“There are almost no free warehouses on the market, demand exceeds supply” - Pavel Yakimchuk

Partner and Head of the Project Management Department at Commonwealth Partnership, Pavel Yakimchuk, shared with Spot the current situation with warehouse spaces in Uzbekistan and why foreign investors are reluctant to invest in this real estate segment.

Warehouse Real Estate at a Potential Growth Point

Warehouse real estate is at a point of potential growth. We forecast accelerated development of this segment over the next 5–7 years. This is supported by both our ongoing projects and market demand.

CMWP has been operating in Uzbekistan since 2018, which marked the emergence of prerequisites for the formation of a market for high-quality warehouse real estate. Demand for such facilities has been forming over the past 2–3 years, as more international companies have started considering the country as an alternative platform for establishing and expanding their businesses. Retail companies entering the Uzbek market also require logistics and warehouses, significantly stimulating demand.

Compared to other sectors, residential construction has long been established, with housing being built even during the period of a closed economy. This real estate segment in Uzbekistan has entered a stabilization phase: key players have emerged, products have been defined, and no explosive growth is expected. The office segment, which started later, was active in the past 3–5 years but also does not anticipate explosive growth.

Demand for high-class warehouse real estate is expected to remain strong in the coming years due to macroeconomic conditions. Since 2017, Uzbekistan has shown positive GDP growth and is undergoing economic liberalization. Foreign investments and international players are entering the country.

Simultaneously, industrial development is advancing. Industrial companies drive logistics and retail development, while retail attracts international brands. This is further supported by a favorable situation with human capital, as Uzbekistan is poised to become a regional leader in terms of young, economically active population.

The Need for Modern Warehouses Amid a Legacy of Old Facilities

In Uzbekistan, warehouses are mostly of medium or low quality, largely remnants of the Soviet era. For instance, decommissioned industrial enterprises, which were not designed as warehouses, dominate the market. Their internal logistics and technical setups are not suited for warehouse operations. Issues such as insufficient ceiling heights, unsuitable column spacing, or inadequate docking equipment often prevent efficient logistics operations.

Additionally, engineering systems are frequently absent. Although warehouses are relatively low-maintenance, tenants have basic expectations for ventilation, fire safety, automation, and lighting systems, which cannot be met in the existing outdated facilities.

There are some new facilities, but they are already in use. The market has no available spaces, and demand exceeds supply. Retail companies, which traditionally prefer renting warehouses, are forced to consider building their own facilities—despite retail's usual aversion to tying up funds in capital expenditures.

At Commonwealth Partnership, we have several requests for modern warehouse spaces in Uzbekistan. For instance, meeting a demand for 10,000 sq. m. is challenging because there are no suitable options on the market. Uzbekistan is experiencing active expansion by international players, and the lack of high-class warehouses could hinder market development.

According to our research, Tashkent currently has about 700,000 sq. m. of warehouse and industrial facilities across eight industrial zones. The stock of high-quality warehouses (categories A and B) is approximately 157,000 sq. m. The average monthly rent is $3.3 per sq. m. for dry warehouses and $5 for cold storage.

Four Factors Slowing Development

Limited Experience of Local Developers: Local developers have little experience in warehouse construction. Many solutions considered standard in developed markets are new to Uzbekistan, requiring expertise for implementation. Partnerships with international companies can help avoid mistakes, accelerate processes, and reduce costs.

Lagging Regulatory Framework: Warehouse construction regulations are underdeveloped, lacking clear and strict requirements seen in more advanced markets. For instance, there are no well-defined fire safety regulations for high-rack storage warehouses. Every new project in Uzbekistan starts from scratch, making it challenging to build warehouses that meet engineering and client expectations.

Land Issues: Finding free and suitable land plots is difficult. Much of the land is designated for residential use or is unavailable.

Lack of Statistical Data for Investors: Foreign investors face challenges in assessing profitability due to a lack of historical data on transactions and long-term rental rates in Uzbekistan. Collecting such data requires realized projects and long-term market monitoring.

Investors Need Data

Investors assess profitability based on past sales or long-term rental rates. However, such statistics are nearly nonexistent in Uzbekistan. Collecting this data requires long-term projects to validate figures.

Warehouse projects are divided into two types:

• User-Specific Warehouses: Built by companies for their own needs, often with higher costs due to customized requirements.
• Speculative Warehouses: Built by developers for leasing or sale without knowing the end user initially.

Speculative warehouses are rare in Uzbekistan, making it difficult for investors to assess average construction costs.

Green Agenda: Necessary but Lacking Interest

The topics of the green agenda, sustainability and energy saving are currently relevant. Warehouses are often certified according to international green standards, but this is not yet done in Uzbekistan.

The green certificate imposes serious requirements on construction materials and equipment. Its presence is important for those owners who plan to attract international tenants or foreign investors. For international companies, it is important in which facilities to locate their business and where to invest.

In terms of energy saving, I would like to note the role of solar energy, although there are difficulties here too. Sunlight is easy to “harvest” but difficult to “store”, storing the collected energy is an expensive process. In our projects, we use solar power plants, which cover the increased energy consumption of warehouses during peak periods.Peak consumption occurs on hot days and is associated with increased air conditioning and ventilation. Thus, in hot weather, we accumulate the maximum amount of energy, which we immediately use to cool the warehouse.

Source: Spot.uz
Photo: Istock