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Nizhny Novgorod is now ripe for first-class logistics

12 Aug '08
Nizhny Novgorod-based Kstovsky Industrial Park has started construction of a $175m A-class logistics complex outside Nizhny Novgorod. This is not before time; it has long been acknowledged by industry analysts that NN suffers from a lack of top-grade warehousing space, over and above the level of its existing B and B+ level space.



Background

By almost every standard Nizhny Novgorod should be one of Russia's major logistics centers, and it looks like it's finally making an effort to become as much.

Geographically, the region has much going for it, situated as it is on the crossroads of European Russia and the Urals on the pan-European (Berlin-Warsaw-Minsk-Moscow-Yekaterinburg) and interregional transport corridors.

It's also connected with strategic major waterways in European Russia (Baltic, Black and Caspian seas with the Volga and other key rivers. Indeed, bang in the city center is the confluence of the massive Volga and Oka rivers.

With the government finally deciding to spend billions on roads, waterways and other logistic components, investors are starting to respond with projects. With at least seven major projects in logistics either being planned or already under way, another international-standard hub has been set up by local developer Kstovsky Industrial Park.

Nizhny Novgorod Region will soon have a $175m A-class logistics and industrial complex.

180,000 square-meters of top-class space

CEO Oleg Gusakov said the 180,000-square-meter complex, to be named Volzhsky Industrial Park, would be built on a site seven kilometers outside Nizhny Novgorod by the M7 Moscow-Kazan federal highway. The site, owned by the company, is where the Kstovo poultry plant once stood.

The logistics complex is to be commissioned in three stages in the fall of 2008, the fall of 2009, and the spring of 2010. Cushman & Wakefield Stiles & Riabokobylko, the project’s agent, says it expects the full lease of warehousing areas as each stage is being put into operation, to avoid empty spaces.

Besides A-class warehousing, the complex is also to have car part shops, an electronics shop, business center, business incubator, as well as trade and entertainment premises. Residential buildings may also be built in the future.

The annual rent per square-meter in a warehouse is about $130, whereas one square-meter of office space is to amount to $235, the project’s managers say. Minimum rent per tenant is 3,000 square-meters; while the minimum lease is ten years. Cushman & Wakefield Stiles & Riabokobylko is now negotiating with large domestic and foreign logistics companies, retailers and manufacturers, including those of auto components.

The logistic complex is financed by a joint venture of Amstar Global Partners and Griffin 2 Development. The project is also supported by the Nizhny Novgorod regional government.

Experts sound positive

Cushman & Wakefield Stiles & Riabokobylko says Nizhny Novgorod's market is rapidly developing. Therefore demand for better logistics space than the existing B and B+ class is on the rise. “The region witnesses flourishing development of retail and production sectors that usually stimulate growth of demand for logistics spaces,” Diana Arakelyan, Senior Consultant at the firm, says. “We are sure that 100 percent of all commissioned spaces will be leased out this year.”

The new complex might be able to compete with Moscow’s warehouses, experts say. Arakelyan believes many companies are now eyeing Nizhny Novgorod as a possible alternative for Moscow. “This helps production companies to reduce costs on salaries and communications,” Arakelyan said. “However, the final decision still depends on each company’s goals. Firms that distribute their products in Moscow will not come to Nizhny Novgorod, as proximity to their distribution hub will remain the deciding factor.”
Oleg Kouzbit, managing editor: “I’m glad you join us here and take The Bridge walk for Marchmont’s weekly review of the Russian regions’ innovative present and future. Stay close and you’ll find out more of how Russia is bridging the existing gap between its researchers and businesses.”
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