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A guide to Siberia’s construction industry

Siberia (officially speaking, the Siberian Federal District) is Russia’s second-largest administrative area, but remains relatively sparsely populated compared to European Russia. But the region is still home to 20 million people, and construction remains a key industry in the cities that have developed over the centuries. Moreover, there is still huge potential for growth.

Much of Siberia’s building activity happens in Novosibirsk and Krasnoyarsk. Each with a population above one million, both cities sit on Russia’s vital Trans-Siberian trade routes and are important both as hubs and consumer market in their own right. Here, we shine a spotlight on the construction market in Siberia and a few interesting projects happening in the Russian Far East.

 

Housebuilding

Between January and November 2015, over 2.2 million square metres of housing was built in the Novosibirsk Region. This is a terrific increase of 26% compared with the same period in 2014. Of the housing built, 76% of it was commissioned by the government. The remaining 28% was sourced from a mixture of private companies and individual homebuilders. This is slightly higher than average ratio of government-to-private commissioning, showing the strong state involvement in Novosibirsk’s residential housebuilding market.

Residential construction statistics from 2015 from other regions of Siberia, where available, can be found below (sourced from the Russian Federal State Statistics Service):

- Altai Krai: no stats since 2013
- Altai Republic: 100,398 sqm of housing Jan-Dec 15, 12% up on last year
- Buryatia Republic: 415,438 sqm of housing Jan-Dec 15, 1.5% up on last year
- Zabaikalskiy Krai – 352,500 sqm of housing in 2014, 19.5% up on 2013
- Irkutsk Region – 835,700 sqm housing Jan-Dec 15, 14.1% down on last year
- Kemerovo Region – 910,700 sqm housing Jan-Nov 15, 4.9% up on last year
- Krasnoyarsk Region – 1.06 million sqm of housing Jan-Nov, 15, 27.9% up on last year
- Omsk Region – 595,988 sqm of housing Jan-Nov 15, 10% up on last year
- Tomsk Region – No stats since 2014
- Tyva Region – 94,410 sqm housing Jan-Nov15, 31% up on last year
- Republic of Khakassia – 184,485 sqm housing Jan-Nov 15, 1.4% down on last year

As well as affordable options, Siberia could also see an increase in the amount of luxury developments. The Flaura & Fauna project, spearheaded by the former co-owner of the Inmarko ice cream company Pavel Shutov and his new venture Siberian Neighbourhoods, is one example. Situated in the Zaeltsovsky Forest, close to Novosibirsk, the development will feature 13 apartment blocks of no more than 7 storeys tall. Unit prices start at 8.1 million rubles ($105,000) with top end apartments reaching prices of 31 million rubles ($402,000).

According to Russian website Continent Siberia (ksonline.ru), development of apartment buildings like this in Novosibirsk is still in its infancy when compared with Moscow, St. Petersburg and Yekaterinburg. As such, the market is likely to expand.

 

Warehousing – a market ripe for expansion

One key area that requires growth in Siberia, and the Russian construction market as whole, is warehousing. A report from consultation firm Knight Frank revealed that 2015 has seen regional demand for warehouse facilities increase by 50% since 2012. Both Novosibirsk and Krasnoyarsk both enjoyed increases in available space during this period.

As mentioned earlier, both of Siberia’s biggest cities are key destinations on Russia trade routes to the Russian Far East. Novosibirsk itself is a major distribution and population centre and as such is a major transport hub, so warehouse space is a growing necessity.

Warehousing deals increased some 27% outside of Moscow and St. Petersburg in 2014 according to Knight Frank. During this period, total quality warehouse space in Novosibirsk stood at 743,000 sqm. In Krasnoyarsk the figure was much lower with only 89,000 sqm.

Vacancy rates are low due to a lack of available facilities. As of 2015 11% of Novosibirsk’s warehouses are vacant, and Krasnoyarsk has much lower rates of available space. Knight Frank reported that only 1% of warehouses are available, demonstrating a clear requirement for these facilities in Siberia.

 

Other projects

Italian real estate developer and investment guru Ernesto Preatoni will be investing further into Siberia, due the ease of doing business in the region. One of his latest projects was the construction of a 218-room, four-star hotel twenty minutes from Novosibirsk.

Preatoni had nothing but praise for Siberia. In an interview with Italian newspaper Il Giornale, the entrepreneur commented on the differences between working in Russia as opposed to his home country. “From the design stage to the start of construction took six months. In the same time period in Italy it would be impossible even to get a building permit [sic],” Preatoni said. “In four years, with an investment of 45 million euros, we built a hotel for business clients. Construction was done by a Russian company, and the project was designed by Italian architects."

Designers Giuseppe Rustignoli and Emiliano Sciacca of R+S Workshop, who worked on the creation of Preatoni’s hotel, did notice a space to fill in the Siberian construction materials market. “What is lacking here are the elements of interior design and lighting,” the designers said. “Therefore, we imported these elements (floor coverings, wallpaper, mosaics for bathrooms, furniture and lighting) from Italy.”

Nine health clinics are also being tendered for construction for private companies in the Novosibirsk Oblast. Vladmir Znatkov, the Deputy Chairman of the regional government, commented: “‘The involvement of private funds is important because it has a huge social effect. If we had only budget money for the construction of those clinics, with the budget that we have today, we would be building them for at least 10 years.” Some 9.1 billion rubles ($118 million) in private investment is required.

Construction of these clinics is expected to take three years. After this, regional authorities are planning on tendering the construction of a local perinatal centre.

 

A bright future ahead

Sputnik News reported that Siberia’s gross regional product has a growth forecast of 7.6% in 2016. With an increase in housing in some of the region’s key areas, alongside growing demand for apartment blocks and warehousing facilities, the future looks strong for Siberia’s construction industry. 


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Venue: CROCUS EXHIBITION CENTRE

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Tanya Aleksankina

International Sales Manager - Interiors sectors

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