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Frunzensky to Become Office Building

12 Февраля 2014, 19:35
The Soviet-era Frunzensky department store, closed since 1998, will be developed into an office building by the Senator business center network.

The Soviet-era Frunzensky department store, closed since 1998, will be developed into an office building by the Senator business center network.

Built in 1938 at the intersection of Moskovsky Prospekt and Obvodny Kanal, the store is a listed historical building. In 1998, a fire destroyed part of the building and the store was closed. Later, entrepreneur Ilya Baskin bought the building and began reconstruction. In 2000, the property was sold to Topaz, which operated the former department store as a shopping and entertainment complex. In 2004, the building was sold to the JFC group and closed down for good.

Various ideas for the building have been floated over the years, including renovating it into a children's-goods shopping center, an educational center or simply demolishing it.

The city government never approved any of the plans, however, and the idea finally arose to create a new concert hall for the Mikhailovsky Theater in the former department store.

"All these ideas demanded financial investments that did not exist and the building was finally seized by Sberbank because of unpaid debts. The building was then offered on the open market, which led to the recently completed acquisition," said Kirill Akinshin, head of the consulting and evaluations department at Maris, part of the CBRE Affiliate Network.

The building was valued at 670 million rubles ($19.3 million), reported Vedomosti.

"Senator, who bought the building, likes to choose buildings with richly decorated public spaces and facades. The Frunzensky building will fit well into the greater Senator chain," said Igor Kokorev, the Deputy Head of the Strategic Consulting Department at Knight Frank, St. Petersburg.

Real estate analysts consider the building's new purpose a logical choice since past attempts to use the building for commercial purposes failed so spectacularly. Senator is ready to adapt their plans to the space since they often face buildings demanding a creative approach, Knight Frank analysts believe.

"We think there may be problems due to the building's lay-out: An atrium, wide staircases, the distance between columns and dimly lit spaces. These aspects of the building do not make for an easy redesign," said Akinshin.

"After the renovation, the site will operate as an elite office building. In our opinion, an ideal designation is B+ class, but according to the announcement of the representatives of the new owner, it will be classified as an A-class business center," he said.

80 percent of the building will be given over to offices, according to the current plans. The plans also include a food court, restaurants and a limited number of shops. A parking lot for 150 cars is planned as well, in order to add value for prospective tenants.

Location is seen as another advantage of the new office center.

"Proximity to the historic city center, accessibility to a metro station and the popularity of Moskovsky prospect will increase the demand for space in the building," Maria Pu- zanova, the head of office real estate for Knight Frank, St. Petersburg, told The St. Petersburg Times.

"For the moment, the nearest A- class competitor is Renaissance Premium business center, near the Electrosila metro station," Puzanova said.

"The building's status as an 'historic site' does not have any impact on prospective tenants' interest since there are lots of historic buildings in St. Petersburg now used for office space," said Kokorev. "Interior decoration and facades can often become a deciding factor in increasing attractiveness of a building for its tenants."

The rental rate in such a location for luxury-class office buildings varies from 1,400 to 1,600 rubles ($40 to $46) per square meter, including all taxes.

Analysts from Maris estimate that the renovation will take from a 12 to 18 months to complete.

Real estate analysts consider the new plan a logical choice since past attempts failed so spectacularly.

Once a Soviet-era department store, Frunzensky's newest owners plan to renovate it into an office building.

Author: By Olga Kalashnikova 

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Компания Maris с 2011 года является лидером среди международных консультантов по сдаче офисных помещений в аренду.