Anton Chekhov is regarded as one of Russia’s greatest writers. But residents of Tomsk, a Siberian city of 520,000 people, have little for which to thank Chekhov. “Tomsk is a dull and intemperate town. There are absolutely no good-looking women and the disregard for justice is Asiatic. The town is remarkable for the fact that governors die in it,” he wrote in a letter to a friend after visiting the city in 1890.
And although many years have passed since Mr Chekhov's trip to Tomsk, the city still battles image problems, says Nina Rozhanovskaya, consultant at the international and regional relations department of the local government. “People hear that we are in Siberia and automatically think of our cold climate. But I can assure visitors to Tomsk that they will not find polar bears on the streets of our city,” she says.
What they will find, however, is a university town that has 85,000 students, one-third of which came to Tomsk from outside the region. “We have people coming to study here. But we also want them to stay here after graduation,” says Ekaterina Efremova, also from Tomsk's international and regional relations department.
To attract both potential investors and residents, local authorities have recently launched the Tomsk Embankment Development Initiative. The project, scheduled to be completed by 2018, will transform 420 hectares along the Tom River with the development of a business centre, a university campus and recreational grounds.
Rostov-on-Don's football fever
Back in the European part of Russia and close to a turbulent border with Ukraine is Rostov-on-Don, a city of 1 million inhabitants and a former Cossack capital. Founded as a trading outpost in the 18th century, the city has been playing an important commercial role ever since, thanks to its location at a crossroads of trading routes with the Caucasus and Middle East. Soon the city will gain hotels to match its role as a business centre, with international hotel groups such as Hyatt, Starwood and Kempinski recognising the city's potential.
Rostov-on-Don, chosen as one of the host cities of the FIFA football World Cup in 2018, will also see its airport and sports stadium upgraded in preparation for the championships. The capacity of the airport is expected to triple to 5 million passengers. The new stadium, the first big project planned in the south bank of the Don River, is intended to convert an underdeveloped area of Rostov.
“There are great investment opportunities connected with the new stadium and airport expansion, and we are willing to provide assistance to investors willing to come to our city,” says Elena Kulaga, a project department head at the investment promotion agency of the Rostov region. A number of foreign companies already operate out of the region, including PepsiCo, Coca-Cola and Guardian Industries, a Michigan-based glass and automotive manufacturer.
Tula’s capital advantage
Without the advantages of hosting any World Cup matches, but benefiting from a closeness to Moscow, is Tula, a city of 500,000 people located 180 kilometres south of the Russian capital. “Given it takes only two hours to get to Tula from Moscow, companies considering moving to the capital should really consider our city as an option,” says Vladimir Pechurchik, commercial director at Tula Region Development Corporation, an investment attraction arm of the local government.
Tula authorities are trying to grab investors' attention in numerous ways. By 2016, the local government plans to open an industrial park in the Uzlovaya district, 50 kilometres south-east of Tula. “It will be the biggest industrial park in central and eastern Europe and it will have all the infrastructure, including access to water and electrical stations, ready for potential tenants,” says Mr Pechurchik. “Additionally, we can help investors who want to settle in the park with engineering consultations and plugging into the grid and the transportation grid.”
Other projects planned in Tula region include eco-resort Dancing Green, a mixed-used development featuring a waterpark, sports centre, private villas and 250 hotel rooms; and Smart City New Tula, a complex that will include 100 hectares of housing, as well as commercial space and a convention centre. “These are all very interesting projects and we help investors every step of the way if they give Tula a chance,” says Mr Pechurchik.
Bringing on a boom?
Will all these investments kindle another real estate boom in Russia, similar to the one recorded in 2013? Svetlana Kuznetsova, deputy director of the Russian Housing Development Foundation (RHDF), a government entity responsible for promoting real estate investments across the country, has no doubts.
“All three regions have high investment potential and are already attracting the world's leading investment companies, as these cities have significant production resources and a relatively well-developed transport and energy infrastructure,” says Ms Kuznetsova.
All three cities have seen a spike in construction projects in 2013, but according to RHDF data, average housing prices have only seen a small decrease or even an increase as a result. Ms Kuznetsova says this suggests a high demand for housing and investments in these cities.
Not everyone shares Ms Kuznetsova's optimism though. The International Monetary Fund (IMF) has recently revised down, for the fourth time in a row, its growth outlook for Russia’s economy in 2014. According to IMF estimates, the country is expected to see $100bn in capital outflows in 2014 and GDP growth of only 0.2%.
The Russian branch of global real estate services firm Jones Lang LaSalle (JLL) went even further by announcing that Russian economic growth would stall completely in 2014. “Investors remain in wait-and-see mode,” said Tom Mundy, JLL head of research for Russia, shortly after the announcement. “This increased level of cautiousness will inevitably have an impact on investment volumes in the short term.”
With sanctions against Russia and uncertainty about the country's geopolitical situation keeping potential investors at bay, new projects, no matter how ambitious, can only provide so much comfort to investors.