Black holes and profitable gaps in Moscow

“Moscow… what surge that sound can start in every Russian’s inmost heart!”[*] The surge in numbers seems even too much now, and if the entity known as Greater Moscow does not learn how to effectively use its spatial resources, it risks losing its huge potential. The participants in a meeting of the futuristic Engineering the Future Club organized by Invest Foresight magazine have discussed Moscow’s economic future and its development risks. Journalists and invited experts offered their projections at the round table, Moscow 2030: Future of Metropolitan Economy, at the Technopolis Moscow special economic zone.

More housing, lower quality of life

“Moscow’s development primarily through territorial expansion is a sensitive issue for Muscovites,” Editor-in-Chief Konstantin Frumkin stressed in his opening remarks. “However, much of the megalopolis’s innovative potential depends on redevelopment of industrial zones.”

Tatyana Polidi, Executive Director of the Institute for Urban Economics, easily made a case in favor of property development being the most important city asset. Although large metropolitan areas in Russia contribute an estimated 50% to the country’s GDP, their economy has not been studied long, she said. Last year, the institute prepared estimation models for 20 million-plus cities; this year they have expanded the scope of the study to 45 largest cities with populations of over 300,000. The data collected suggests that the Moscow metropolitan area is very different from the others. Whereas the economic structure of all other such regions is dominated by the old-fashioned manufacturing industry and the public sector, Moscow has successfully brought the output of high-tech products to 18% of the gross metropolitan product. This makes the region an innovation center. Therefore, its main growth assets are development and management of urban space.

As for new housing, Moscow – as, indeed, many other large metropolitan areas – shows fantastic dynamics, mainly due to the Affordable Housing policy the government has been consistently pursuing in the last decade.

“Housing in the Moscow metropolitan area is highly available both compared to other big cities in Russia and cities around the world,” claims Tatyana Polidi. “In the past, Muscovites had to save up all their income for eight years in order to buy a 54 sq m one-bedroom apartment. Now a Moscow family would need five and a half years. Compare it to Hong Kong where it takes 20 years or London where it takes 10 years.”

As housing became more available, the quality of the urban environment deteriorated. Tatyana Polidi believes that higher density of construction outside the city is the problem. Some 70% to 80% of all new housing is built outside the Moscow Ring Road.

“Instead of low-density construction in remote territories, we did the opposite and built high-rises in the Moscow Region. This resulted in an increased number of commuters and higher demand for infrastructure. Moscow responded with trillions of investment in the metro, road junctions, park-and-ride facilities, the Third Ring Road. As a result, the population in the metropolitan area increased as did the amount of residential properties, infrastructure while the total capitalization of all residential real estate decreased.”

Executive Director of the City Economy Institute stresses that due to disagreements between the management of the two areas the Greater Moscow lost in economy and in creating a comfortable urban environment.

“We need to finally consider this space as a whole,” Tatyana Polidi says. “As long as two opposing management bodies take decisions without consulting with each other at least on some issues, the situation will be getting worse.”

Polidi thinks that the problem could be solved through more efficient use of industrial areas, the territories inside the Third Ring Road and increasing the density in the ‘dispersed’ city center. This is exactly what the relocation project is about.

Following Beijing

Yevgeny Balatsky, Director of the Macroeconomic Research Center at the Russian Government’s Financial University, depicts Moscow as a four-headed dragon, with power, finances, culture and innovations concentrated in one area. Since it is very unlikely the capital would be moved elsewhere, the first three will remain in place while Moscow could give up its innovation leadership.

“The ‘black hole’ model, with Moscow absorbing all resources while giving away nothing, is now starting to conflict with the current state of affairs”, Prof. Balatsky says. “The peak of innovation resources’ concentration in Moscow was in 2009. Investment indicators plummeted from 43% in 2009 to 35% in 2017, and even the opening of the Skolkovo innovations center, with immense investments made, could not cushion the fall. This is a result of overall crisis developments in the economy, which always have a drastic effect on the vulnerable innovation sphere. Given that Russia is entering a period of minor depression that may span a decade, this is becoming a real challenge for the capital’s innovation sector”.

Balatsky believes that Moscow may share the same fate as Beijing, which was China’s innovation center for many years where about 20% of the economic resources were accumulated in the early 21st century. However, the city’s urban environment, which was too uncomfortable, led to new centers emerging in the provinces of Jiangsu and Guangdong. In 2017, the Chinese capital already ranked 3rd.

“Innovation center will be withdrawing from Moscow unless efforts are taken to reverse the old trend of housing development and urban compaction”, the expert emphasizes. “The old model was leading to another problem: a bad migration balance. There is a vast number of people in the city who are poorly educated and sometimes have insufficient knowledge of Russian, while the most qualified people are leaving Moscow, primarily for abroad”.

This is partially why such prospective business areas as biomedicine, electronics engineering and nanotechnology are so underdeveloped in Moscow. According to Yevgeny Balatsky, sporadic attempts at launching companies in these areas cannot be called a stable trend.

The future of the ‘rust belt’

Moscow yields to New York City as regards population density (25,000 people per ha against 75,000 people per ha); however, further expansion of the Russian capital will be deleterious, head of the Wall architect bureau Ruben Arakelyan believes.

“Moscow is underestimates as regards its space. The city, including the downtown, has a hidden potential – small plots of land with the area of 5-10 sq meters, whose owners are not even specified. In addition, there are numerous cooling and industrial towers as well as under-bridge spaces that could be used wisely, let alone the ‘rust belt’ – former industrial zones”, Arakelyan says.

For instance, in an expensive neighborhood of Moscow there are gaps between buildings that are up to one meter wide and 50 meters long and are filled with garbage. The architect suggests using them as offices for small businesses, student workshops, aquariums, swings and trampolines to attract investment under the public-private partnership scheme.

“There are no investors who would want to take part in small projects,” the architect laments. “And the city is now used to work with large developers, for it is easier to make agreements with one developer that with a hundred small ones.”

For the past several years, brownfields have been in the center of attention of the Moscow government, but were mostly used for housing construction. Moscow’s innovative companies will require some 100 hectares of land in the next 5-7 years, said Renat Mustafayev, managing director for strategy at the Technopolis Moscow special economic zone. Brownfields near the Third Ring Road would be a great place for that; they occupy over 10% of the city land.

“New plants that occupy about 5,000 square kilometers and provide jobs for up to 100 people can and should be located in the center,” Mustafayev believes. “Look at the cutting-edge facilities of American high tech companies that are located not in the Silicon Valley, but on Manhattan. The scene is crucially important for business, especially for startups: their neighboring companies can be their potential partners.”

According to Mustafayev, such land is usually in demand but the city cannot provide the necessary infrastructure. Tabula Sense founder Andrei Rogozin confirmed the situation.

“Industrial spaces that can be found in Moscow do not have any specialization,” the businessman says. “For instance, my advertising facility was located at a former toilet bowl factory. We had to build the second floor and install electrical and ventilation equipment. After about one and a half years the owner decided to demolish the building and we had to move out. Now we reside at the Vladykinsky Mechanical Plant and are facing the worst bureaucracy because the plant works for the defense sector.”

It seems that even in Moscow, small high-tech production facilities have to struggle to survive. Moscow risks losing startups that bring innovations to the city.

[*] Alexander Pushkin ‘Eugene Onegin’

By Anna Oreshkina

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