Management Company MLP Supported Industry Conference—The Development of Small Storage: Divide and Conquer
The Management Company MLP served as a partner for a conference that took place in Moscow on April 24, 2018—the Development of Small Storage: Divide and Conquer.
The conference was one of the key events in the first half of 2018 for the warehouse real estate market.
The conference opened with a sweeping research presentation on the Light Industrial format's structure and its potential in the Moscow region, presented by Aleksander Khomich, the Director General for Skladman USG, and Evgeny Numerov, Managing Director and Partner for Skladman USG. "What is Light Industrial format? These are facilities designated for warehouse and industrial use with separate blocks ranging in size from 500 to 2,500 sq. meters. The format already offers the potential for rapid growth to a quarter of the warehouse market. The capitalization of this segment in the Moscow region is about 150 billion rubles." In addition, experts from Skladman USG discussed foreign experience, mentioning in particular that the Light Industrial format is the leader of the warehouse segment in Germany. Citing statistics for Germany, Evgeny Numerov said that the ratio of Light Industrial and Big Box is shifting in favor of the former, which constitutes 65% of the warehouse market. Answering the question of who needs this format, Evgeny Numerov noted that "this is an infrastructure for small and medium-sized businesses, they are already ripe for quality storage facilities." So, what is preventing the segment from developing more intensively?
According to expert data, Big Box owners do not want to divide their treasures into smaller "appendices," and even if a warehouse was divided to create a 1,000 sq. m. space, there may still be many problems, including the lack of a separate entrance. The major trend in all segments over the past few years has been unstandardized real estate formats. And it is precisely in the area of warehouses that a real breakthrough is visible. Industry experts discussed their attitude to the format and situations they've had to deal with in the changing, post-2014 market. According to Gleb Belavin, Deputy Director General of Tenant Relations at MLP, "a tenant's reliability and efficiency are associated with his capacity to pay rent and the amount of rent to be paid, and not with the amount of area that he rents. Moreover, too large a leased area can affect the overall risk, because if the lease expires and the tenant leaves, then large areas remain that are more difficult to repurpose."
When discussing the format's popularity, the speaker expressed the opinion that it would be easier and more interesting for any warehouse developer on the market to work with large tenants. "But the Light Industrial market has existed, will exist, and isn't going anywhere. Now the demand is higher because of the crisis, but once the market is restored, everything will again be oriented towards large tenants. Thus, now we need to form a separate niche for Light Industrial," he added. Vyacheslav Kholopov, Regional Director and Head of the Department of Warehouse and Industrial Premises for JLL, agreed with him: "It is most interesting, of course, to work with large tenants, but reality dictates other conditions. Now, demand from small companies is frequently geared towards industrial parks."