Luxury apartment buildings to cater for the new Russian elite are springing up at every corner of the city. Despite the two-year slump that followed the rouble crash in 1998, the retail sector is growing again, with more stores opening every day. Ikea's first Moscow store, which opened over a year ago, has had 4 million customers so far and, remarkably, the Muscovites spend more than their counterparts in Sweden.
Even the industrial market is expanding, along with the quality of life of Moscow's middle class. For years now, middle-class Muscovites have been avid purchasers of foreign brands. But now the tide is turning against the importer, and corporations are planning to take advantage of low labour costs and avoid high import duties by making everything from confectionery to cars in Russia. Exports are at their highest level since the collapse of the Soviet Union, and foreign investment, which has overtaken pre-crash levels, continues to expand rapidly.
To the new international contractor, language is the first hurdle. Construction licensing is another. Adapting to the Russian construction hierarchy of client, technical supervisor, project author and general contractor is an interesting challenge for many, making design and build a difficult procurement route. Russian contractors usually rely on the designer pricing the works to the 1984 SNiP (a type of official Russian price books) and then multiplying the price 5000-fold! Developers working in Moscow face an uphill struggle and deserve admiration when they succeed: finding a site with clear title, gaining building approvals, then organising project finance (complete with complex international taxation issues), are all huge hurdles for property developers to overcome.
Ikea’s first Moscow store has had 4 million customers in a year – and Muscovites spend more than their counterparts in Sweden
Russian statutory site safety standards are high – theoretically. Unfortunately, enforcement is weak, and it takes a committed contractor to raise standards above those of a developing country. Because of its mafia reputation, newcomers might expect New York-style labour "protection" but this is not the case in Moscow: labour unions are ineffectual and the individual worker is on their own. Protection, where required, comes from state inspectors.
No description of life in Russia would be complete without some reference to the climate. The Russian winter takes no prisoners, and what is really impressive is that sites continue to operate despite the cold, with concrete poured in temperatures that would make UK contractors blanche.
For the international contractor, the experience of working in Russia is of a fusion of cultures, with Finns, Turks, Americans, Germans, French, Italian, Brits and Yugoslavs all adding something to the mix. The Russian community itself contains many minorities – high unemployment in the regions makes Moscow attractive to many Russians, though the city authorities strictly control registration of provincials, forcing them to work "on the black".
Postscript
Peter Titus is country manager at Bovis Lend Lease Moscow.
