Commercial Real Estate

The Urals can boast of not only modern shopping centers, but also of brilliant hi-tech office towers, while international hotel chains have also begun to enter the region. However, the warehouse industry today is far from being properly represented on the international level, and the future of the logistics chain in the Urals has not been resolved either.

Recently, the development of the transport and logistics infrastructure has become a priority for most cities in the Urals. The regional and municipal authorities are set to offer the initiators of such projects full support, given that the lack of quality warehouse and logistics infrastructure is one of the main blights thwarting the development of the region’s economy and the entrance of prospective investors.

Indeed the starting position of the intensive development of the warehouse real estate market in Yekaterinburg was the decision in 2004 by the European Union to have the international transport corridor pass through Yekaterinburg along the Berlin-Moscow-Yekaterinburg-Novosibirsk-Peking route, a.k.a. MTK-2.

The prospective areas were determined for the development of warehouse complexes, near transport junctions and infrastructural hubs.

Actually, similar large-scale programs are being completed today in many big Urals’ cities, for example, by Chelyabinsk-based Lainer, which has announced the construction of the 130,000-sqm, class A LC-Lainer warehouse complex.

The facility is part of a larger scale industrial project called Krasnoe Pole Logopark located on 127.5 ha in the Chelyabinsk region. “We are set to open at least eight large projects by 2012 in the Chelyabinsk region, including warehouse projects, distribution centers and techno-parks,” reports Lainer.

“But one of the restrictive factors is the lack of full information on existing offers and prospective demand for quality warehouse space in the Urals,” comments Mikhail Urinson, managing director at Alur. “Thus the demand for warehouse space is difficult to determine for developers, especially in terms of investment.”

The Drive for Storage Space

The Urals includes four nearly equally potential large areas, such as Ufa, Perm, Chelyabinsk and Yekaterinburg, which could be the first among others. Furthermore, these cities are located at transport junctions, and Tyumen is another prospective city, although it is lacking in the number of citizens versus the other four. The city has fewer investments, but has convenient access to the consumer markets in the oil-rich regions of the north.

Since no one can accurately predict how much is precisely needed for the five quickly developing markets of the Urals region, in terms of modern warehouse premises, some local developers believe in the almost unlimited absorption capacity. This is because Ufa, Chelyabinsk, Perm and Yekaterinburg will meet the storage needs for the entire Urals region, plus the Mid-Volga Region as well as Trans-Urals, Kazakhstan and the North.

The disadvantages of Ufa and Chelyabinsk are a comparatively small volume of the retail markets. The nearly two-fold less vis-a-vis Yekaterinburg is the retail turnover, at 98 and 102 billion rubles versus 180 billion in 2006 attests to the lower consumer demand and the less attractiveness of these markets for numerous retail chains, using the services of the logistics operators. Indeed, both will see the soon boom in the commercial real estate market.

Everything Shall Take Shape

Based on demand for modern warehouse premises, Yekaterinburg holds an indisputable lead in the Urals logistics. In addition to the city’s high retail turnover, its other competitive advantages include a robust retail market, population as large as in Bashkortostan, strong export enterprises, as in Chelyabinsk, and favorable location equal to that of Perm. In short, this is the most likely number one logistics hub in the Urals.

Meanwhile, the new consumer economy – in which prestige is more important than the inexpensiveness, and complete service is more important than the size of expenses – is picking up in the city along with new commercial centers, the dealer salons and fashionable boutiques on the central streets. Yekaterinburg is still trapped in the late 1990s in terms of business technologies, but it seems that the wave of heavy consumption sweeping the country is gaining strength.

“Despite Yekaterinburg’s leading positions in the Urals, the percentage of its qualitative warehouse premises, according to our estimates, does not exceed 10% of the overall area on offer,” explains Urinson. “There is practically not any quality warehouse space for lease in other cities of the Urals. For example, the warehouse market survey for Tyumen shows that most of the warehouses are in 35-40-year-old buildings, totaling only 5,000 sqm, of which the majority is unheated hangers.

The acute shortage on the market of warehouse space and the almost complete lack of class A space in Yekaterinburg must lead to the creation of large 100,000-200,000 sqm premises and quality warehouse complexes. To date, neither local nor national companies could solve the land issue. Even Multinational Logistics Partnership which advertised its future warehouse complex in the Koltsovo airport area could not agree on the matter about the area under their building. However, this paved the way for Eurasia industrial group’s investment, which is quickly developing the Pyshma logistics complex, where numerous national logistics players already lease premises.