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Q1 2021 results: warehouse real estate market continues to set new records

At VI Annual Warehouse Conference, Alexandra Selezneva, Commercial director of Orientir Company, discussed new challenges faced by developers, as well as commercial real estate market behaviors and trends in the first quarter of 2021.

Interest in warehouses from both customers and investors has become a steady trend. According to consultants, in the first quarter of 2021 the volume of transactions in the warehouse real estate market has amounted to 500 thousand square meters. This exceeds the 2020 figures almost by a factor of two.

"Last year was a record year for Orientir in terms of the volume of contracted space and the number of realized logistics parks - the volume of transactions amounted to 320 thousand square meters in three new parks. The demand in 2021 also remains at a high level", - commented Alexandra Selezneva.

With the record demand looming over the market, especially for large-scale warehouse facilities (100 thousand square meters and up), the developers face a number of challenges. First of all, they are facing a growth of the construction costs, in particular a rise in price of construction materials. According to the Orientir Company, the price of fittings has risen by about 60%, glass - by 30%, sand - by 25% compared to the last year. There is also a labor shortage, which was formed as a result of border closures during the pandemic. As a result, the cost of construction in 2021 may increase by 30%, according to Alexandra Selezneva. These factors, along with the remaining vacant warehouse space of the old fund leaving the market, provoke an increase in rental rates.

"Against the background of the low vacancy rate, which does not exceed 2%, all financial models show that the optimal level of rental rates in the current environment starts from 4500 rubles per square meter per year, - commented the Commercial Director of Orientir. - The compromise between developers and tenants can be reached through an increase in efficiency of areas already in use or under construction by implementing automation solutions. Many companies are already investing in upgrading warehouse facilities so that they meet new demands for speed of order processing and reduction of the human factor. Payback periods for automation projects are typically half as long as leases and can be as short as 3-5 years."