In 2020–2021, e-commerce was largely driving demand for warehouse space. According to consultants, it accounted for 937,000 sq. m, or 35% of the total volume of transactions on this market; fulfillment warehouse was the most popular format. According to Radius Group experts, conventional retailers also showed high demand for warehouse space, accounting for 22% of all transactions. The third place went to transport and logistics companies. It seems like the top three are going to be rotated in 2022, with manufacturing companies joining the game; distribution centers, light industrial and warehousing & manufacturing facilities are likely to become the most popular formats.
The share of warehouse space used by online retailers decreased in the first quarter of 2022, according to Colliers International. One of the reasons could be the segment’s saturation with warehouse infrastructure in previous years; on the other hand, economic slowdown has also played a role. At the same time, as Radius Group notes, FMCG players are still active; manufacturing companies’ activity remains at a high level despite all the changes; and logistics companies aren’t idle either. Transitioning to local production remains the most important trend. Triggered by the first anti-Russia sanctions and later catalyzed by the pandemic, this trend is even more relevant today. New sanctions imposed on Russia after February have once again demonstrated that certain categories of goods need to be made domestically. The above factors will continue to support the demand for industrial and logistics infrastructure, but they will also change the specific types of facilities in demand.
Light Industrial and warehousing & manufacturing facilities
Since the beginning of this year, we have seen a growing interest in warehouses with manufacturing spaces, which is definitely a manifestation of the localized production trend. Kärcher launched an equipment plant project at the South Gate Industrial Park in Moscow in January; other players are now in talks to implement similar projects. Several large industrial developers besides Radius Group have reported similar situations.
“Production facilities and industrial parks with production spaces are usually BTS projects, specifically constructed to the client’s needs. They can involve facilities of any size or configuration, most often with a high degree of automation, with cutting-edge tech solutions,” says Alexandra Shakola, Deputy Director for Leasing and Marketing, Head of Customer Solutions at Radius Group. “As for light industrial, we have been expecting this segment to boom for more than a year, and there are a number of factors that will definitely push it in 2022 — such as the need to create small local manufacturing projects that require premises with latest engineering, technical and digital capabilities. In light of import substitution, sites with assembly or packaging spaces will enjoy great demand.”
The sanctions imposed on Russia by the EU and the United States in the last month suggest that Russia can remain isolated from the West for a long time. On the other hand, there are no obstacles to building up foreign trade with the East. Russian marketplaces purchase up to 50% of goods abroad; most of them need storage spaces without full customs clearance before orders are placed. This is exactly what bonded warehouses do, while also being high-class facilities that meet international quality standards, technology-wise. They can be established in the eastern part of the country close to the border with Kazakhstan or China; but location is not particularly important. Existing warehouses in the Moscow Region can be reorganized as such facilities.
Multi-temperature distribution centers
The demand for such facilities will be generated by logistics companies, retailers and even e-commerce players. Multi-temperature distribution centers are large refrigerated warehouses that can store and process goods throughout the company’s area of influence. For most retail operators, a distribution center in the Moscow region is also their distribution hub for the entire Russia. A single distribution center accepts goods coming in from different suppliers, including from the company’s own food hubs, and further distributes them through various channels. Most of such facilities are located 25–60 km away from the Moscow Ring Road. The largest ones – 50,000 sq m and bigger – have automated systems for more accurate accounting and stocking. In addition to the above formats, we will see development of the usual high-quality dry warehouses for e-com logistics, and last mile warehouses. With some adjustments, developers will continue to promote sustainable development and the implementation of energy efficient, safe ‘green’ projects because they are economically viable and practical in the first place, and not just because they’re trendy.