MARKET OVERVIEW

There is currently a major shortage of good quality warehousing space in Kyiv. Majoy western corporations are willing to pay top dollar and have been conducting their own renovations or settling for mediocre space. With the exception of the Ost-West and Kempa projects, there is currently little or no construction underway to alleviate the shortage.
New space for lease is almost non-existent, and can be acquired mainly from new office centers that also provide a limited warehousing space (i.e. Kempa office center). One major exception has been the Ost-West project, which is a mixed use office-warehousing complex situated near the city center on one of the major roads. This project, recently developed and financed in the joint venture with the Ost-West Express transportation company, features over 3,000 square meters of office space, 5,000 square meters of long-term warehouse and industrial space, and 2,000 square meters of bonded warehousing space. Ost-West Express offers additional transportation services to the tenants of the complex.
Most warehouses have been privatized (usually by management and workers collectives), and those that have not been are currently owned by the State Property Fund, whose function is to sell them off. Many warehouses are located at former factories that have halted their production, and are now letting their facilities to anyone with the highest bid. A study completed by Colliers HIB in 1998 surveyed a group of 128 warehouse users already in Kyiv, including 45 multinationals.

Security systems are usually provided, as well as fire alarms and sprinklers. A large percentage of warehouses have loading docks, though many lack proper equipment to make full use of them. Temperature control and racking systems are almost non-existent at most warehouses. The services available at most warehouses are far below western quality standarts, most clients say. To some degree this is to be expected given that older service industries are deficient across the board in post-Soviet economies. Most western lessees say that for this reason service is the most important factor when choosing space. Issues such as reliability, timeliness, consistency with accountancy and paperwork, and being able to handle frequent tax and customs related problems are what is needed most from local warehouse managers.
Over 70% of all warehouses in Kyiv are non-bonded. The best quality warehouses are bonded ones, because of the strict state regulations requiring the to be equipped well.
Most of the warehouses give their clients an option to choose between services provided by the warehouse management and setting-up their own services.

Typical Lease Conditions

LEASE TERMS 1-3	YEARS IN SECOND-HAND PREMISES
Monthly Rates for Prime Second-Hand Premises	$5-10
Monthly Rates for Regular Second-Hand Premises	$0.5-6.5
Monthy Service Charges	$2-4

SUPPLY

The amount of new warehouse space built since independence is less than 50,000 m2. While users have been investing into warehouses, most projects are directed at the renovation or completion of existing facilities (such as those executed by Reemtsma, Coca-Cola, KTTJ Holding, and TetraPak). Notably, all these investments have been made by large importers for in-house operations. One interesting project reviewed for this survey is a 4,000 m2 bonded warehouse that Scania is constructing for its logistics operation. The site is located directly on the ring road and designed to provide suitable truck access, bonded warehousing, and truck service.
Price for second-hand space range from $0.5 to $6.5/m2 per month for most warehouses; for prime quality locations they are within $5 to $10 range. Western companies typically pay 40% more than local companies.

Current vacancy rate at prime quality premises is circa 10%.
For owning vs. Leasing preferences, the western desire to own indicates both greater cash resources and a willingness to make long-term capital investments. Local companies tend to be cash poor, more hesitant to invest, and more diversified so as to mitigate the considerable risks inherent to the environment. Over 80% of all warehouses are non-cooled, suitable for storage of consumer goods that do not require cooling; around 10% of warehouses are equipped with refrigerators, and around 7% are freezers.

DEMAND

Typical ceiling height for warehouses is 6-8 meters. Most warehouses are located along the railways in the industrial districts of Kyiv.This is a function of the railways having been the primary and best developed form of transportation under the Soviet System. The areas of the greatest concentration are near railroad joints in Rybalsky Ostriv (Fisher's Island), Kurenivka, Chokolivka, Darnytsia, Sviatoshin, Zhuliany and areas outside city border such as Vyshneve and Brovary.
Despite the railways focus, 70% of Kyiv warehouses have good access to main highways. There are 3 main highways going into Kyiv, including M17 (from Poland), and M20 (from St. Petersburg to Odessa). Currently, the most heavily used road is M17, as this is the road that most trcuks coming in from the West use. The ring road around Kyiv is of particular importance for warehouses in Kyiv.
The ring road is part of highway A255, which circumvents the western part of Kyiv and intersets both M17 and M20. Scania's green-field warehouse is on the ring road just North of M20.c

TREND FORECAST

The Colliers warehouse survey concluded that among multinationals active in Kyiv storage space requirements average under 1400 m2 per company. This resulted in combined demand among surveyed companies of 53,000 m2 in 1997.
The main users of industrial space include companies specializing in furniture, consumer goods, construction materials, electronics, food and beverage products, etc. Demand along the large companies is the strongest for prime quiality warehouses, specifically for specialized warehousing space.

Take-up by interviewed companies is expected to reach approximately 57,000 m2 in 1999. As multinational companies expand into other cities, new hubs will be required in other main areas, such as Dnipropetrivsk, Donetsk, Kharkiv, Crimea, and Lviv. In Kyiv the areas that will attract the major developments will be those along the ring road, M17, and M20 roads.

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