Warehousing in Russia: the market warms up
Published on 11/04/2017
Warehousing in Russia has been subject to the state of the Russian economy in recent years. 2016 signalled another change: one that sees the Russian warehouse market return to growth, showing a stronger transport and logistics environment nationwide.
The state of Russia’s warehouse market
As briefly mentioned above, warehousing in Russia starting show the green shoots of recovery in 2016. 1.1 million square metres of space was bought or leased across the last twelve months, with some regional sectors posting the biggest gains.
Let’s start with Moscow, Russia’s capital, where 120,000 sqm of new built facilities were put into place during the last year. Roughly 257,000 sqm of fresh space was delivered around the Moscow Region towards the end of 2016, which was almost three times as large as 2015’s volumes.
Head 715km north to St. Petersburg, and the story is much the same. 15 warehouse projects were completed in Russia’s second city during 2015, holding 243,000 sqm of storage space. 62% of these were built-to-suit complexes, suggesting the future of St. Petersburg warehouse market lies in the more bespoke end of commercial real estate. 85% of these units were class A format.
Occupancy rates in St. Petersburg dropped 2.4% in 2016, reaching 5.6% of class A and 5% of class B warehouses being vacant. Collectively, Moscow’s rate fluctuates around 12%.
Differing vacancy rates might be explained by the differing industries of both cities. St. Petersburg, for example, is a huge port and responsible for handling millions of tons of cargo annually. 42% of its warehouse occupants operate in the logistics sector, which indicates local companies seeking more space to match growing freight volumes coming through St. Petersburg. Moscow is focussed more on retail and manufacturing, by contrast.
Regional warehousing posts biggest Russian gains
The biggest gains, in terms of space put in use or freshly constructed, lay outside of Russia’s two largest cities. 683,000 sqm was delivered across Russia’s many regions in 2016 – 16.8% higher than 2014’s pre-crisis levels. In fact, 2016 was a record breaking year for Russian regional warehouse delivery. The previous highest levels were seen in 2009 where 673,000 sqm of new space was put into place.
55% of new warehouse building, taking place outside of Moscow and St. Petersburg, occurred in Russia’s top-10 regional real estate markets: Yekaterinburg, Novosibirsk, Samara, Rostov-on-Don, Nizhniy Novgorod, Kazan, Voronezh, Tula, Chelyabinsk and Krasnodar.
The highest delivery was seen in Yekaterinburg, where new supply reached 98,000 sqm. As a result, Yekaterinburg became the largest regional market in terms of modern logistic premises, slightly ahead of Novosibirsk (764,000 sqm vs 757,000 sqm).
Modern retailing fuelling Russian warehousing growth
Fuelling this surge in warehouse construction is Russia’s retail sector. Several of its largest companies are investing heavily in updated logistics premises to match their growing revenue streams.
Take the case of Ulmart. The e-commerce merchant is taking a new approach to reaching customers. Rather than deliver goods bought through its online portals, Ulmart sets up unique fulfilment centres where customers pick up their goods. Subsequently, the brand has spent $2 billion on storage facilities since 2008. Now it is planning 10 suburban fulfilment centres of 25,000 sqm and two 70,000 sqm distribution centres by 2021.
Lenta, X5 Retail Group, and Magnit are market-leading grocers in Russia – and voracious consumers of warehouse space. Regionally, they are responsible for the large chunks of storage volumes and are further investing in real estate. X5 alone acquired over 112,000 sqm of logistics facilities in Krasnodar, Kaluga and Perm throughout 2015.
A further million square metres of warehousing space could be put into operation during 2017, thanks to a collection of large scale developments taking place across the country. Over half a million square metres are currently under construction by federal retail chains, encouraging further regional market growth.
Heading back to St. Petersburg, four projects are in various stages of completion, ready for opening in 2017:
- 41,325 sqm fulfilment centre close to Pulkovo airport
- 60,000 sqm Sofiyskaya project
- 45,000 sqm Piskarevskiy suburban fulfilment complex
Moscow too will see contemporary warehouse developments – the biggest of which could be the 300,000 sqm in Marushkinskoe, a part of the colossal new Moscow urban expansion project.
With more and more space being put into operation across Russia, the nation’s warehousing sector certainly holds and optimistic outlook. What’s more, the industry’s expansion heralds increased economic recovery – and, subsequently, a more robust transport and logistics climate.