You're reading: Warehouse service market rebounding, prices down

Despite the turbulent market and tough investment climate Ukraine’s logistics sector is picking up with new warehouses about to open.

Indeed, 2013 is likely to show a solid revival after the sluggish demand
and supply of previous years.

Already in the first half of 2012 four new top class warehouses opened in Kyiv Oblast covering a cumulative area of 50,000 square meters.

The biggest of these was the opening in April of the 23,000 square meter Schatlyve Logistics Complex. But that’s nothing compared to the Amtel Logistics Complex, a giant of 51,100 square meters expected for 2013. Amtel will be the only warehouse on the right bank of the Dnipro River where storage space bigger than 10,000 square meters will be available for rent.

“By the end of 2012 we expect to see the completion of another three mid-size schemes totaling some 24,000 square meters,” reads the 2012 Market View report by the CB Richard Ellis, one of the world’s largest real estate service and consulting firms. Some of the storage facilities have already been booked in pre-lease agreements.

The total supply of modern warehouses in Kyiv region by end-2012 is set to reach some 1.33 million square meters, taking into account refrigerating, freezing and chemical warehouses.

Most of them are situated around Kyiv, along the Kyiv-Moscow and Kyiv-Chop (on the border with Slovakia) highways, and on the city’s left bank. This is part of a general trend, with Kyiv’s eastern side becoming increasingly popular with tenants. Its share of the city’s storage lease agreements grew from 39 percent in 2011 to 84 percent in 2012.

Occupancy has also improved, though some space for growth remains. Vacant space decreased from 17.1 percent in 2011 to 13.8 percent in 2012 “due to the improving business of retailers and distribution, which remain the key clients of the warehouses,” said Oleg Kalensky, secretary of the Logistics & Transportation Committee at the American Chamber of Commerce in Ukraine.

Sluggish supply remains a barrier to growth, however, the CBRE report indicates.

Amtel, a huge warehouse of 51,100 square meters near Kyiv, is to open in 2013.

Prices for storage dropped significantly during the 2009 economic downturn and have remained on the same level since then. Basic average monthly rent rates are from $5.50 to $7 per square meter on the right bank, and $4.50 to $6 per square meter on the left one.

“The warehouse market remains a tenant’s market, as tenants are willing to switch the warehouse because of its price and location,” said Fedor Arbuzov, head of the industrial and logistics property department at DTZ, a consulting company.

The Ukrainian government has repeatedly emphasized the importance of opening new warehouses in Ukraine, especially for the consumption of raw products.

“During the next 3 to 4 years there will be enough facilities for storing vegetables and fruits,” Prime Minister Mykola Azarov said in August at the opening of a new facility in Vinnytsya Oblast.

However, Azarov did not elaborate on how exactly the investors will be attracted.

Despite the need for more high quality warehouses, especially for the fruit and vegetable markets that still lack the specialized storage facilities, the crisis has scarred many potential investors. “Almost all of the warehouses that are about to open have been under construction since before 2009 and are now being finished,” said senior research analyst at CBRE Maryna Gavrylenko.



The financial crisis in 2008-2009 cut short ambitious growth plans for the warehouse storage sector, with many of the then-planned projects only recently seeing completion. The sector is now reviving with low prices, causing vacancy rates to drop despite the growing surface available.

According to the American Chamber of Commerce, investments in the sector are barely on the margins of what investors find interesting, with returns of 15-17 percent. This means investing in a warehouse begins to pay off after five or six years.

The problems that potential investors face are similar to those seen in other areas: a lack of predictability, the existence of wide-reaching political risk, bureaucracy and corrupt state and local authorities.

“Another problem is the high interest rates (charged by) Ukrainian banks,” said the American Chamber of Commerce’s Kalensky.

Few experts dare to make forecasts even for the near future amid the shaky economic situation. Most believe tenants are now focused on further cutting their costs and skip the services of operating companies, preferring to make direct deals with warehouses.

CBRE said it does not project significant changes in storage rental rates but “expects further strengthening of the left bank, which will be driven by increased tenant interest in this area and the subsequently falling local vacancy rate.”

Kyiv Post staff writer Svitlana Tuchynska can be reached at [email protected].