BRICKS & MORTAR: The "erection index" applied to Russia and Belarus

By bne IntelliNews December 5, 2008

Ben Aris in London -

Developers refer to the "erection index" tongue in cheek. The index is an economic indicator, which has proven over time to be pretty accurate, that suggests whenever a country embarks on building the "tallest tower in the world," it's well on its way to suffering some sort of financial crisis. Moscow has just stopped work on its tallest tower, but Minsk has just started work on its one.

Russia broke ground on the construction of the Russia Tower at the end of 2007, which was designed by British architect Norman Foster. Due to be the tallest tower in Europe at 610 metres with 118 floors, it was also the centrepiece of the Moscow City development, Russia's answer to Canary Wharf.

Then the crisis hit in September and work the tower was scrapped on November 21. Real estate magnate Shalva Chigirinsky, who had the contract to build the tower, said he had run out of money. "Say thanks to [former US federal reserve chairman] Alan Greenspan and George Bush," Chigirinsky told Reuters bitterly.

This is the second time the tower has been laid low by a crisis. The last time the cranes were over the Moscow City development was in 1998 when they had just started preparing the ground for the SBS Tower, as it was known then, which was due to be occupied by a failed bank of the same name. But after the government defaulted on its debt and devalued the ruble, all work on both the tower and the City project was iced for almost a decade.

However, work on the Russia's tower's little sister, the Federation tower, at 506 metres and 93 floors, is still going ahead and is more than half finished. It is due to be completed next year and will take over the mantel of tallest tower in Europe if it gets that far.

The Minsk Massive

By the index's reckoning, Minsk has just started on a four-year long economic boom that will end in a crisis sometime before 2020 when the 45-story tower is due to be complete.

The work is being done by the Russian company Itera-Invest-Story, which is the construction arm of the famous gas trading company Itera and also includes well-known Indian entrepreneur Shiv Khemka's Sun group as an investor, who together form the strategic investors.

Minsk City, as the development is called, covers six hectares in the heart of the capital. There will be a residential complex, two towers that will hold offices, retail, an entertainment complex and about 3m square meters (sqm) of residential space - enough for 60,000 residents. The demand for the planned 550,000 sqm of office space should be infinite for the simple reason there is no class-A office space at the moment.

Work on the two towers at the centre of the development is due to be completed by 2012 at a cost of $650m, but the plan is invest a stunning total of $5bn in the whole complex by 2020 - equivalent to a sixth of Belarus' current GDP. Ten famous architects have already bid to design the project, including the inevitable offer from Norman Foster. A decision on the design will be made in the New Year.

Another familiar face working on the project as a member of the Minsk City board is Vladimir Resin, the deputy mayor of Moscow, who has overseen most of the construction boom in the Russian capital for most of the last decade. Russian real estate company SU-155, which works closely with the Russian government, is also involved while the Minsk Municipal Real Estate Centre represents the locals.

Finally, Russia's Vnukova Airport company has also been roped in to help, as part of the territory is occupied by the Soviet-era airport and aviation workshops that will have to be moved to the new airport that is also on the drawing board.

Itera's chairman Sergei Makarov said: "Currently, our plans in Belarus are focused on urban development which is a relatively new business for us. We already have 15 projects in Russia, but this is the first project we have undertaken in Belarus."

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