Warehousing sector growth to continue

In the past two years the Ukrainian warehouse storage market has seen huge growth in the number of high-quality facilities on offer, but the sector is still far from capacity. The major stumbling block to further exponential growth now appears to be the absence of land reform legislation needed to free up strategically located land plots.

The Ukrainian warehousing market is the least developed of all the country's commercial real estate markets. Until as recently as 2005 most of the country's storage facilities were built by individual companies to meet their own private needs, with many smaller companies preferring to use private facilities for storing goods. However, the situation has radically altered in the past few years, with the market now attracting the interest of leading Ukrainian and international companies.

A word about quality.

Alongside this rise in available warehousing space has been a concurrent growth in the quality of facilities. Rudenko says that developers are moving fast to fill the supply shortage of space with quality warehouses" A-class storage facilities have been appearing comparatively quickly over the past year or a year and a half."

Crucially, most of these new warehouses are in line with the highest existing world quality standards. High-class warehouses are equipped with the latest technologies, adds Gapich Oleksandr, the marketing manager from the storage equipment supplier Zeus. He states that in 2007 the market for hi-tech warehousing equipment such as forklift trucks grew by between 60% and 80%.

"There is a noticeable trend here that reflects a commitment to adhering to European quality requirements when building new facilities" says Oksana Yelmanova, the General Director of the FIM group of investor and developer companies.

Location, location, location.

The dynamic growth of the warehousing market has been driven by a combination of factors, including attractive levels of profitability and expectations over the country's continued economic growth, especially in the retail and production sectors Yastrebov also cites the expansion of the EU to the Ukrainian border and the arrival on the domestic market of major international warehousing developers and logistics operators as key factors in the market dynamic.

Despite Ukraine's huge territory and geographical location as a prime trade route linking eastern and western markets, this growth remains very much focused on Kyiv. The majority of modern warehousing projects are still located in and around the Ukrainian capital, which continues do dominate all aspects of the fast-growing Ukrainian economy, "About 80% of all storage facilities are focused in the fight bank part of Kyiv region," confirms Yelmanova.

The most popular locations for new storage construction remain the Kyiv-Odessa and Kyiv-Zhytomyr highways due to their command of key trade routes. The development of warehousing facilities in left bank Ukraine remains restricted largely due to the limited carrying capacity of many bridges over the Dnipro. Nevertheless, developers and operators are now actively considering expansion into major Ukrainian regional cities including Odessa, Dnipropetrovsk, Kharkiv, Lviv and Donetsk, according to DTZ.

Not enough land

The development of the warehousing market in the Kyiv region has highlighted the current shortage of suitable land plots "The land question remains the key problem. It is very difficult to find a plot with the status for necessary end use," explains Yelmanova. Experts predict yet more dynamic growth across the warehouse real estate sector if this land issue is resolved. "If a decision is reached many of the major projects which were announced in 2007 and which remain on paper only due to land problems will be completed this year," Gapich predicts.

Even superlative growth over the coming years will not be enough to bring Ukraine up to par with its smaller European neighbors. The total warehouse area in the country remains relatively insignificant for a country with such huge transportation potential as Ukraine. According to a recent survey by DTZ, as of September 2007 the amount of modern warehousing space available in Kyiv stood at approximately 320,000 square metres, while in Poland's Warsaw region this figure was 2 7 million square metres of quality warehouse space and in Budapest the total was around 0.9 million square metres.

Source: http://www.fim.ua/