ZAO YIT Lentek brought market participants together in the Greenstate Industrial Park
On September 6, 2011, as part of the PROEstate international forum ZAO YIT Lentek organized a business tour to the Greenstate Industrial Park located in the Leningrad Region. The event included: a presentation of the facilities of the industrial park in Gorelovo; a tour of the territory, infrastructure and the production facilities of current residents and a panel discussion involving experts.
Many guests from various regions of this country thoroughly examined Greenstate with a total area of 112.4 ha. Participants highly praised the site's engineering readiness for construction with all necessary utilities already laid up. Thus, water supply (3000m3/day) and waste water removal (2700m3/day) is contracted to GUP Vodokanal of St.Petersburg. Electric power (27 mW) is supplied by ОАО Petrodvorets Electric Company; and a 30 mW block heating station has been installed. The territory of the park has been equipped with a motor road and a railroad, a stormwater discharge network and a fire line (with a fire pump plant). Gas line is also available on site. As well as a rainwater disposal network.
Proximity to the intersection of the Ring Road and Tallinskoye Motorway (1.7 km away from the Industrial Park) ensures easy accessibility of the city's major thoroughfares. Personnel working in the Industrial Park is transported to/from metro by the residents' company buses. Travel time from Prospect Veteranov metro station is 10 minutes.
"The overall territory of the Industrial Park is divided into two 2 functional areas: food companies and other companies' logistics & production.
In 2007, the land plot was bought by ZAO YIT Lentek mainly for sale to Scandinavian companies. At an early stage of the site development the target was 10-15 major residents but 2008 brought about changes. Today we understand that there are about 50 more clients who are interested in buying smaller plots and will soon be able to build their production facilities here. Most of these potential clients are Russian. The plan is to finish making contracts with clients for the rest of the territory within next 5 years," - Maksim Sobolev, ZAO YIT Lentek Real Estate Development Director, pointed out.
At present time we have already commissioned the new generation logistics centre Gorigo (90 thousand sq m), the Danish VIKING Life-Saving Equipment service station of life-saving equipment of the (1500 sq m). In 2010, the industrial park saw the launch of the most advanced meat processing plant in Russia (29 thousand sq m) commissioned by the Finnish Atria Group plс and operating under Pit-Product brand. In March 2011, Dermosil - a St.Petersburg subsidiary of Dermoshop - put into operation its facility (8.2 thousand sq m) for packing of cosmetic products.
"At the moment we are negotiating with several dozen companies. And we are planning to close several deals before the year end," - Maksim Sobolev, ZAO YIT Lentek Real Estate Development Director, said.
As to the finances, today the volume of investments in the Greenstate development, including the cost of the site full engineering development, exceeds 6 bln rubles. The operation of all the infrastructure of the Industrial Park will cost about 70-80 mln rubles a year which amount shall be absorbed by the Industrial Park residents.
ZAO YIT Lentek offers several options to its clients: the sale of fully serviced land plots (with connection points within the Park territory); "built-to-suit" and subsequent sale or long-term lease of the facilities built to the clients requirements.
The participants, who were over 80 people, showed their genuine interest in the round table discussion that took place in the second part of the business tour. The event comprised a lively discussion about the "Advantages of and Industrial Park over the rest of the commercial estate in setting up new productions".
The round table was attended by:
1. Denis Zhuravsky, Executive Director< Russian Industrial Parks Association
2. Yulia Stefanishina, Senior Manager, Ernst&Young
3. Viacheslav Kholopov, Department Director, Knight Frank
4. Peter Gebhardt, Director for Development, Ozery Industrial Park
5. Roman Isaenko, Business Development Manager, Aecom
6. Sergei Vassin, Executive Director, Ulyanovsk Region Development Corporation
Summarizing the discussion one can say that the experts agreed that an industrial park is a special type of commercial estate. Essentially it's a service in the first place that helps to mitigate the future owners' risks.
Paraphrasing the father of the classical economics Adam Smith one may say: "The builder must build, and the producer - produce." And indeed, an independent try by an investor to build a plant in Russia it is not nearly always successful. Small and medium-sized enterprises suffer the most difficulties. Whereas the state is supporting big investors in the first place. Therefore, it's easier for a company to enter an industrial park where a bulk of problems is settled not by an individual future owner but by a company rendering such risk mitigating service. There are more than enough complex issues requiring competent solutions: land use planning, provision of utilities and all necessary technical inputs, ensuring transportation accessibility and services, etc.
In fact today from 3500 to 8000 ha of land is available on the market for industrial development. It's a lot of land but only a small part - 5-10% - offers engineering readiness. Such small a share of areas with completed land use engineering is in the first place due to high cost as full engineering of 1 ha of an industrial park territory requires 0.8 - 1 mln euro in investments. Not every developer is able to obtain the needed investment. An industrial park without any land use engineering is just another way to name land for sale.
Industrial parks are just starting as an independent line of real estate development. Most parks in St.Petersburg and Leningrad Region are unbuilt territories that owners are planning to develop within the next several years.
Demand for land to place production facilities on in St.Petersburg and Leningrad Region is sporadic. In 2011, the total volume of deals is estimated at 100-150 ha. Such demand makes dynamic growth in this sector very unlikely. However, with general stabilization of the world economic situation one may expect a gradual growth in demand for industrial sites.
"Industrial Sites Development" Conference: Outcomes
In the PROEstate environment YIT representative Maksim Sobolev, Real Estate Development Director, took an active part in the "Industrial Sites Development" Conference. The event focused on two major issues: YIT Greenstate Industrial Park experience and industrial parks prospects in Russia.
Participants became firmly convinced that an industrial park offers an investor risk mitigation service and not just a plot of land for placing a production facility. Further on, based on YIT practical experience with the Greenstate Industrial Park project speakers discussed main investor's risks involved.
Main Risks:
- Lack of spatial planning documentation as most settlements in the Leningrad Region do not have master plans and land use planning schedules. For an investor to develop the necessary documentation takes over six months. If the same is done by municipalities it may take years.
- Lack of land use engineering. To fully equip the industrial park territory with utilities will require substantial investments: 0.8 - 1 mln euro for each ha. On some territories utilities can not be provided due to the lack of main sources.
- Additional expenses related to buying out land for utilities laying, as most territories suitable for construction are in private ownership.
Thus, by bringing production inside an industrial park the investor obtains a fully serviced site. The above risks are assumed by the developer. And investor's task in this case is project follow-up and budget control. Having placed production outside an industrial park the investor will have to solve the above and other issues by itself. Such projects usually take more time and cost more to implement than what had been planned in the beginning.
Finalizing the discussion about development prospects for industrial parks in Russia one may say that an industrial park is the modern day of productive forces development. Under the conditions of the new industrialization in Russia industrial parks have a great potential for development, although real demand is still sporadic. Experts estimate that in 2011 over two dozens projects to create new production facilities will be launched.
