Knight Frank’s presentation:
The Warehouse and Industrial Real Estate Market - 2005

8 November 2005

Knight Frank held a presentation in the Renaissance Hotel in Moscow on September 15 dedicated to the warehouse and industrial real estate market in Moscow and the regions. Over 150 guests were present. 

Roman Burtsev, a partner of Knight Frank, said: "Today we are opening a new page in the history and development of the warehouse real estate market in Russia. While a few years ago it was difficult to call the warehouse segment a fully-fledged market, today we are witnessing vast changes in this area. Over the last two or three years, a market has formed in the capital, which is becoming more and more transparent and civilized. Our company is already working on building "north-south" and "east-west" inter-working logistic and strategic axes. This will make it possible to serve the logistic needs of large cities, and to create a network of distributor centres in Russia."

In the presentation, the situation on the warehouse and industrial real estate market was presented in detail, as well as trends and medium-term forecasts for the development of the segment in the markets of Moscow, the Moscow Region, the more promising Russian regions, and Kiev.

The company's strategy is aimed at creating and developing a unified logistic system focusing on the development of the warehouse real estate market in the Moscow area, as well as the St Petersburg, Novosibirsk, Yekaterinburg, Rostov-on-Don, and Kiev markets. In the future, depending on the development of the economy and the emergence of demand for high-quality warehouse space, the company plans to expand the area of its interests to new local markets.

Developing local real estate markets depends directly on the overall level of economic development and potential of a particular region. Retail real estate is still the most attractive, primarily thanks to continued strong interest from domestic and foreign retail chains. This allows us to talk about demand for warehouse development in the regions.

Alexei Novikov, vice-director of the warehouse and industrial real estate department of Knight Frank said: "The experience of our foreign partners shows that logistic systems need to be developed which allow even distribution of goods traffic throughout the country. Knight Frank has made considerable efforts towards forming the warehouse real estate in Moscow and the Moscow Region. Our current aim is to form a unified and highly developed market for warehouse real estate in Russia.

Moscow and the Moscow Region

Currently, the most developed market is the Moscow area, which so far is the only distribution centre in Russia. 2.18 million sq. metres of high-quality warehouse space has been built in this area. Active demand alone totals 0.9 million sq. metres, and total short-term demand totals around 2 million sq. metres. Knight Frank is currently implementing several large-area warehouse projects, which will in the near future be able to serve as principal distribution and logistic hubs.

St Petersburg

Russia's second-largest city has a limited amount of high-quality space. So far, there is only around 300,000 sq. metres of class A and B warehouse space on the local market. However, over the next two years, another 300,000 sq. metres will be constructed, which will to some extent close the gap between supply and demand. Total demand currently stands at not less than 450,000 sq. metres.

Yekaterinburg

One of Russia's major industrial and consumer centres. A principle advantage of the city is its position on the Trans-Siberian Highway. The city has around 50,000 sq. metres of high-quality warehouse space. We estimate that the total demand for class A warehouse space is around 250,000 sq. metres.

Novosibirsk

Russia's third-largest city is situated at the intersection of trade flows linking Europe to Asia, with two major rail goods transport branches passing through it. In the future, the region may become a major link in the logistic chains of goods transit in Russia, and also a transit point for the movement of goods between European and Asian counties. Novosibirsk is also in itself one of the largest consumer centres in Russia, with very large demand for high-quality warehouses for its internal market. However, there is not more than 50,000 sq. metres of high-quality warehouse space in the city. Demand for class A warehouses totals around 250,000 sq. metres, which will rise in line with overall economic growth. A major advantage is the presence of a developed river port and an international airport.

Rostov-on-Don

One of Russia's major transport hubs with around 80,000 sq. metres of high-quality warehouse space. We estimate total demand for Class A warehouse space at around 150,000 sq. metres.

Kiev

Despite being Ukraine's economic centre and having strong potential, Kiev has a very undeveloped warehouse real estate market. There is only 100,000 sq. metres of modern warehouse space, while current demand for class A and B warehouse space in the city is over 500,000 sq. metres.

Currently, on the local markets of Russia's more developed regions, there is a supply shortage in high-class warehouse space. International consulting company Knight Frank is able to offer several projects in each of these five regions. We believe that this will allow a boost in activity among professional market players on a national scale. It is good opportunity for leading companies to make a leap forward by developing the local markets with the strongest potential.

Founded more than a century ago in the UK , Knight Frank currently brings together 3,000 professionals, with 110 offices in Europe, Africa, and Asia.

Knight Frank aims to provide the fullest spectrum of real estate services in all the countries in which it operates, and the highest quality of service for clients, as well as a creative and innovative working environment, and the best career opportunities for its staff. During its nine years of work on the Russia market, many Russian companies and international corporations have become regular clients of Knight Frank. In 2004, company specialists leased and sold more than 150,000 sq. metres of warehouse and industrial real estate in Russia. By the end of 2005, Knight Frank plans to sell over 200,000 sq. metres, out of a total volume of new construction of 450,000 sq. metres during this period.