• RU Articles
  • GREENSTATE RU News 2019
  • 12/23/2019

Lack of quality areas and migration from the gray belt. Top trends of the year in the industrial real estate market

In 2019, rental and purchase of finished industrial premises were in high demand. Custom-built industrial premises are less and less of interest to customers. The most scarce segment is sites for food industry, pharmaceuticals and hazardous industries.

In the industrial real estate market of St. Petersburg, rates are rising and there is still a shortage of production facilities that meet strict requirements by the tenants. Due to the active redevelopment of the gray belt, an increasing number of companies are striving to transfer their production from the city to the territory of the Leningrad Region. The most advantageous offers for tenants continue to concentrate to the south of the city.

These and other results of 2019 for DP were summed up by experts of Greenstate Industrial Park, created by a subsidiary of the leading Finnish construction company, YIT.

It's time to relocate

According to Greenstate, the footprint of industrial land in St. Petersburg is 19 thousand hectares, which corresponds to 13.6% of the total area of the city. Production is conducted at 50 large sites, their cumulative area reaching about 15.6 thousand ha.

Rental rates for 2019 grew to 500 rubles/m2. Compared to last year, that figure increased by only 20 rubles. The maximum growth rate was observed in 2018 – the price of the “square” leaped from 400 to 480 rubles then. Maxim Sobolev, the head of Industrial Park calls the shortage of high-quality modern production sites the reason for that continued growth in rental rates.

In addition, transfer of production from the city to the Leningrad Region continued, especially in the gray belt during the past year. Due to the fact that developers have launched a hunt for plots available for residential and commercial development, that trend will become even more noticeable in the future, experts predict.

According to Maxim Sobolev, rental and purchase of finished industrial areas are in great demand in the market now, rather than building new facilities for the needs of the client. Popularity of the build-to-suit format is declining.

Areas short of offer

Greenstate emphasizes that there is an acute shortage of production sites in the market for food production, pharmaceuticals and hazardous production due to their specific site requirements. In particular, it is difficult for food enterprises to comply with the sanitary protection zone regulations; they are resource intensive in water, gas and electricity too. The requirements are even more stringent in pharmaceuticals: residents need clean rooms, separated commodity flows, humidity control, air conditioning systems, specific and differing temperature modes.

There are about 15 industrial parks in St. Petersburg and the Leningrad Region. Their average occupancy rate is 40% and higher for those parks that are closest to the city and have utilities and engineering resources fully available. The occupancy rate at Greenstate IP is 70% due to its proximity to the city, convenient logistics, full engineering support, the presence of a railway line, an approved set of legal and urban planning documentation,”says Maxim Sobolev.

In his opinion, industrial parks remain a tool for hosting small and medium-sized enterprises, as large companies are capable of building all the necessary infrastructure of their own themselves. Topical for small enterprises is the issue of financing projects to relocate their production facilities from the quarters actively developed as residential. The minimum available financing interest rates available in the market are 8.5% offered by state structures responsible for developing small and medium-sized enterprises. At such interest rates, loan payments become equal to or even lower than rental rates.

According to Greenstate statistics, several industries are leading in the number of requests: food industry enterprises, pharmaceutical companies, metal processing enterprises, trade enterprises and logistics companies. It is also possible to accommodate food industry enterprises featuring the appropriate type of permitted land use on site of the Greenstate Industrial Park, located 1.5 km from the Ring Road.

In general, at the end of 2019, more than half of the park territory was occupied by industrial facilities of two dozen residents, including large foreign enterprises and Russian small and medium-sized businesses. 70% of the land was transferred to the residents, free land plots occupy more than 30 hectares.