And along the road – terminals with warehouses are…
The development of logistics infrastructure is one of the priority directions in the framework of the integration of the economy of our country into the world economic community. In the November round table, we offered our invited experts to evaluate such a component of the logistics infrastructure as warehouse real estate.
Sergey Karamnov (S. K.) President of Real Estate Solutions
Alexey Chaika (A. CH.), Director of Architecture and technologies construction company»
Alexander Marchenko (A. M.) the analyst of the company “TIKO construction»
Victoria Pasechnik (VP) project Manager of BauMarketing
Oksana elmanova (O. E.) General Director of FIM group
– According to the available statistics, the warehouse real estate market in Ukraine is the weakest place among all segments of commercial real estate: the imbalance between supply and demand – the latter is sharply inferior to the first, the low percentage of high – quality and specialized areas, the weak development in most regions.
Yes, today the Ukrainian warehouse real estate market is one of the most promising and at the same time the least developed segment of commercial real estate. Despite the positive dynamics of economic growth of Ukraine, constantly increasing production and international trade, the organization of production of international FMCG companies in Ukraine, the increase in turnover of logistics Ukrainian and international operators, the Kiev market of professional logistics complexes is at an early stage of development. The demand for high-quality warehouse and logistics facilities exceeds the existing supply in the market several times, and new warehouse real estate projects are implemented in a very small amount.
Today the main part of the market offer consists of warehouses located in industrial buildings or abandoned garages, which have remained since the Soviet times – that is, premises not adapted for specialized storage and logistics functions. However, with the development of the economy and the business environment in the country, there is an update of outdated warehouses of the post-Soviet times and the construction of new professional logistics complexes. Only in the last two years, the situation in the warehouse real estate market, at least in Kiev, began to change dramatically, more and more large objects are introduced, which significantly affect the change in the overall situation in the market. Several large-scale professional warehouse complexes of class “A” have already been put into operation or are already at the final stage of construction. The volume of professional warehouse space in Kiev is about 620 thousand square meters, most of which are located in the reconstructed buildings. Of these, about 450 thousand square meters. located in warehouse complexes” A “and” B ” class.
Logistics operators and large trading companies, in turn, are already looking at the largest warehouse properties and plan to become tenants of new warehouse space long before they are put into operation. The risk of limiting business development without the necessary storage conditions forces tenants to negotiate the lease of warehouses long before the facility is put into operation. As a result, the landlord market is created in Ukraine – a situation in which the conditions of work in the market and rental rates are dictated by the landlord. In the absence of an alternative offer, tenants are forced to accept all terms and conditions of landlords.
The steady growth of demand increases the investment attractiveness of industrial real estate in Ukraine and contributes to the effective implementation of professional projects in the market. Large international companies, which have been successfully operating in the Russian and European markets for a long time, are already eyeing the Ukrainian market.
Most of the market today is occupied by low-quality warehouses of classes “C” and ” D ” with a total area of about 950 thousand sq.m. They are located mainly along the Railways in the industrial zones. To date, the most massive offer is still represented by the warehouses and other low-capacity facilities of low technical level.
The industrial and warehouse real estate market has enough prerequisites for active development in the future. The trend of increasing demand for warehouse real estate is confirmed by the current process of growth of business activity in Ukraine, as well as the development of the trade sector, the increase in the purchasing power of the population, the saturation of the segments of retail and office real estate and other factors. During the year, the warehouse real estate market will not increase significantly, as most of the projects are under construction. However, in the next two or three years, large foreign developers interested in the development of the industrial and warehouse market may appear on the Ukrainian market.
The warehouse real estate market of Ukraine is actively developing, which is facilitated by stable economic growth over the past few years, the growth of consumption in the largest cities of Ukraine and the associated positive dynamics of the number of retail facilities of national retail operators, which, in turn, necessitates the development of the market of logistics operators. The most attractive market for warehouse real estate is still the market of the Kiev region, where the bulk of both operators and consumers of this segment are concentrated. At present, the total amount of professional warehouse space is, according to our estimates, about 400 thousand square meters by the end of 2008 should grow significantly due to the commissioning in the 2nd half of 2008 number of major projects with a total area about 400 thousand square meters.
According to our estimates, the total volume of unsatisfied demand in the Kiev market is about 600-650 thousand square meters of warehouse space, which is due to the intensive development of companies operating in the retail market, pharmaceutical companies, enterprises specializing in Metalworking, as well as distributors of food products, household chemicals and cosmetics, logistics operators.
Due to the fact that demand is currently higher than supply, the vacancy rate of existing projects remains extremely low, and rental rates in the warehouse segment have also been growing steadily until recently.
However, the financial crisis can make significant changes in the balance of power in this market, because in the conditions of stabilization of trade growth and slowdown in the economy as a whole, the demand for quality warehouse space, the implementation of which until recently was quite difficult due to the small volume of supply of suitable land, may decrease, which will lead to the correction of the level of rental rates in this segment of the commercial real estate market.
I would like to add that in the context of the global financial crisis it has become difficult to talk about demand, supply and make forecasts about the development of the market. We can talk about the results of the first half of the year. The demand for professional logistics space this year amounted to about 700 000 sq. m. among the objects declared to enter the market by the end of 2008 was about 690 000 sq.m. that is, with the successful implementation of the declared objects by the end of the year, we would almost satisfy the current demand. However, demand is growing by about 20-25% annually. And for the period January-February 2008 only 145 000 sq. m. was put on the market. Therefore, it is too early to talk about the saturation of the market. But the demand will subside, and the real supply will be much smaller. Already, many companies are leaving the logistics real estate market, selling their logistics portfolios. The construction of some facilities planned for this year is postponed for an indefinite period. Few companies remain in the Ukrainian market, which are ready to continue to develop the logistics segment. After all, it is the least profitable in the short term. And the payback period of logistics facilities is higher than that of commercial, office real estate. At the same time, these are very capital-intensive projects, so few companies will be able to implement their logistics plans in the time of crisis.
– In connection with the current situation in the warehouse real estate market, what formats do you consider the most promising for implementation in Ukraine?
In Ukraine, there is no officially adopted and approved classification of warehouse real estate. Today there are several classifications, which operate different groups of market participants. Basically, the letter graduation is used: “A”, “B”, “C”, “D”. For example, the market of warehouse premises in Kiev region has the following structure: class “A” – 8%, class “B” – 12%, class “C” and “D” – 80%.
As the most promising format for Ukrainian warehouse real estate, I would like to highlight logistics parks – large complexes with warehouse space from 20 to 50 thousand square meters, where the presence of a car and/or railway infrastructure, professional management is required. It is this type of warehouse real estate that is most interesting for developers and investors today, because here we are talking about the creation of a classic warehouse complex, the tenants of which, according to Western European practices, are large logistics companies.
The priority format, which is primarily developed by developers, is the universal warehouse complexes of class “A”, which are characterized by the following criteria:
* A modern one-storey warehouse building of light metal structures and sandwich panels, preferably rectangular, without columns or with a column pitch of at least 12 meters, with a distance between the spans of at least 24 meters.
* Building area-40-45%.
* Flat concrete floor with anti-dust coating, with a load of at least 5 tons per 1 m2, at 1.2 meters from the ground level.
* Ceiling height-not less than 13 meters, allowing the installation of multi-level rack equipment (6-7 tiers).
* Adjustable temperature mode.
* Fire alarm system and automatic fire extinguishing system.
• Ventilation system.
* Security alarm and video surveillance system.
* Stand-alone power substation and thermal unit.
* Sufficient number of automatic dock type gates (dock shelters) with loading and unloading platforms of adjustable height (dock levellers) not less than 1 per 500 m2.
* Platforms for settling of heavy-load and Parking of cars.
* Platforms for maneuvering of heavy-load cars.
* Office space in the warehouse.
* Auxiliary rooms in the warehouse (toilets, showers, utility rooms, locker rooms for staff).
* System of accounting and access control of employees.
* Fiber-optic telecommunications.
* Fenced and guarded round the clock, illuminated landscaped area.
• Location close to major highways.
* Professional management system.
* Experienced developer.
• Branch line.
The development of specialized warehouse complexes (such as refrigerated warehouses, chemical storage warehouses, etc.), despite the higher rental rates, has not yet become widespread due to the higher cost of implementation of such projects.
I agree that the most promising direction is the construction of modern warehouse complexes and logistics centers of class “A”. For example, as a result of removal of industrial zones outside of Kiev (according to the General Plan of development of the city till 2010) development of profile complexes in the nearest suburb of Kiev will go fast. Especially relevant will be warehouses within the twenty-kilometer zone from the Ring road, near the main routes of long-distance and international importance.
– If we consider the regional structure of warehouse real estate development in Ukraine, which regions can be considered leaders?
The leader in the development of modern warehouse real estate is, of course, the Kiev region, which is characterized by the greatest activity of both developers and end users of warehouse complexes. Other regions are also actively developing, which is due to the attractiveness of the market as a whole due to the lack of quality warehouse facilities in the regions, especially in those that are located along international transport corridors and are characterized by a significant volume of transit traffic – namely, the southern regions – Odessa, Ilyichevsk, Central – Dnepropetrovsk, Eastern – Kharkiv, Western – Lviv.
The most developed in terms of logistics real estate is really Kiev and the region. Such popularity is caused by the capital status and the fact that many highways pass through Kiev and here the main distribution points from which there is already a delivery of goods further to the East or Vice versa, from the East to the West are concentrated. The most active regions for the development of logistics real estate were Dnipropetrovsk and Odessa region. This is due to the access to the regional markets of the network of commercial operators and large logistics operators. The first announced projects appear in Donetsk and Kharkiv regions.
But still, the market of warehouse space in the regions is very poorly developed. The most attractive is the creation of large logistics complexes in the Odessa region – the key factors of the region’s attractiveness are:
* possibility of trade relations between Central, Northern and Eastern European countries;
* the possibility of using the region as a major trading base between Europe, Asia and Africa.
– We have touched upon such a thing as the world transport corridors (ITC). Is the development of MTK in Ukraine the most significant factor that has an impact on the development of logistics infrastructure in General and warehouse real estate in particular? And what, in this context, regions of Ukraine, the MTC will play a catalytic role?
– V. P.:
The international transport corridor is a complex of land and water transport highways with appropriate infrastructure, additional facilities, access roads, border crossings, service points, cargo and passenger terminals, equipment for traffic control. For the successful functioning of the transport corridor, it is also necessary to introduce organizational and technical measures, legislation and regulations that would ensure the transportation of goods and passengers at the EU level.
I believe that the MTK will give impetus to the development of warehouse real estate only in the southern (sea) direction, and this is primarily due to the fact that this issue is very politicized. And so, until Ukraine has a clear understanding of where it is moving – to the East or West, and the East and West will be “idle” in anticipation of “will from above.” As for the South-whether because of the mentality of the Odessa region and its representatives, whether on physical and historical features, it has long been a clear position on this issue, and in General-is actively working and as far as possible (mainly by local investors) is developing.
Yes, it is possible to make a forecast that the strategy of Ukraine’s integration into the world economic community as a transport and communication hub of the European level will be implemented to a greater extent due to the development of the Odessa region. However, the warehouse complex of the region requires large investments. At the moment, the warehouse is a building class C and below with a rental rate of 3.5 y.e./m2. The storage facilities of the class In amount to the total mass of the proposals only 0.4% with rental rate at 7-8.e./m2.
The development of the MTC is a significant factor that affects the attractiveness of the region for the placement of warehouse real estate, as arising in such conditions, significant transit traffic requires further promotion of the relevant warehouse infrastructure, which ultimately stimulates the further development of warehouse real estate. Priority MTK in Ukraine are the ports of Odessa and Ilyichevsk, which annually serve a significant share of transit traffic, as well as highways Odessa-Kiev-St. Petersburg, Kiev-Chop, Kiev-Moscow, Moscow-Kharkov-Simferopol and located on them Kiev, Odessa, Kharkov, Dnepropetrovsk, Donetsk, Lviv. These regions are the main traffic flows connecting Western and Eastern Europe and Asia. These regions do not yet have a developed logistics infrastructure, which significantly affects the dynamics of trade turnover between Ukraine and its foreign economic partners. Accordingly, it is in these areas that powerful logistics hubs will have to be formed over time to ensure the proper quality of service required for the smooth transportation and storage of transit cargo.
Relatively good transport and geographical position remain promising Odessa, Dnipropetrovsk, Donetsk, Kharkiv region, and in the West can be noted good conditions for the development of logistics terminals in the Lviv region, as well as a good potential for development in this regard has Volyn region. The most large – scale of the announced projects is the project of the Ukrainian Construction & Development Company (UCDC) – the logistics center “Eastern terminal” on 315 000 sq. m. in the Kharkiv region, the beginning of construction of which is planned for
1 sq. 2009.
– And what are the General trends in the development of warehouse real estate in Ukraine?
Most of the promising warehouse complexes are being built for commercial use. However, there is a tendency of construction of warehouse complexes for own use by large trading companies on the market. Many large trading and manufacturing companies are forced to independently create a warehouse complex in the absence of existing warehouse facilities that meet the professional requirements and demands of trading companies.
To date, the construction of warehouse centers for their own use said companies such as Roshen, Kvisa Trade, Fozzy. Data company plan to build warehouse complexes of a class “A” primarily in Zhytomyr and Brovary highway. Among the total number of warehouse facilities declared by trading companies, there are complexes with an area of more than 100 thousand square meters.
The declared warehouse facilities are characterized by scale, developed infrastructure, professional management. Taking into account construction and planned warehouses in the market will increase the share of facilities with an area of 50 – 100 sq. m., and also for the first time will have a large warehouse space of over 150 sq. m.
If the investment plans for 2008-2009 will be implemented, the total supply of professional warehouse can in 2010 to get closer to the mark of 4 million sq. m.
The growth of demand for professional warehouses is directly related to the dynamics of the retail real estate market.