Growing Money: Stock is sent away

The document, already agreed on by all the profile structures of the administration, is to bring order to the roughly growing market of warehouse premises and to define the priorities of the city in this sphere. In particular, officials want to set target parameters of development of warehouse facilities up to 2025, to approve the borders of zones where the construction of large logistics terminals will take place, and, on the contrary, designate territories from which warehouse premises should gradually leave. The formation of a cargo skeleton of St. Petersburg will be agreed on within this policy – including the lay out of new roads and the expansion of operating ones so that the realization of a potential European-level distribution centre in the Northern capital will not lead to the collapse of transport.

Misplaced storehouses

According to the Agency of Special Research, in St. Petersburg there are 6 million sq.m of warehouse premises, including fitted premises THAT make up about 12.5 per cent of the whole market.

The share of modern class A and B premises, according to Knight Frank St. Petersburg, at the end of 2007 totaled almost 600,000 sq.m. There are 14 main zones in the city where warehouses are concentrated. Among them, premises adjoining the Big Seaport, and industrial areas developed in the second half of the last century prevail.

The developers of the concept have allocated three main zones in which warehouses are located. The first one covers the center (Admiralteisky, Vasileostrovsky, Petrogradsky, Tsentralny areas) where fitted warehouses prevail, and where new premises are not under construction due to the deficit and high price of land. The second covers developed industrial areas in the Vyborg, Kalininsky, Krasnogvardeisky, Nevsky and Moskovsky areas where indoor warehouses total almost 2 million sq.m. The third zone includes areas located along the main highways into St. Petersburg and in the suburbs of Kronstadtsky, Kurortny, Petrodvortsovy and Krasnoselsky (altogether almost 3.3 million sq.m of warehouse real estate).

According to data from 2007 in St. Petersburg about 90 large warehouse construction projects on approximately 320 hectares of land were at various stages of realization. The rough area of the future complexes is almost 3 million sq.m. Logistics companies are acting in the role of developers in 30 projects (1,795,000 sq.m), industrial enterprises are for 42 (but with a much smaller area – 231,000 sq.m), and retailers for 17 (171,500 sq.m).

Among the most significant warehouse constructions are the Greengate logistics park by Eurasia Logstic (almost 600,000 sq.m.), Gorigo Terminals, АKМ, Neva Lоgоpark, KPD Cargo, and new phases of the MLP – Utkina Zavod and Teorema Terminal projects.

The authors of the concept consider modern, class A and B+ terminals are distributed throughout the territory of the city extremely non-uniformly and not at all optimally. They are mainly created in already developed industrial zones, for example, in Parnase, in the area of Sofyskaya ulitsa, and in the Predportovaya-1 zone.

According to the estimations of the experts of the committee on transport-transit policy, warehouse premieses generate most of the city’s freight flows - about 39 per cent.

As they "rest" on the existing infrastructure, the transport cargo network crosses the main routes of public transport and personal vehicles, aggravating the critical situation on roads.

Green card for logistic officers

"We don’t want the further growth of warehouse facilities to harm the metropolis. It is obvious that the investment process needs to be put in order somehow," says Nikolai Asaul, chairman of the committee on transport-transit policy.

Having analyzed data on existing complexes, announced projects and the growth rates of external and internal freight flows, and also the requirements of the industry and trade in warehouses, the committee has predicted what warehouse capacities will be necessary for St. Petersburg in the short and medium term.

By 2010 the area of port terminals should increase to 318 hectares, and indoor warehouses for manufacturers and retailers to 6.4 million sq.m.

By 2025 these figures will total 565 hectares and 8.2 million sq.m respectively. By 2025 the area of warehouses that carry out the functions of regional distribution centres, according to the plan, will reach 2.58 million sq.m, of which class A premises should total 1.92 million sq.m, and modern low temperature warehouses – 375,000 sq.m.

As the estuary of the Neva limits the capacities of ports, the city will continue to form a system of dry ports. By 2010 their area will increase to 100 hectares. Port terminals will expand mainly due to the Bronka - Lomonosov zone and in the outskirts of Kronstadt.

"From these parameters we have tried to formulate the tasks for the development of warehouse terminal infrastructure, which will be taken care of by the city. First of all the area of indoor warehouse complexes should be concentrated in specialized territorial zones - mainly in the area of the KAD and its outer limits (for example, in Shusharakh, in the area of the Izhorskiye factories, in the Predpartovaya-2 and Predpartovaya-3 zones, in Obukhovo, on the right side of the Neva, in the area of Vantovy bridge, in Pargolovo, in Kamenka, in the zone of Pulkovo airport and so forth). Most of such territories are located in the south. The popularity in this area is quite obvious – it is close to the port and to the route to Moscow.

A recreational zone is being formed in the North. And to locate logistics there is difficult and not always practical. Warehouses need to be removed from the city gradually. They should remain within the Ring road in volumes that would provide a distributive function, considers Asaul.

In 2005 outside the KAD there was almost 174,000 sq.m of warehouses and by 2010 officials would like to see here more than 1.2 million sq.m. Warehouse facilities inside the Ring road, by their calculations, should increase by that time by no more than 170,000 sq.m. And by 2025 it plans to reduce the volume of warehouses within the limits of the KAD to 2.55 million sq.m (approximately half), and along the Ring road and outside it to increase to 5.69 million sq.m.

The concept provides for designated zones where the authorities consider it impractical to locate warehouse infrastructure as it "may negatively affect the development of the neighboring territories." These zones include the center and industrial zone bordered by Prospekt Stachek, Staropetergofsky prospekt, the shores of the Obvodnoy channel, the Neva and northern railway half ring, and also a number of other areas that are not provided for by transport and are outside the so-called cargo skeleton.

"The main lever of influence on the market is to not allow the occurrence of new warehouse premises. This is in the power of the city and will not affect operating businesses. In the future we will consider the possibility of re-profiling existing complexes and developing measures of influence on their proprietors. But only after an all-round assessment of the possible consequences and without infringing on private interests," promises Asaul.

On the rest of the territory of the city where the accommodation of warehouse terminal infrastructure does not contradict the general plan of development of St. Petersburg, the authors of the concept will allow the construction of warehouses, however propose restricting the premises to no more than 10,000 sq.m. That, by their estimations, is enough for a distribution centre of intercity streams.

Warehouse city

The priorities of the concept substantially coincide with the natural development of the warehouse market. Shushary promises to become a strategic warehouse center of the city where there is almost 1.6 million sq.m of modern terminals just under construction, the majority of which are class A.

"We want to assign spontaneously developed zones of investment activity, to give them official status so that they develop more effectively,” says Asaul. “For example, in the city a new list of road infrastructure, the construction of which is planned in the near future, is now being formed. And on the basis of the concept we will be make updates in the development of the street and road network.

This concerns both the construction of new roads and the modernization of old ones (the expansion of roads, the creation of "hard shoulders" for lorries and so forth)." Vladimir Novozhenin, regional director of logistics company Kune+Nagel thinks that the development of the concept is 3 years too late: "The city needs to approve the concept as soon as possible. Business is moving forward and it is important to understand whether our development is in line with the plans of the authorities. However, in my opinion, too much value is given to warehouse terminal infrastructure and super size transport located out of the KAD’s limits.

Meanwhile in the residential suburbs, which have started to develop actively from the point of view of logistics, transport problems are already present. Will it turn out that the city will artificially create a situation where traffic jams will be multiplied not in the center, but on roads into the metropolis? And citizens dissatisfied today with lorries under their windows, will complain tomorrow, that they can not get into the city."

The deficit of land at reasonable prices in zones adjoining the Ring road may become an obstacle for realizing the city program. "A typical offer in Shushary is $100 per sq.m for agricultural-use land in the settlement category of land. Here plots are already almost gone, demand is high, despite a difficult transport situation," says Nikolai Vecher, general director of Vecher.

"It is not right to say that enterprises on the whole do not wish to leave the city. Unfortunately, there is a situation where companies that are prepared to resettle, find out that they simply have no place outside the KAD to move to. It would be desirable that such a concept not only imposed restrictions on enterprises working in the center, but also provided possibilities for their resettlement," says Kiril Malyshev, director of the department of warehouse and industrial real estate at Colliers International St. Petersburg.

Operators of the market also have other questions for the developers of the concept. In particular, a classification guide of warehouse premises, which was based on the development of Knight Frank, is included in the document. "Actually it is a developed market tool and we want to give it official status to regulate mutual relations between the state and business to a greater degree,” explains Asaul. “When buying a warehouse for state needs from a private proprietor, if it’s, for example, in a construction zone of a road, it is important to be aware what class premises it is. And for construction under a state order the city should precisely formulate a technical commission to the contractor so that the constructed terminal corresponds to the given standards."

The opinions of experts as to whether or not approval at city level of such classifications are necessary vary. "They should correspond to the purposes of the concept. To rationally place warehouse facilities on the territory of St. Petersburg, it is necessary to consider the characteristics of complexes, such as engineering maintenance, fire and ecological safety, quality of road access, warehouse capacity, etc. All this allows a conclusion to be made on the practicality of the presence of a premises in a specific zone. The technical details like the maximum loading per sq.m or the post spacing, in my opinion, are unnecessary," Malyshev considers.

Nikolay Pashkov, director of professional services at Knight Frank St. Petersburg, notes that the analytical product developed to value universal dry warehouses, is hardly applicable for low-temperature, bulk, container and other types of warehouses: "I would expand and make more detailed the part of the concept devoted to classifications."

Igor Luchkov, director of the department for valuations and analytical research at Becar Commercial Property St. Petersburg believes that it is necessary to pay attention not only to the physical parameters of warehouses, but also to the quality of services for tenants: "logistics is a set of services.”

In classifying business centers in this or that category, we consider the professionalism and quality of work of the managing company, but for some reason it this is not reflected in warehouse classifications." But Vecher believes that the classification of premises concerns the professional community, not the government: the market, as a rule, negatively perceives anything that comes from above.