Around 1 million square meters of industrial and logistics facilities built in Serbia since 2000 – Greenfield investments most cost-effective
Participants in the “Development of Logistics and Industry” panel
Serbia is a country with the potential for the development of logistics and industry, it was concluded at the panel held on Wednesday, June 19, within the REBEC 2019 conference. The moderator of the panel was Alexander Samonig of the company Ecovis SEE, and the panel also included Vlatko Djuricek of CTP Invest, Jelena Drazic of Siemens Serbia, Nikola Djogatovic of Colliers International and Darko Djoric of Mind Group.
Increasingly more foreign investors are coming to the Serbian market, and one of the challenges all companies face is how to find the workforce.
– When Siemens came to Serbia, we had trouble finding, not just qualified workforce, but any kind of workforce at all. That's why we worked on explaining to people why working for a large, international company was good. Furthermore, it was also difficult to find suppliers as as well. We now organize education for young people, there are always jobs available at the factory, we see our employees as part of our family, part of a large, successful system and that's our guiding principle – said Jelena Drazic of Siemens Serbia.
CTP Invest is building logistics and production facilities in several locations in Serbia, and, in addition to carrying out the construction, it also advises its clients in all segment.
– For each client, we first do a market analysis. We talk to clients to determine what they need and we pick the location based on that. For example, if the company is in the high-end production business, if it needs engineers, Novi Sad is an ideal location. The same is true of Kragujevac. The location for raising the facility needs to be chosen wisely. All aspects, including the future workers, need to be taken into consideration – emphasized Vlatko Djuricek of CTP Invest.
Nikola Djogatovic of Colliers International, a real estate consultancy, says that several factors are important in picking a location for the investor.
– The price, the existing infrastructure and the available workforce. These are the things that each investor needs to take into consideration when starting a business in a country. Today, thanks to the internet, an enormous amount of information is available to everyone, but what's important is to have the true, official data, so as to be able to make the right decision in the end – Djogatovic pointed out.
He also sees the constant growth of construction costs as one of the problems in Serbia.
– There have been situation where a client calculates the costs of the construction of a facility, after which building and other permits are obtained, and then, when the construction is ready to start, we realize that the costs have grown by around 35% in about a year. This is certainly something that we need to take into consideration at any moment – Nikola Djogatovic said.
Djuricek agrees with him.
– The price of the land you're buying also needs to be chosen carefully. The truth is that construction costs are growing and that the trend will continue. However, there's still room for good tenders, lower prices and a higher quality of construction.
Illustration (Photo: Petinov Sergey Mihilovich/shutterstock.com)
As he pointed out, Serbia is a country which used to have a very developed industry in the past. Foreign investors remember that and are not here accidentally.
– The real estate market in Serbia, and I include this industry sector here as well, is constantly growing and has a potential to keep developing. Although we don't have exact data on how many facilities for production and logistics have been built, we can give a rough figure of around one million square meters in the period since 2000. It's important to emphasize that there's still room for growth. If we take the long view, each small town will have at least one production facility in the future. This is very important, as it will lead to employment, but also to an increase in salaries – Djuricek pointed out.
Darko Djoric of Mind Group pointed to the problems of financing, but also finding the workforce.
– Initially, we found it very hard to explain the idea of building Mind Park as a center for competence in the rail vehicle industry. We first used our own funds for financing, and then came contracts with banks. It's important to note that we have great cooperation with the University of Kragujevac. We have started a center for the education of employees there, and, in addition to engineers, we also train technical workers to operate CNC machines – Djoric said and emphasized the importance of the arrival of Siemens.
Jelena Drazic of Siemens Serbia agreed that the industrial real estate sector in Serbia was on the rise.
– Companies coming to Serbia are increasingly aware of the possibilities and resources provided by our country. There are increasingly more investors, both those that are building from scratch and those interested in making brownfield investments, or looking to stay in Serbia for the next 5-10 years. The state also has to recognize the importance of this market, because, in the end, this is something that will return to Serbia as an investment, because the country will be recognized as a good place to invest in – Jelena Drazic emphasized.
The existing infrastructure is also important for the arrival of investors, the participants in the panel agreed. In choosing the location for the construction of a production facility or a logistics center, one also needs to take care of the proximity of a highway. This certainly attracts investors. Also, as they said, the issue of the transport of goods and honoring the shipment deadlines is also important.
– There are efforts to upgrade the railway infrastructure in Serbia. Mind Park is lucky in that it will be connected with the Lapovo-Kragujevac railway. By the end of 2019, we expect to obtain the building permits, and the construction might start as soon as 2020. We expect to be finally connected to the railway in 2021. At the moment, we are experiencing problems with logistics and transport, especially when it comes to heavy cargo, so this railway connection will mean a lot to us – Darko Djoric pointed out.
The panel moderator, Alexander Samonig, also emphasized the importance of river transport. The participants agreed that it was a good solution, but not all year round.
– The situation is such that, in certain periods, rivers are not navigable, and it all depends on water levels, the season and the weather. So there can't be a sustainable transport arrangement for the whole 12 months – Nikola Djogatovic said.
The importance of free zones in Serbia was also emphasized at the panel. At the moment, a total 14 are active in Serbia. Also, it was discussed whether it paid off more to make greenfield or brownfield investments.
– It all depends on the investor, but our advice is to always build from scratch. It happens that our clients ask for an existing facility to be rebuilt and then realize that it requires much more money than if they had built an entirely new facility. That's why it's important to plan and make all decisions wisely. Nowadays, we need to take care of the quality above all, facilities need to meet high construction standards, which is why investors choose greenfield investments more often – Vlatko Djuricek pointed out.
At the end, it was repeated that all companies in the fields of industry in logistics had a bright future in Serbia. There are increasingly more investors, opportunities for growth and development are considerable, and around a million square meters of space is available in the Belgrade area alone. The great potential of Serbia is also shown by the fact that foreign investors are mostly pleasantly surprised when it comes to doing business in Serbia, it was concluded at the “Development of Logistics and Industry” panel.