailed to all Russian and foreign partners concerned.

SUPPORT MEASURES

Moscow Government targeted programs stimulate industrial growth

Since the beginning of this year, the production of manufacturing industries has increased by 33.3 % against the same period of 2017, according to Deputy Mayor of Moscow for Economic Policy and Property and Land Relations Natalya Sergunina.

From January to April, positive dynamics were mostly observed in the field of power cables and equipment production, as well as rail transport services. Production in these areas increased by 2.5 and 1.4 times, respectively; chemical production grew by 37 percent. In car production and printing industry, the growth made 12 percent.

According to Minister of the Moscow Government, Head of the Moscow Department for Economic Policy and Development Vladimir Efimov, the active development of industrial production became possible due to the implementation of the Moscow targeted investment and industry support programs launched in 2016.

AUCTIONS

Eight land plots for production and industrial parks put up for auction in Moscow

Eight land plots in Moscow with an area of 0.3 to 4.4 hectares intended for industrial park construction have been put up for auction. The plots are subject to various types of permitted use.

«Investors can use the auctioned plots to build office and warehouse complexes, production sites and industrial enterprises. Leased lots are located in the Southern Administrative District, South-West Administrative District and Zelenograd Administrative District, two in each. One auctioned lot is in the Northern Administrative District, and one is in the Western Administrative District. All the land plots are located in industrial zones, close to large railway and transport hubs,» Head of the Moscow Department for Competition Policy Gennady Dyogtev said.

The building area varies from 6,000 sq. m. (Narvskaya Street, Northern Administrative District) to 81,000 sq. m. (Proektiruemy Proezd 188, South-West Administrative District). The plot lease periods vary from three years and two months to seven years.

The initial plot cost is in the range from RUR 5.6 m (Southern industrial zone, Western Administrative District) to 30 m RUB (Dorozhnaya Street, Southern Administrative District). The auctions will be held in the summer of 2018.

You can find the lot documentation for each land plot in the Land Plots section of the Moscow Investment Portal.

Special rental rates: number of bidders for business property increased by half

This year, more entrepreneurs are attracted by reduced rental rates, as compared to 2017. On average, there are 1.5 times more bidders per lot, with a starting annual rate of 4.5,000 RUB per 1 sq. m., Head of the Moscow Department for Competition Policy Gennady Dyogtev said.

«An average number of bidders per lot in 2018 made nine small business representatives, against six bidders last year,» he said.

From the beginning of the year, 25 facilities were sold via the Moscow Unified Trading Platform for special starting prices, with an average excess of 180 percent. Investors mostly use rented premises to open shops, pharmacies and consumer service centers.

«Despite a rather considerable excess of the urban facilities total cost, the deals with the city are still the most profitable ones, since investors can rent an item at rates at least 20 percent below the market value,» Mr. Dyogtev added.

To date, the city is auctioning more than 120 facilities at a special price. The lot details can be found at the Moscow Investment Portal.

18th century estate wing at Kremlyovskaya Embankment put up for auction

The wing of the Zotov-Alyabyev city estate at Kremlyovskaya Embankment has been put up for auction via the Moscow Unified Trading Platform. The auction winner will be entitled to rent the building for RUR 1 per 1 sq. m.

«The wing of the Zotov-Alyabyev city estate can attract many potential leaseholders, which has already been proven by the successful auctioning of similar facilities: investors are willing to bid for historical buildings located in the Moscow center. The initial rental rate of the wing is RUR 7.47 m. After an investor fulfills its obligations to restore the cultural heritage item, it will be entitled to an annual rate of RUR 1 per 1 sq. m., with an allowed lease period of 49 years,» Head of the Moscow Department for Competition Policy Gennady Dyogtev noted.

The wing of the Zotov-Alyabyev city estate is a two-story brick building with an area of 1,045 sq. m., located in a side street between the Kremlin and the Cathedral of Christ the Savior, at Kremlyovskaya Embankment, 1/9-10. The historical and cultural value of this item is justified by its location, layout and architecture, bearing wall material and facade decoration.

Bids can be submitted until July 13. The auctions will be held on July 19, 2018.

Moscow invites investors to build a leisure center in the city south

An investor might fund the construction of a cultural and leisure center in Biryulyovo Zapadnoe. Developers will be selected at the public auction scheduled for July 27, 2018.

Currently, the land plot accommodates the old Biryulyovo baths built back in the 1960s that have been out of use for a long time.   According to BTI 2017, the buildings deterioration degree makes 59 percent.

Developers are invited to build a cultural and leisure center to replace a 1,900 sq. m. two-story non-residential building, a 2,900 sq. m. one-story building and an adjacent area of 3,300 sq. m. The buildings are provided with all utility connections.

The facility is located at Bulatnikovsky Proezd, 10a -1, 2, within a walking distance from the Biryulyovo-Tovarnaya station and a 10-minute drive from the Ulitsa Akademika Yangelya metro station.

You can find the lot documentation here.

The Department of Economic Policy and Development of Moscow

www.depr.mos.ru

Moscow City Investment Agency

https://en.investmoscow.ru/agency/

Purchasers’ portal

www.zakupki.mos.ru

The Moscow Digest archive is available at the Moscow Investment Portal.