Lack of quality areas and migration from the gray belt. Top trends of the year in the industrial real estate market
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INTERVIEW OF MAXIM SOBOLEV FOR KOMMERSANT
In the new issue of the Kommersant, dwelling on the economics of the Leningrad Region, Maxim Sobolev, Commercial Real Estate Director of YIT Saint Petersburg JSC, acted as an expert. What is the specifics of having a location in Saint Petersburg and the Leningrad Region? What are the advantages of industrial parks as compared to the industrial zones and how does Greenstate Industrial Park help its clients and residents? Maxim Sobolev, Commercial Real Estate Director of YIT Saint Petersburg JSC, commented on the above issues and other things in his interview to Kommersant.
BUSINESS GUIDE: Who are your residents? How do companies decide that they need a site in the industrial park?
MAXIM SOBOLEV: There are two types of customers. The first one is represented by companies that are not satisfied with the old production facilities in the city: from the technological standpoint, it is more convenient for them to develop their production at a new site or they don’t want to invest in the arrangement of a leased territory. More often these are small Russian companies whose production is located in the Grey Belt of Saint Petersburg. Somehow it is being developed, but it becomes obvious that in the future it will be used for construction of more profitable residential estate, commercial or business centers. Therefore, the companies understand that in the future they will need to move and are looking for a new site in the industrial park.
The second one is represented by companies that create new production in Russia. For example, a joint venture between Siemens and Power Machines appeared in our industrial park. Tikkurila plans to create an integrated organic paint production facility in our industrial park: the company has a need to unite its scattered facilities. Therefore, the have come to the need to move to the industrial park.
BUSINESS GUIDE: How long do companies make decisions about buying a site from you?
MAXIM SOBOLEV: The fastest deal took us four months from the moment the company submitted an application through our website until signing the contract. There are few companies that make a prompt decision and but a site immediately.
Usually negotiations last from one to three years. Basically, we are talking about international companies, they study the situation for a long time, analyze all the risks, invent mechanisms to hedge them.
Sometimes it happens that a company sends us a request, finds out our prices and conditions. It seems to the company that it is expensive, that the market is full of cheap offers. They begin to study them, however, in a year they come back to us, because they understand: a cheap offer means that they will have to spend almost the same amount, if not more, to build the entire engineering network. In this situation it is not feasible to spend own money and efforts on development, especially taking into account that this process can take from six months to a year and a half or two years.
BUSINESS GUIDE: Is it necessary to immediately buy land in Greenstate?
MAXIM SOBOLEV: As a rule, we first sell the land, and then the company does survey, design and construction works.
However, there is also another pattern: we lease out the land for the period of survey and design, and when a company receives a construction permit, it buys it.
BUSINESS GUIDE: Is this a more convenient option for business partners?
MAXIM SOBOLEV: Yes, it helps to eliminate the risks: the company is not worried whether it will be able to start production they need on the site for which money has already been paid. Although, in fact, in the industrial park the risks of a business failing to build its facility are minimal. Nowadays, we have 17 residents and six operating enterprises, the largest of which are Siemens, Atria meat production plant, Gorigo logistics center, owned by Raven Russia. The first companies started working with us since 2008 and this is additional evidence that the risks of failing to build the necessary facilities in the industrial park are minimal. Of course, all production facilities have their own technological specific features, however, we can take into account all their specific requirements. For example, now we are actively helping Tikkurila to get all the necessary approvals for locating their company in our park.
BUSINESS GUIDE: Do you help your residents with getting necessary approvals?
MAXIM SOBOLEV: Yes. Large companies hire qualified technical and legal consultants, however, such consultants usually take a common approach and often miss the nuances that we already know. For example, while working to get site approvals for Siemens, we have prepared a comprehensive package of town planning and technical documents, so for Tikkurila, the approval process is faster.
Legislation has its own lacunae, there are no ready-made answers on how to fill in the gap between the statutory regulations adopted in different periods of time, and the municipal authorities also do not know the answer to this question. Therefore, we are looking for solutions together.
We help our residents to solve these difficult tasks. If a company works outside the framework of an industrial park, due to such collisions and problems in getting necessary approvals, projects may be frozen or suspended for at least six months or a year.
BUSINESS GUIDE: Do you charge a fee for provision of such assistance to your customers?
MAXIM SOBOLEV: No, we don’t.
BUSINESS GUIDE: Do they get such support from the industrial park for the whole period of their existence?
MAXIM SOBOLEV: There is a need in such a support at the stage of getting approvals, performance of design and construction work. We help our clients deal with municipal authorities, if necessary, resolve issues at the level of urban settlements, municipal districts, the administration of the Leningrad Region, and interact with utility providers.
Even experienced professionals in large companies that have already implemented more than one project may not know the nuances that are essential in this particular case.
In the management company of the industrial park there are two large divisions: the development division with specialists who help residents with town planning preparation, and the technical division which deals with operation of utility networks.
BUSINESS GUIDE: Is there any difference in conditions for companies that are residents of a industrial park and companies that lease a site in an industrial zone?
MAXIM SOBOLEV: In the industrial park there is a single management company that is responsible for its entire territory and all of its utility networks. Industrial zones have been developed over the period of many years, they appeared already in the Soviet times – so they do not have a single owner who monitors the state of the site as a whole. When problems occur with the monopolist’s networks in an industrial zone, it takes a lot of time to find out who is responsible for a particular site and who should eliminate the problem.
And what’s more, in an industrial park, a company can choose a specific land plot suitable for its own needs. Whereas, in an industrial zone, a company has to adapt to the available conditions.
BUSINESS GUIDE: Greenstate is located in the Leningrad Region, however, it is clear that you interact with Saint Petersburg. Is there a difference in working with the two regions, with their authorities?
MAXIM SOBOLEV: Yes, there is the difference. The problem of the city is that the level of regulation is too high. There are a lot of smart people in Saint Petersburg, however, that have invented too many laws that are difficult to be aligned with each other. The result is that all decisions, especially non-standard ones, are made for a very long time. In this sense, it is easier to deal with the Leningrad Region – there are fewer smart people there, however, the laws are not so strict, there are fewer regulatory acts, therefore, it is easier to sort things out, to find out who is responsible for what.