Industrial and Logistics Market in Georgia PREPARED FOR: 2017
Smart Warehouse CONTENTS
Executive Summary 3
Country Profile 4
Business Environment 5
Economic Outlook 6
Georgia Transport And Logistics Infrastructure 8
Free Industrial Zones In Georgia 9
Tbilisi Industrial and Logistics Market Overview 10
Kutaisi Industrial and Logistics Market Overview 15
Batumi Industrial and Logistics Market Overview 19
Poti Industrial and Logistics Market Overview 24
Conclusions and Outlook 29
Appendix 1 - Real Estate Registration and Construction Permit 30
Appendix 2 - Primary Information Sources And Data Used For The Study 33
Disclaimer 36
Colliers Georgia at a Glance 37
Colliers Global Stats at a Glance 38
2 Colliers International Georgia EXECUTIVE SUMMARY
Georgia’s total volume of industrial and logistics space amounts to approximately 2.3 million sq m, of which 740,000 TOTAL INDUSTRIAL AND LOGISTICS SPACE sq m is leasable. With 43% of the leasable supply, Tbilisi is the country’s largest supplier. 31% is located in Kutaisi, DISTRIBUTION IN GEORGIA (sq m) while Batumi and Poti account for 17% and 9% of the leasable stock, respectively. 94% of the leasable supply is dry storage; cold storage accounts for 43,000 sq m. Total capacity of cold storage is 164,000 tons. 67% of the leasable supply is classified as B Class space. At 32%, the share of C Class space is comparatively low. Class A space is in short supply, with just 10,000 sq m being operated by the Austrian logistics specialist, Gebrüder Batumi Weiss. 293 K During 2016-2017, Georgia’s overall leasable space grew by 24,000 sq m with the highest growth reported in Tbilisi. Due to the departure of several market players, leasable supply decreased in Batumi and Poti. Tbilisi Food and Beverage together with Consumer Goods and Appliances are the broad categories utilising 35% and 31% 1,436 K of the listed warehouse space. Building materials occupies 19 % of the stock. Depreciation of the national currency significantly impacted Georgia’s industrial and logistics market. The Kutaisi bargaining power of occupiers is high, pressuring property operators to maintain rental prices. Considering that, a large portion of rental fees are payed in GEL, and USD rental revenues are reduced. 472 K The average rent for dry storage B Class facilities in Georgia varies between USD 2.2-3.6 / sq m and USD 1 -2.2 / sq m for C Class properties. Poti 102 K The average rent for Georgian cold storage facilities usually varies between USD 6-18 /ton net of VAT, depending on the location and quality of the property. In December 2017, Tbilisi experienced the lowest vacancy rate at 18%. In Kutaisi, Batumi, and Poti, the figures were approximately 29%, 22%, and 23%, respectively. During 2016-2017, the vacancy rate in Poti terminals increased significantly, due in large part to the decrease in Cargo turnover at the Poti Sea Port.
SUPPLY DISTRIBUTION (M2) SUPPLY DISTRIBUTION (M2) 19% 28,706 10,000 31% 292,625 SPACE 68% OCCUPIED SPACE 231,908 198,623 32% DISTRIBUTION 198,606 121,327 12,916 57,013 112,708 35% 6% 51,958 65,714 42,171 33,502 22,703 4% 5% Tbilisi Kutaisi Batumi Poti Tbilisi Kutaisi Batumi Poti Food & beverage Building materials Dry Stoage Cold storage C class B class Leaseble supply Owner occupied Consumer goods and appliances Auto parts Transit Other Source: Colliers International Source: Colliers International Source: Colliers International Source: Colliers International
3 Colliers International Georgia COUNTRY PROFILE Background Georgia is the most active economic center in the region. With a liberal tax code, corruption free government, and significant opportunities for foreign investment, it provides a highly supportive business environment.
At the crossroads of Europe and Asia, Georgia borders Turkey, Armenia, Azerbaijan, and Russia. The country KEY FACTS occupies an area of 69,700 square kilometers (sq km) and is home to a population of 3.7 million people. The country’s land borders run a length of 1,839 kilometers (km), while the Black sea coastline is 315 km. During last two decades, Georgia has implemented large-scale reforms that have led to political and economic transformation. It has strengthened its democracy and furthered its relationship with the European Union (EU). Georgia has also made business development within the country a top priority through encouraging 3.7million sq km entrepreneurship, attracting private investments, and shifting tax incentives, thereby positioning itself as an 69.7K attractive option to the international business world. With its unique cultural heritage and exuberant hospitality, Georgia’s tourism industry continues to grow and POPULATION AREA thrive, further bolstering economic growth. Government CAPITAL CITY OF GEORGIA TBILISI Georgia is a parliamentary republic. Parliamentary elections are held every four years. Georgia’s parliament is located in Kutaisi City and acts as the representative body for the country, exercising legislative power and OFFICIAL LANGUAGE GEORGIAN developing domestic and foreign policy. As an executive council of government ministers, Georgia’s cabinet is CURRENCY GEORGIAN LARI (GEL) headed by Giorgi Kvirikashvili, who is a member of the majority “Georgian Dream Party.” Based on accountability, citizen participation, technology, and innovation as its guiding values, today’s government GDP PER CAPITA, 2016 3864.6 USD continues to make European and Euro-Atlantic integration a primary strategic objective. UNEMPLOYMENT RATE, 2016 11.8% Legal Framework AVERAGE MONTHLY SALARY, 2016 375 USD The Georgian Constitution, adopted in 1995, lays out the structure of the national government and defines its authority and function. Georgia’s court system has three branches: the Courts of First Instance (District or City LIFE EXPECTANCY 72.7 years Courts), the Appellate Courts, and the Supreme Court. The Courts of the First Instance have jurisdiction over all civil, criminal, and administrative cases. Decisions from the Courts of the First Instance may be appealed to the Appellate Courts and further appealed to the Supreme Court. Labor Market Overview As an alternative to litigation, Georgian laws allow arbitration both in local as well as international arbitration institutions. Georgia is a member of the International Centre for Settlement of Investment Disputes (ICSID). Georgia’s labor force comprises approximately 1,998,300 people. The Public service hall in Georgia provides customers with state services including business registration and unemployment rate is 11.8%, which is lower than the 14.8% average property registration through ‘one-stop-shop’ principle that ensures efficient service delivery. over the last decade. As of December 2016, 14.9% of the working population are employed by public sector, while 85.1% work in the non- Property Ownership & Non-Agricultural Lands public sector. Georgia’s labor force is well-educated, multi-lingual and relatively low cost. In Georgia property rights are recognized and protected by the Law. An owner has the right to possess, use and dispose of his or her property. The rights of individual owners to possess, use and dispose of land are regulated by the land legislation. There is no restriction on non-agricultural land ownership in Georgia. According to the Heritage Foundation Index, Georgia has substantial improvement in property rights and is 11% above the world average.
4 Colliers International Georgia BUSINESS ENVIRONMENT
International Rankings GLOBAL COMPETITIVENESS INDEX 2017-2018 Georgia has improved its status as a free economy thanks to its fiscal policy, regulatory efficiency, and open market policies. According to the World Bank’s Doing Business report 2018 , Georgia ranks 9th for ‘ease of doing business’ among 190 economies, 4th for ‘ease of starting business’, and 4th for ‘ease of registering property’. In 2017 Fitch Ratings has affirmed Georgia's Long-Term Foreign Currency Issuer Default Rating at 'BB-' with a Positive Outlook. Standard &Poor’s and Moody’s rated Georgia as ‘BB-’ and ‘Ba2’ respectively. Georgia has been among the top ‘most improved’ countries four times in the past 13 years. Registering a new business takes a maximum of two days and requires no minimum capital requirements. According to the ‘Heritage Foundation Index of Economic Freedom 2018,’ Georgia’s economy is categorized as Mostly Free, ranking 16th across 180 countries. Georgia remains the least corrupt country in the region. According to Transparency International, Georgia remains the top performer among the Eastern Partnership countries. Foreign investors in Georgia are guaranteed equal rights to those of Georgian citizens. After payment of taxes foreign investors are entitled to repatriate the earnings (income) gained from investments and other funds abroad.
Tax Climate Source: World Bank, Colliers International In order to attract investments and boost economic growth, an Estonian-type tax model was adopted in 2017 that exempts undistributed earnings from profit tax, and instead taxes distributed earnings only. Georgia has a liberal EASE OF DOING BUSINESS 2018 tax code that includes only six types of taxes: Profit Tax (15%), Personal Income Tax (20%), Value Added Tax (18%), Import Tax (0%, 5% or 12%), Excise Tax (on selected goods), and Property Tax (up to 1%). Georgia has 9 Double Taxation Avoidance treaties with 52 countries. Georgia Lithuania THE WORLD CORRUPTION RANKING, 2017 Latvia Belarus Moldova Romania 46 Armenia 59 Bulgaria 71 68 81 Georgia Azerbaijan Romania Turkey Bulgaria Belarus 107 Turkey Ukraine 122 122 76 130 Armenia Azerbaijan Moldova Ukraine
Source: Transparency International, Colliers International Source: World Bank, Colliers International
5 Colliers International Georgia ECONOMIC OUTLOOK
Overview
Georgian economy performed well in 2017; GDP growth picked up to 4.8%.This boost was largely driven by REAL GDP GROWTH double-digit export growth that worked to improve the trade balance. Based on preliminary data, it is estimated that the annual export rate grew by 29% year-over-year (y-o-y). According to the National Bank of Georgia’s %, year preliminary data tourism revenues grew by 27% and money transfers also increased by 20%, narrowing the 6.4 current account deficit. 5.5 As Georgia’s principal trade partner economies such as Russia, Iran, and the EU are recovering, we should expect 4.8 5.0 to see an increase in Georgia’s export capacity. Georgia has free trade regimes with countries of Commonwealth 4.6 4.5 of Independent States and Turkey; Georgia has already signed free-trade agreements with the EU (DCFTA), the 4.2 4.8 European Free Trade Association (EFTA) states, and China, and negotiations are currently underway for free- 3.4 trade with India. 2.9 2.8 3.6 According to the International Monetary Fund’s forecast, Georgia will maintain the economic growth at around 4- 3.3 5.5% in 2018-2021. The Georgian government is committed to fiscal sustainability and restraining current 2.9 3.0 3.0 spending. Therefore, the fiscal deficit is expected to narrow through 2018-20. 2.5 2.1 Exports 1.0 -0.1 Georgia’s leading trade export partners in 2017 were Russia, Azerbaijan, Turkey, Armenia, and China. Exports to 2012 2014 2016 2018 2020 the EU countries increased by 13% y-o-y and represented 24% of the total exports; exports to the CIS countries that rose significantly by 60% y-o-y amounted to 43.3% of the total exports. Georgia Caucasus F'cast Fast-growing Sectors Source: Colliers International, Geostat, IMF The fastest growing sectors during the first nine months of 2017 were construction (up 12%), hotels and restaurants (up 11.9%), mining and quarrying (up 7.2%), financial intermediation (up 7%), and real estate NOMINAL GDP STRUCTURE, 2016 operations (up 6.9%).
REMITTANCES, 2012-2017 CURRENCY FLUCTUATIONS (LCU PER USD), Y-O-Y % CHANGE 1,600,000 30% 90% 1,400,000 20% 1,200,000 70% 10% 1,000,000 800,000 0% 50% 600,000 -10% 400,000 30% -20% 200,000 10% - -30%
2012 2013 2014 2015 2016 2017
2017
2013
2015
2012
2014 2016 -10% Ukraine Azerbaijan Armenia Total Remittances, thousands USD (LHS) -30% Growth, y-o-y (RHS) Russia Turkey Georgia
Source: National Bank of Georgia, Colliers International Source: World Bank, Colliers International Source: Geostat, Colliers International
6 Colliers International Georgia ECONOMIC OUTLOOK
Foreign Direct Investment (FDI) FDI INFLOWS BY YEARS (mln, USD) Based on preliminary data FDI inflows in 2017 increased by 16.2% y-o-y and amounted to USD 1.86 billion (bn). FDI growth in the construction, and hotel and restaurant sectors accelerated by 114% and 58%, respectively. FDI is expected to remain high into the 2020s due to two factors. The first will stem from Chinese road and rail investments that plan to link with new, long-distance trade routes (boosting traffic via Turkey, 1,818 1,862 Azerbaijan, and Iran). The second increase is expected to come from foreign investors seeking to do 1,653 1,603 business in a low-tax, lightly-regulated regional base. Approval by the European Bank for Reconstruction and Development (EBRD) to finance the Nenskra Hydropower Plant project (HPP) and the offer of USD 1,023 1,021 285mln in extended funds from the IMF also worked to strengthen external financing assurances. Inflation 2012 2013 2014 2015 2016 2017* Although the headline inflation in 2017 was at 6%, above the central bank’s target (3%), inflation is expected to slow down starting in early 2018. According to the IMF, Georgia’s monetary policy rightly *Preliminary data places emphasis on price stability. In addition, reforms continue to support price stability. Georgia’s Source: Geostat, Colliers International Larization program has triggered the decrease in the dollarization of deposits and loans.
INFLATION, % 9.0
8.0 8.6% 7.0 16.3% Transport and Communication 10.1% 6.0 Headline Inflation Construction
Core Inflation 5.0 4.8% Financial Sector FDI BY SECTORS 15.8% Real Estate 4.0 2017 Energy 3.0 16.0%
2.0 Hotels and Restaurants Others 1.0 28.3%
0.0
Jul17
Jul15
Jul16
Jan17
Jan15
Jan18
Jan16
Apr17
Oct17
Apr15
Oct15 Apr16 -1.0 Oct16 Preliminary data Source: Geostat, Colliers International Source: Geostat, Colliers International
7 Colliers International Georgia GEORGIA TRANSPORT AND LOGISTICS INFRASTRUCTURE
While already contributing roughly 12% to the country’s Gross Domestic Product (GDP), Georgia’s manufacturing sector is poised to provide further significant investment opportunities. Greenfield investments are expected to rise in the export- oriented manufacturing sectors for which access to the European market would be attractive. Together with international and local experts, Georgia’s government is performing deep analysis of the competitive sectors, and seeking new ways to stimulate foreign investment, attract new technology and know-how, and create high value-add production in the country. From the transport and logistics perspective, Georgia can serve as a gateway for foreign companies interested in the Caucasus/CIS region due to its geographic location and open business environment. Georgia is uniquely positioned to AMBROLAURI capitalize on the increasing trade flows between Europe, the Caspian Region, Central Asia, and China. With a transport system that functions as a key link in the historic “Silk Road”, it offers the shortest route between the Black and Caspian Seas. In October 2017, leaders of Georgia, Azerbaijan, and Turkey officially opened the Baku-Tbilisi-Kars (BTK) railway as a part of Iron Silk Road project. The 826-kilometer (km) / 513-mile line has the capacity to transport one million passengers and 6.5 million tons of freight per year. The project will deepen trade relations between Georgia and China, making the country a primary link between Europe and Asia. Additionally, the government is investing heavily in road infrastructure, including highways and local roads. It is believed that long-term growth will stem from Georgia’s role as a transit state for pipelines. Three pipelines currently exist: The Baku-Supsa pipeline; The Baku-Tbilisi-Ceyhan oil pipeline; The South Caucasus pipeline (operated by BP). Georgia has 1,603 km of international roads, 5,298 km of internal state roads, and 2,084 km of railway lines. Construction of Georgia’s central highway is one of the top priorities in the Government’s infrastructure rehabilitation program. Since 2005, most of the country’s significant roads for international trade have been upgraded or are now under reconstruction. Poti Sea Port is the largest port in Georgia. Currently serving as the European gateway for international trade in Georgia, Armenia, and Azerbaijan, it is ideally located to become a future hub for trade with central Asia. Together with the Georgian 2,084 km government, the Chinese conglomerate CEFC China Energy group recently signed a cooperative agreement regarding the 5 construction of Common Market Zone in Poti. It will actively promote the export of advanced technologies, production capacity, and products from China to countries in the Eurasian region, and build a new Eurasian land bridge that will function as an economic corridor between China, Central Asia, and Western Asia. Georgia’s government is striving to enhance the country’s sea transit potential through improved port infrastructure and AIRPORTS RAILROAD establishment of the Anaklia Deep Sea Port project. The Anaklia Development Consortium (ADC) is developing the Anaklia Deep Sea Port and the Anaklia City/Special Economic Zone in the Black Sea Region to breathe new life into the ancient Asia- Europe trade route. ADC is a consortium of TBC Holding from Georgia and Conti International from the United States. The Anaklia Development Consortium has established a framework of preliminary agreements with diverse global players in port and transport infrastructure for Anaklia Port’s long-term success The total value of investment projects amounts to USD 2.5 billion. The first phase of construction on an 110-hectare area of land began in 2017 and is set for completion in 2021. Development in Anaklia and its special economic zone began in 2017. 1,603 km 5,298 km Georgia’s five airports are located in various regions, with the largest - operated by TAV Airports - in Tbilisi. The Ambrolauri airport opened in December 2016; it serves smaller aircraft with a 30-50 passenger capacity. Georgia’s additional airports are in Batumi, Mestia, and Kutaisi.
A recent governmental initiative regarding establishment of logistic centres in Tbilisi and Kutaisi created substantial interest INTERNATIONAL INTERNAL from investors. Along with several Georgian companies, applications from companies registered in China, Switzerland, Turkey, and others were received. The anticipated development of infrastructure and manufacturing in Georgia, combined ROADS STATE ROADS with its increasingly recognized strategic location at the cross roads of Europe and Asia, will open up opportunities for modern industrial and logistics real estate investments.
8 Colliers International Georgia FREE INDUSTRIAL ZONES IN GEORGIA
The Georgian government adopted a law that provides for the establishment of Free Industrial Zones (FIZ) in strategic locations of the country. Companies operating in a FIZ are not subject to import and export duties, KUTAISI FREE corporate profit tax, dividends, VAT, or property taxes. The only tax levied on companies within a FIZ is a 4% import/export duty on the transactions between the zone and mainland Georgia. Georgian legislation does INDUSTRIAL ZONE not impose restrictions regarding foreign ownership of companies. Therefore, any legal and natural person, Georgian resident or foreigner, is allowed to register a company in the country. ha International 27 Land plot with
Four Free Industrial Zones operate in three Georgian cities: the Tbilisi Free Industrial Zone, the Kutaisi Free Operator Industrial Zone, the Hualing Free Industrial Zone (in Kutaisi), and the Poti Free Industrial Zone. Holding total size of The Kutaisi FIZ, established in 2009 in Georgia’s second largest city, was the country’s first tax-free territory. Its largest tenant is Fresh Georgia, producing home appliances in several factories. The FIZ covers 27 hectares of land and is currently operated by the Georgian International Holding Company. POTI FREE The Hualing Free Industrial Zone was created in 2015 by Hualing Group, which supplies the market with INDUSTRIAL ZONE 25,000 sq m of dry storage space. The Hualing FIZ specializes in wood and stone processing, metal construction, and furniture and mattress production. Leasable Warehouse space amounts to 25,000 sq m. CEFC k China 7
The Free Industrial Zone in Poti was founded in 2010. This FIZ was operated by Rakia Georgia FIZ LLC until Warehouse space Operator the end of 2017. Starting in 2018, the Poti FIZ will be operated by CEFC China Energy group, a large Chinese Energy with total size of conglomerate. The total warehouse space in Poti FIZ is around 7,000 sq m. In November 2015, Tbilisi’s Free Industrial Zone was developed by the BitFury Group, who have retained ownership. The company has already launched a mega data centre (6,000 sq m) in the Tbilisi Free Zone HUALING FREE (TFZ). The territory’s 170,000 sq m is divided into 28 individual plots that can be leased separately or collectively for up to 50 years. As the TFZ becomes more established, it will facilitate further development of INDUSTRIAL ZONE Tbilisi’s warehouse and industrial market. Hualing 25k
Georgian Laws Regarding Free Industrial Zones Operator Group Warehouse space with total size of Taxes in Free Industrial Zones 1. Issues related to taxes in free industrial zone shall be regulated by the Tax and Customs Codes of Georgia. 2. Profit taxes shall not apply only to those enterprises in free industrial zone that are granted the status of international enterprise under the Georgian Tax Code. TBILISI FREE 3. Import of foreign goods into free industrial zone shall be exempt from any value-added tax. 4. Operations carried out in free industrial zone shall be exempt from any value-added tax. INDUSTRIAL ZONE 5. Property in free industrial zone shall be exempt from property taxes. BitFury 6. The import of foreign goods into free industrial zone shall be exempted from customs duties. 170k 7. The import of goods produced in free industrial zone from an industrial free zone to another Georgian territory (beyond the industrial free
Operator Group zone) shall be exempt from customs duties. land plots with total size of 8. Employees shall pay income taxes in free industrial zone on the basis of income declaration.
9 Colliers International Georgia Tbilisi Industrial and Logistics Market Overview 2017
Gebrüder Weiss TBILISI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Tbilisi’s total industrial and logistics space amounts to 1.44 million sq m . 279 k sq m 2015 During 2016-2017, the city’s total industrial and logistics space grew by 86,000 sq m, of which 49% is leasable. 2017 Supply growth was reported in B and C Class spaces. The A Class supply remains 321 k sq m limited with a total of 10,000 sq m, operated by Austrian logistics specialist Gebrüder Weiss. LEASABLE SUPPLY TBILISI plots with BitFury Gldani 28 total space of FREE Khizanishvili 1,071 k sq m Group Street 170 k sq m INDUSTRIAL ZONE 1,115 k sq m OPERATOR LOCATION LEASABLE AREA OWNER OCCUPIED The leasable supply amounts to 321,000 sq m, of which 293,000 is dry storage. The total capacity of cold storage facilities in Tbilisi is around 140,000 tons. Food and Beverage is the broadest demand category, primarily represented by local and international supermarket chains. Demand by the Consumer Goods and Appliances and Building Materials sectors is also significant, amounting 26% and 18% respectively.
35% 18% 26% 9% 3% 78% OCCUPIED TOTAL SPACE LEASABLE SUPPLY LEASABLE SUPPLY SPACE DISTRIBUTION DISTRIBUTION DISTRIBUTION 8% 22%
91% 7% 41% 62%
Leaseble supply Owner occupied Dry Storage Cold Storage A class B class C class Food & beverage Building materials Consumer goods and appliances Auto parts Source: Colliers International Other
11 Colliers International Georgia TBILISI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
A downward trend in rental prices was observed in B Class dry storage facilities. Main Market Players Compared to 2014, rental prices dropped by 27% in 2015, followed by a further decrease (13%) during 2016-2017. A slight increase in rental prices was reported in C Class dry storage spaces. GLA (sq Operator District Class Type Main Occupiers m) The average rent increased in both classes of cold storage facilities. At 11%, price growth in the B Class Gebrüder Tegeta Motors, Lilo 10,000 A Dry category was more significant than the same figure for C Class rates which climbed 7%. Weiss LLC Bosch PSP Pharma, Aversi During 2016-2017, 65,000 sq m of total space was leased, of which 90% was dry storage. JSC Lilo 1 Lilo 60,000 B Dry Pharma Accordingly, vacancy rates decreased in cold and dry storage facilities by 10% and 19%. The average G & A Didi Carrefour, Smart, 3,300 B Cold vacancy rate of A Class spaces in Tbilisi stands at 0%. The figure decreased by 15% in B Class and by Logistics LLC Dighomi Tolia 7% in C Class warehouses. Smart Didi Ori Nabiji LLC, Warehouse 6,000 B Dry Dighomi Supta Sakhli LLC LLC WEIGHTED AVERAGE RENT IN COLD WEIGHTED AVERAGE RENT IN DRY Iceberg Lilo 3,000 B Cold Europroduct LLC STORAGE (USD/TON) STORAGE (USD/sq m) Tbilisi LLC Sharm Trading LLC, JSC LLC Nadzaladevi 26,500 C Dry Style LLC, Baldosi 4.1 LLC 18.2 16.3 3.6 14.0 15.0
2.0 2.2
Benchmarking B class C class B class C class
2015 2017 2015 2017 Tbilisi’s prime industrial and logistics rental price is around USD 10 / sq m, which is significantly higher comparing to other European cities. VACANCY RATE BY TYPE VACANCY RATE BY CLASS BENCHMARKING OF PRIME RENT USD 2017
53.0% 10.2
34.0% 32.0% 27.7% 6.3 26.8% 5.5 21.1% 4.2 4.1 4.0 16.3% 17.1%
Dry Storage Cold Storage B class C class 2015 2017 2015 2017 Source: Colliers International
12 Colliers International Georgia TBILISI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Super Iceberg Tbilisi Tbilisi Free GLDANI Industrial Zone G & A Logistics Sarajishvili DIDI DIGHOMI
NADZALADEVI Smart Warehouse
Lelo
DIDUBE
SABURTALO
CHUGURETI LILO VAKE VARKETILI DZVELI TBILISI ISANI Gebrüder Weiss Lilo 1 Gebrüder Weiss
SAMGORI
Main market players Upcoming projects Airport Central Railway Station
Upcoming Projects
Construction Completion Operator Location District GLA (sq m) Class Category Type Status Date
Kakheti Highway, Airport Gebrüder Weiss LLC Lilo 37,000 A Leasable Announced Greenfield N/A Adjacent Territory Zahesi, Mukhatgverdi Owner Super LLC Zahesi 7,300 B Ongoing Greenfield 2019 Territory occupied Gldani- Sarajishvili LLC 4 Sarajishvili Avenue 6,000 B Leasable Ongoing Greenfield H1 2018 Nadzaladevi Source: Colliers International
13 Colliers International Georgia TBILISI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Major part of industrial properties in Tbilisi is owner occupied. Leasable supply is primarily represented by old industrial buildings, which fell to the possession of individuals after the collapse of Soviet Union. Demand is dominated by producers of building materials and furniture. Average rent of industrial space ranges between USD 2 - USD 5 per sq m based on location, condition and existence of production machinery in the property. The bargaining power of landlords is high, which is reflected in the short term lease contracts, empowering leasers to change rental rates frequently.
Furniture cluster in Avchala
GLDANI
DIDI DIGHOMI
NADZALADEVI
DIDUBE Building materials cluster
SABURTALO in Didube
CHUGURETI LILO VAKE VARKETILI DZVELI TBILISI ISANI
SAMGORI
Cluster Building materials
Cluster Furniture Furniture cluster in Nadzaladevi
14 Colliers International Georgia Kutaisi Industrial and Logistics Market Overview 2017
Hualing Free Industrial Zone in Kutaisi KUTAISI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
The total amount of Industrial and logistics space in Kutaisi equates to 472,000 sq m. During 2016-2017 the figure grew by 46,000 sq m, of which 31% was leasable. Kutaisi’s dry storage supply is represented by B and C Class warehouses. Kutaisi’s cold storage warehouse space is extremely limited and primarily comprised of small, cold storage containers. 232 K 239 K sq m sq m KUTAISI FREE HUALING FREE INDUSTRIAL ZONE INDUSTRIAL ZONE Georgian ha Hualing 25k LEASABLE SUPPLY OWNER OCCUPIED International 27
Land plot with Warehouse space Operator
Operator Group Holding total size of with total size of
The Consumer Goods and Appliances category is the largest occupier, leasing 50% of the supply. Additional categories with substantial occupied space are Building Materials and Food and Beverage, representing 23%- WEIGHTED AVERAGE RENT IN DRY 24% of the listed supply STORAGE (USD/ sq m) Prices fell for dry storage warehouse space. 2.8 Rental prices in the B Class category reduced by 11%, while rates dropped a significant 24% for C Class space. 2.5 Cold storage rates averaged roughly USD 6 per ton. 1.5 A total of 42,000 sq m was leased during 2016-2017, of which the majority was B Class space. 1.2 B and C Class space vacancy rates dropped by 16% and 14%, respectively, a drop that was driven largely by increased occupancy in FIZ Warehouses. B class C class 2015 2017 Source: Colliers International 14% 50% VACANCY RATE IN DRY STORAGE
49% 46.4%
LEASABLE SUPPLY OCCUPIED 38.9% TOTAL SPACE 24% DISTRIBUTION SPACE DISTRIBUTION 30.5% 25.0% 51% 3%
86% 23%
B class C class Food & beverage 2015 2017 Leaseble supply Owner occupied B class C class Building materials Consumer goods and appliances Source: Colliers International Other
16 Colliers International Georgia KUTAISI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Kutaisi Free Industrial Zone
Hualing Free Davit Aghmashenebeli Ave Industrial Zone Imereti Mirazhi Green Flower 1950
Gold Star Davit Tvaltvadze
Ana Group
Main market players Upcoming projects Airport Central Railway Station
Main Market Players
Operator Location GLA (sq m) Class Type Category Main Occupiers Hualing Group LTD Kutaisi Free Industrial Zone 25,000 B Dry Leasable N/A Imereti LLC 21a Ir. Abashidze Street 13,000 B Dry Leasable Knauf, Nikora, G.D. Alko, Philip Morris
Davit Tvaltvadze 186 A. Tsereteli Street 8,000 B Dry Leasable Pepsi, Nabeghlavi, Sno, Alta, Kent, Teliani Valley Green Flower 1950 LLC 14 Orkhelashvili Street 10,000 B Dry Leasable Energo Pro Georgia, DHL, Mitana Mirazhi LLC, Imedi XXI Century LLC 3 9 April Street 7,000 C Dry Leasable N/A
Georgian International Holding LLC Kutaisi Free Industrial Zone ≈ 120,000 B Dry Owner occupied Fresh Georgia
Upcoming Projects
Construction Operator Location GLA (sq m) Class Category Type Completion Date Status JSD Ana Group 12a, Nikea Street, I Turn N/A B Leasable Announced Greenfield N/A
Gold Star LLC 20 Gugunava Street 3,000 B Owner occupied Ongoing Greenfield 2018 Source: Colliers International
17 Colliers International Georgia KUTAISI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Davit Aghmashenebeli Ave
Stone Production Hualing Free Industrial Zone
Building Furniture Consumer Food materials Production Electronics Production production production
Major part of industrial properties in Kutaisi are located in Free Industrial Zones. Hualing FIZ specializes in wood and stone processing, metal construction, and furniture and mattresses production. As regards Kutaisi FIZ, its largest tenant is Fresh Georgia, who produce home appliances in several factories. Average rent of industrial space ranges between USD 2 - USD 4 per sq m based on space condition and existence of production machinery in the property.
Furniture Production Hualing Free Industrial Zone
18 Colliers International Georgia Batumi Industrial and Logistics Market Overview 2017
Batumi Sea Port BATUMI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
The total industrial and logistics space in Batumi amounts to 293,000 sq m, of which 42% is leasable. The vast majority of facilities in Batumi are old, Soviet-era buildings, some of which have undergone recent renovations. 25%
25% 170 K 123 K OCCUPIED sq m SPACE sq m 5% 4% 41% LEASABLE SUPPLY OWNER OCCUPIED
Food & beverage Building materials During 2016-2017, Batumi’s total industrial and logistics space grew by 10,000 sq m, Consumer goods and appliances Auto parts which was primarily attributable to the growth of owner-occupied supply. Other Several leasable warehouses were sold, thus reducing the leasable supply by 14%. Batumi’s industrial and logistics supply is dominated by dry storage space, while cold storage represents an insignificant share of the leasable supply. Main Market Players The Food and Beverage category is the most substantial occupier, leasing 41% of the supply, while Building Materials and Consumer Goods and Appliances each lease 25% of the occupied space Operator Location GLA (m2) Class Type Category Main Occupiers
Nati+ LLC 37 Khakhuli Street 1,800 B Dry Leasable N/A
54% Anagi LLC 111 Lermontovi Street 5,300 B Dry Leasable Sharm Trading
Imperial 2000 133 Bagrationi Street 6,000 B Dry Leasable Elit Electronics 42% LLC TOTAL SPACE LEASABLE SUPPLY 18 General Abashidze TBC Bank JSC 2,000 B Dry Leasable Nabeghlavi DISTRIBUTION DISTRIBUTION Street 58% 16 General Abashidze Subtropic LLC 600 B Cold Leasable N/A 46% Street Batumi Bamboo 7 Sulkhan-Saba Furniture 4,800 B Dry Leasable N/A Orbeliani Street Factory JSC
B class C class Leaseble supply Owner occupied Source: Colliers International
20 Colliers International Georgia BATUMI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Average rental prices increased by 8% in B Class dry storage facilities, while they decreased by USD 0.3 (USD 1 / sq m) for C Class space. Growth was reported in cold storage facilities as well, with average rental rates hitting USD 13.9 / ton. The vacancy rate decreased in both dry and cold storage facilities. Vacancy rates decreased by 10% and 2% in B and C Class dry storage spaces.
WEIGHTED AVERAGE RENT IN DRY WEIGHTED AVERAGE RENT IN STORAGE (USD/ sq m) COLD STORAGE (USD/ TON)
13.9
2.1 2.2 12.1 1.3 1.0
B class C class B class
2015 2017 2015 2017 Source: Colliers International Source: Colliers International
VACANCY RATE BY CLASS VACANCY RATE BY TYPE
47.8%
32.2% 28.1% 29.8% 28.4% 27.1% 21.5% 18.1%
B class C class Dry Storage Cold Storage 2015 2017 2015 2017 Batumi Port Source: Colliers International Source: Colliers International
21 Colliers International Georgia BATUMI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
BLACK SEA
Imperial 2000 Nukol Group Macivarkombinati Anagi Subtropic Batumi Bamboo Furniture Factory
TBC Bank Nati+
Main market players Upcoming projects Airport Central Railway Station
Upcoming Projects
Construction Operator Location GLA (sq m) Class Category Type Completion Date Status Nukol Group LLC 131 Bagrationi Street 2,400 B Leasable Announced Greenfield 2018
JSC Macivarkombinati 3 Sulkhan-Saba Orbeliani Street 1,500 B Leasable Ongoing Greenfield 2018 Source: Colliers International
22 Colliers International Georgia BATUMI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Batumi Sea Port
Building Furniture Consumer Food materials Production Electronics Production production production
Major part of industrial properties in Batumi is owner occupied. Demand is dominated by producers of building materials and furniture. Average rent of industrial space ranges between USD 2 - USD 5 per sq m based on space condition and existence of production machinery in the property. Batumi Sea Port
23 23 Colliers International Georgia Poti Industrial and Logistics Market Overview 2017
Poti Free Industrial Zone POTI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Currently, Poti has 102,000 sq m of total industrial and logistics space, with 27,000 sq m (27%) of that leasable floor space. Total terminal space amounts to 38,ooo sq m, while Poti has 23,000 tons of cold storage capacity.
POTI CEFC 37 K OWNER OCCUPIED FREE China 7k Sq m sq m INDUSTRIAL Energy Warehouse space ZONE LEASABLE SUPPLY - OPERATOR LEASABLE AREA 27 K WAREHOUSES Poti’s leasable supply is represented by B Class spaces, of which 53% is dry storage. sq m During 2016-2017, the leasable market supply decreased slightly, due primarily to the departure of 38 K several market players. sq m There are no new, significant industrial and logistics projects planned for the near future. TERMINALS Transit companies are the major occupiers of the leasable stock. Among non-transit demand, Food and Beverage is the most significant category, occupying 21% of the leasable supply. Auto parts, Consumer Goods and Appliances, and Building Materials account for 6%, 4%, and 3% of the leasable supply, respectively.
47% 37%
35% SUPPLY SPACE DISTRIBUTION OCCUPIED SPACE DISTRIBUTION IN WAREHOUSES 27% AND TERMINALS 65%
36% 53%
Transit Non-transit Leasable Warehouses Terminals Owner occupied Dry Storage Cold Storage Source: Colliers International Source: Colliers International Source: Colliers International
25 Colliers International Georgia POTI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
Average rental prices in leasable facilities have not changed significantly over the last two years. In cold storage, rental prices averaged USD 12.7 per ton, and USD 1.5 per sq m for dry storage. Vacancy rates increased by 8% in dry storage, while in cold storage the figure reduced by 3%. During 2016-2017, rental prices dropped by 7% in terminals to USD 0.33 per ton per day. The average vacancy rate significantly increased in terminals to 67%. Occupancy rate reduction in terminals was primarily caused by decreased cargo turnover at the Poti Sea Port. The Georgian government recently signed a cooperative agreement with Chinese conglomerate CEFC China Energy, who will become a new operator in the Poti Free Industrial Zone.
AVERAGE VACANCY RATE IN WEIGHTED AVERAGE RENT IN WEIGHTED AVERAGE RENT IN AVERAGE VACANCY RATE IN WAREHOUSES COLD STORAGE WAREHOUSES TERMINALS (USD/ TON/ 24 TERMINALS (USD/ TON/ MONTH) HOURS)
12.7 12.7 67% 0.35 24% 24% 16% 21% 0.33 18%
Cold Storage Dry Storage Dry Storage Cold Storage Dry Storage 2015 2017 2015 2017 2015 2017 2015 2017
Source: Colliers International Source: Colliers International Source: Colliers International Source: Colliers International
Poti Free Industrial Zone
26 Colliers International Georgia CTM POTI INDUSTRIAL AND LOGISTICS Poti Free Industrial American Monolith Zone MARKET OVERVIEW Iceberg Poti
Peis Warehousing Georgia
B&P
BLACK SEA
Main market players Upcoming projects Central Railway Station
Main Market Players
Operator Location GLA (m2) Class Type Category Main Occupiers
CEFC China Energy Poti Free Industrial Zone 7,271 B Dry Leasable N/A
CMT LLC 35 St.Giorgi Street, Center-Maltakva 5,700 B Dry Leasable N/A
American Monolith LLC Larnaka Street, Center-Maltakva 6,000 B Cold Leasable N/A Peis Warehousing Georgia 15/39 Gegidze Street, Center-Maltakva 4,530 B Dry Leasable N/A LLC Iceberg Poti LLC 7 Larnaka Street, Center-Maltakva 4,200 B Cold Leasable Monterey Farms Source: Colliers International
27 Colliers International Georgia POTI INDUSTRIAL AND LOGISTICS MARKET OVERVIEW
BLACK SEA
Poti Free Industrial Zone
Wood Fish Food Building Materials Manufacturing Manufacturing Manufacturing Manufacturing
Industrial real estate supply in Poti is primarily owner occupied, mainly represented by large scale factories. Fish and seafood manufacturing is the main driver of Poti Industrial Market. Recently signed cooperative agreement with Chinese conglomerate CEFC China Energy group regarding construction of Common Market Zone in Poti will further facilitate development of industrial market in the region.
Poti Free Industrial Zone
28 28 Colliers International Georgia CONCLUSIONS AND OUTLOOK
Among Georgia’s real estate sectors, the Industrial Market is the least developed. Supply of modern A Class space is limited, represented only by the Gebrüder Weiss’s facility in Tbilisi. The market is further characterized by its high share of (local) owner-occupied stock and limited amount of international tenants. After the collapse of the Soviet Union, state-owned industrial buildings fell to the possession of individuals. This led to an increase in low-class warehouse space, the majority of which is now occupied by local companies. Among other factors, the relatively low level of export activity impacted the warehouse market’s growth. Given the country’s strategic position and potential as a gateway between Europe and CIS/Asia, the warehouse market will likely experience accelerated growth in the near future. Increased investment in infrastructure, including the recently-completed the Baku-Tbilisi-Kars railway, development of Anaklia Deep Sea Port and a special economic zone will all help to facilitate sector growth. Combined with Georgia’s strengthened ties to Europe, featuring the Association Agreement and DCFTA, these public infrastructure investment initiatives should lead to strongly improved conditions for industrial real estate market growth in the medium term. With the current modern supply at a very low level and A Class vacancy at 0%, this potential is already evident. Recent governmental support for local producers will likely fuel regional demand and drive the potential growth of centrally-located hubs such as Kutaisi and Khashuri. Establishment of the Free Industrial Zones (FIZ) are aiding the development of Georgia’s industrial and warehouse markets. Together with flexible and comprehensive legislation, these steps have created a healthy investment climate for both large and start-up companies. Four FIZ areas currently exist, two of which are located in Kutaisi, a significant industrial centre since the Soviet era. Establishment of a deep sea port and a FIZ in Anaklia will also help the country fully exploit its potential and superior location. The first phase of the project is planned for completion by 2021 and is expected to breathe new life into ancient Asian-European trade routes. The recently-completed railway project – the Iron Silk Road – will establish Georgia as an important transport hub and deepen the country’s trade relations with China. Georgia’s government strives to attract foreign investments by creating opportunities in Tbilisi and Kutaisi’s logistic centre markets. Growing interest from foreign investors proves that Georgia has great potential to become a regional commercial hub for neighboring countries. The entrance of international, large-scale distribution companies and the continued progress of the manufacturing industry will also accelerate Tbilisi’s warehouse market. Given Georgia’s relatively narrow economic base, the real estate market’s potential is likely to remain modest in the coming years, though the country’s strong economic growth and public investment initiatives have positioned the market for significant expansion. Implementation of third-party logistics (3PL) will become one of the main drivers behind warehouse demand in the nearest future. 3PL service is already implemented in several warehouses and will continue to develop in the foreseeable future.
29 Colliers International Georgia APPENDIX 1
Real Estate Registration and Construction Permit REAL ESTATE REGISTRATION AND CONSTRUCTION PERMIT
Application Submission Public Service Hall or territorial Property Acquisition office of National Agency of Purchase / Gift Public registry
Document Preparation Service Fee Payment Documents needed: - Within 4 business days - 50 GEL - Proof of identity document - Within 1 business day - 150GEL - Duly attested Purchase Contract / - On the day of application - 200 GEL deed of gift on immovable item
Property Registration In Georgia, the National Agency of Public Registry is the state institution responsible for the In the case the property being purchased from the state/municipality (privatization, auction registration of property, registering both transfers between private entities and state-owned or other form of purchase) the documents should be submitted directly to the Agency. properties. Times and fees for registration In case of private transfer, the purchaser has two options: • 4 working days upon the submitting of documents (ordinary time) - the day of • Via a notary - contract drafting and legalization by the notary and subsequent submission of documents is not counted - GEL 50 (registration fee per one property) + registration. The notary assumes responsibility for the content of the draft and its GEL 5 for certifying the document (GEL 5 per each document subject to submission) legalization. The presence of a translator and his signature on the bilingual purchase • 1 working day - GEL 150 + GEL 5 for certifying the document document is required and the translator assumes responsibility for the authenticity of texts. Time for preparation of the bilingual document and its legalization varies • On the day of submitting the agreement in the Agency - GEL 200 + GEL 5 depending on the notary Times and fees for renewal of public registry information • Via the National Agency of Public Registry - direct submission of the purchase contract Online for legalization and registration. In this case, the bilingual purchase document is to be • 1 working day - GEL 10 (USD 4.4) drafted directly by both parties or by their authorized representatives. The Agency’s • Same working day - GEL 40 (USD 17.6) representative certifies the signatures and may provide recommendations if the Justice House document is not accurately drafted, but does not carry any responsibility for the validity or its content. • 1 working day - GEL 15 (USD 6.6) • Same working day - GEL 50 (USD 22) • The National Agency of Public Registry is represented in: a) Public Services Halls (Tbilisi, Gori, Kutaisi, Batumi, Ozurgeti, Mestia, Zugdidi, Rustavi, Marneuli, Gurjaani, Telavi, Kvareli and Akhaltsikhe) and b) regional departments of the National Agency of Public Registry (located in cities throughout the country).
31 Colliers International Georgia REAL ESTATE REGISTRATION AND CONSTRUCTION PERMIT
Construction Permits Stage II 18 days for II and III class buildings For the purposes of construction, buildings are divided into five types: 20 days for all IV class buildings, for Bakuriani, Bakhmaro, Ureki-Shekvetili recreation st 1 class buildings - no construction permit is required; territories , for all buildings that require ecological expertise and for V class buildings. nd 2 class buildings - buildings with low risk factors; Stage III rd 3 class buildings - buildings with medium risk factors; 5 days for II, III and IV class buildings th 4 class buildings - buildings with high risk factors; 10 days for V class buildings th 5 class buildings - buildings with very high risk factors. Exceptions: The permit issuance process is divided into three stages: The special terms for permission process: Stage I - Statement of urban construction terms; Construction permits concerning: Stage II - Approval of architectural-construction project; III class buildings with an intensity coefficient up to 1,500 p/m2 and for buildings with a Stage III - Issuance of Construction Permit; height of up to the 14 meters that will be located on the territories where urbanization State organs responsible for the issuance of permits: regulatory plans do not exist and are organized according to land use or which are organized according to the perspective development regulatory plans on the territory of Tbilisi - the Local self-governmental (municipal) organs - for II, III class buildings within the municipal permission process may involve II and III stages only territory (at stages I and II) except from Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi. The simplified permit procedure may involve just two stages and the permit is issued in the second stage. Local self-governmental (municipal) organs - for IV class buildings (at stages I and II) with the participation of corresponding state organs The terms for the simplified procedure are as follows: Local self-governmental (municipal) organs - for II, III and IV class buildings (at III stage) Stage I - 12 days for II and III class buildings independently (including Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation 15 days for all IV and V class buildings, for Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi) territories and for all buildings that require ecological expertise. Tbilisi City Hall - for II, III and IV class buildings in Tbilisi Municipality (at all stages) Stage II (issue of permit) - 20 days for all classes independently Permission fees Corresponding local organs of Adjara Autonomous Republic and Abkhazia Autonomous The municipal organs determine the permission fees though the maximum limits are Republic - for II, III and IV class (at all stages) on the territory of the Autonomous Republics envisaged by the Law: Local self-governmental (municipal) organs - II, III and IV class buildings (at stages I and II) For all territory of Georgia - 1 (one) GEL (USD 0.4) p/m 2 of construction territory for Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi - with the participation of the Ministry of For construction of industrial buildings at resort areas- 5 (five) GEL (USD 2.2) p/m2 of Economy and Sustainable Development. construction territory Ministry of Economy and Sustainable Development - for V class buildings Exceptions: Ordinary terms per each stage (working days): Investors seeking the construction of hotels in free tourism zones and investing not less than Stage I 1,000,000 (one million) GEL (USD 440,494) per each hotel are exempted from paying the 10 days for II, III and IV class buildings permission fee. 15 days for Bakhmaro, Bakuriani and Ureki-Shekvetili recreation territories (excluding V class buildings), also for all buildings that require ecological expertise. 30 days for V class buildings
32 Colliers International Georgia APPENDIX 2
Primary Information Sources, data used for the study, definitions and assumptions PRIMARY INFORMATION SOURCES AND DATA USED FOR THE STUDY
In the process of preparing the research, we were guided by the information provided by property Prime Rent: The Prime Logistics & Distribution Headline Rent represents the top open-market tier managers, owners, developers, governmental institutions (The National Agency of Public Registry, of rent that could be expected for a unit of standard size commensurate with demand for units over the National Statistics Office of Georgia, the National Bank of Georgia, the Ministry of Economy 3,000 m2 or greater, of the highest quality and specification (Grade A) in the best location in the and Sustainable Development of Georgia, City Halls, World Economic Forum). The following web- market at the survey date. Warehouse Units would typically include up to 10% office space, the portals is also used: balance being general warehousing/logistics/distribution space with at least 6 to 12 metre ceiling heights. All loading is dock-height. www.geostat.ge www.nbg.ge Prime Headline Rent should reflect the level at which relevant transactions are being completed in www.gnta.ge the market at the time but need not be exactly identical to any of them, particularly if deal flow is very limited or made up of unusual one-off deals. If there are no relevant transactions during the www.tas.ge survey period, the quoted figure will be more hypothetical, based on expert opinion of market www.worldbank.com conditions, but the same criteria on building size and specification will still apply. The figure should www.cia.gov exclude service charges and taxes, and not reflect tenant incentives. www.imf.org Gross Building Area: is total construction area of the building including common and technical spaces. Definition and Assumptions Net Leasable area: is calculated by deducting common and technical area from the gross building CIS: Commonwealth of Independent States area. DCFTA: Deep and Comprehensive Free Trade Agreement Net Rent: is based on the market data. It is assumed that the net rent for the investment indicators ADC: The Anaklia Development Consortium sections equals market figure. FIZ: Free Industrial Zone Occupancy rate: is calculated by deducting percentage amount of vacancy rate from 100%. FDI: Foreign Direct Investment Past/Future Project Investment Volume: the information regarding past/future projects investment IMF: International Monetary Fund volume is based on the data provided by real estate developers. In some cases there were no GDP: Gross Domestic Product available data and justifications were made based on the information, provided by construction GEL: Georgian Lari cost accountants. The type/class of the past and future projects was also considered during such justifications. GLA: Gross leasable area m2: Square metre Transaction trend analysis: Warehouse selling transactions are limited. Basically, warehouses are part of the industrial real estate in the database of National Public Registry of Georgia. There is not USD: The United States Dollar available relevant data for statistical analysis of selling transactions. VAT: Value added tax Benchmarking with European cities: Since the warehouses are considered part of the industrial Rent Prices: Are calculated based on the data provided by warehouse developers and owners, sector and market researches in the comparable countries of Georgia are not conducted on regular property managers, tenants, National Agency of Public Registry etc. all rents are calculated in USD basis, benchmarking of Georgian warehouse market figures was not available by the date of the per month net of VAT and service charges. Rents for dry storages are calculated per m2 except research. Poti, where it is calculated per ton. All rents for cold warehouses are calculated per ton. Performance Indicator analysis by Districts: is based on the administrative borders of city districts. Prime Yield: The yield an investor is prepared to pay to buy a modern warehouse facility, fully-let Market Conjunctures for different real estate segments were also considered during mentioned to high quality tenants at an open market rental value in a prime location. Lease terms should be analysis and several districts were added/merged based on its importance in supply and demand. commensurate with the market e.g. typically 5yrs +. The size of the building should also be commensurate with the local market. Gross Yield is considered in calculations. Gross Yield = First years' passing rent (i.e. net effective rent) / Property Price (irrespective of transaction costs)
34 Colliers International Georgia THE WAREHOUSE PROPERTY CLASSIFICATION
General Criteria's A class B class C class
Modern warehouse building made New built or redeveloped Industrial facility or heat- Building type of light-gouge and sandwich warehouse building insulated hangar constructions
Flat concrete floor with anti-dust Anti-dust surface or uncoated Asphalt or concrete tile, Site coverage ratio 40-45% surface concrete uncoated concrete
Flooring Must Optional Optional
Ceiling height 9-12 m. Must Optional Optional
Controlled temperature and ventilation system Must Must Optional
Fire alarm and automatic fire-fighting systems Must Optional Optional
Alternate power solution Must Optional Optional
Security alarm and video surveillance Must Must Optional
Parking and marshalling area for heavy duty vehicles and trucks Must Must Optional
Office premises Must Optional Optional
Personnel facilities (toilets, showers, changing rooms and etc.) Must Must Optional
Fiber-optic telecommunications Must Optional Optional
Fenced area, perimeter security control Must Must Optional
Proximity to the major highways Must Optional Optional
Property management International operator Local operator Local operator
Railway spur Must Optional Optional
35 Colliers International Georgia Disclaimer
Colliers International is a leading commercial real estate services company Established by the Ministry of Economy and Sustainable Development of operating in 67 countries, providing a full range of services to real estate Georgia, “Enterprise Georgia” is a legal entity of public law aimed at occupiers, developers and investors on a local, national and international basis. development of Georgian enterprises. As the first state-owned institution Services include brokerage sales and leasing (landlord and tenant mandated to facilitate development, growth and internationalization of representation), real estate management, valuation, consulting, project country’s private sector through use of different mechanisms, Enterprise management, project marketing and research, and a recently added GIS Georgia operates within its three pillars: EG – Business, EG – Invest, and EG services. Colliers International provides services across the following core – Export. sectors as well as many specialized property types: retail, office, hotel, industrial and logistics. As one of the EG Pillars, Investment Promotion and Support Divisions play a role of moderator between foreign investors and the Government of Georgia, ensuring that the investor gets different types of updated information and has means of effective communication with the Government bodies. The aim of the Invest division is to attract, promote and develop foreign direct investments in Georgia. It serves as a “One-stop- shop” for investors to support companies before, during & after investment process.
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36 Colliers International Georgia COLLIERS GEORGIA AT A GLANCE
5 100* MILLION GEL REVENUE FROM REAL MARKET & ADVISORY REPORTS ESTATE SERVICES 50 25,000 RUSSIA PROFESSIONALS VALUATIONS CONDUCTED BLACK 13 $2,9** SEA CERTIFIED IVS VALUERS TOTAL AGGREGATE VALUE OF VALUED PROPERTIES ** 2 $1.3 TURKEY RICS MEMBERS BILLION CONSULTING PROJECTS’ AZERBAIJAN TOTAL DEVELOPMENT VALUE ARMENIA
* Accomplished by team members during last several years ** 2015-2017 figure COLLIERS GLOBAL STATS AT A GLANCE
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