What helps real estate companies survive in tough times

In recent years, many industries have faced high volatility and significant change. Industrial real estate has also fallen into a difficult situation. Nowadays, companies are trying to be anti-fragile and remain resilient. We talked to Aleksandr Dubrovin, a famous real estate marketing expert and marketing director of PNK Group, about how business reality has changed and what marketing tools help companies survive in difficult conditions.

Industrial real estate consists mainly of warehouses, production buildings, logistics, and distribution centers. These industrial facilities are often combined into industrial parks, occupying several million square meters. Currently, the largest industrial park in Russia is the PNK Group, with an area of 2.9 million square meters.

Marketing innovator Aleksandr Dubrovin began working in real estate marketing in 2017 when the company expressed ambitious plans. An innovative marketing strategy led to rapid business development in just a few years. By 2020, the company had strengthened and taken a stable place among the country's leaders in developing industrial real estate. In addition, the pandemic has been another growth driver.

Beginning in the spring of 2020, malls and stores began operating on a limited basis. Still, consumers' need to shop for home goods, clothing, cosmetics, and more did not disappear, and it caused a rapid shift of business online. Market participants were forced to quickly adapt to the new conditions and focus on online sales. There was a noticeable increase in the activity of marketplaces, which actively used premises as warehouses.

Developers were forced to adapt quickly to the new reality to meet the growing demand. They adjusted their promotion and market positioning strategy to meet the new requirements. For example, the company where Aleksandr worked had a large portfolio of land plots, and they offered clients construction along with demand: if they had a potential client for a particular location, they would start a gradual development of an industrial park.

The industrial real estate market showed a very low vacancy rate, i.e., the share of vacant space of less than 1%, which indicates a shortage and a heavy space workload. The average vacancy rate for Class A warehouse complexes is 4-5%. The pandemic has greatly accelerated the development of online commerce, and even after two years, this market continues to grow. Commercial real estate marketing specialist Dubrovin Aleksandr says that developers play an important role by building a framework for this industry, where their goods are stored in warehouses and then assembled and shipped to customers on online orders. It wasn't until the middle of this year that the vacancy rate began to return to normal levels, with tenants able to choose the right space.

February events of this year influenced the demand for industrial real estate. On the one hand, a number of foreign companies left the Russian market, which freed some of the space they were renting. On the other hand, many Russian companies have frozen in anticipation, without any understanding of how the market will change in the future. Some tenants announced their departure or moved to the sublease market, but over time, the panic subsided, and most of them stayed and continued their business.

Currently, the vacancy rate for Class A industrial real estate has dropped to a few percent. Second, because of the significant decline in new construction deals this year, tenants are limited in their choices and have fewer options. In addition, because of the uncertainty in the market, companies are in no hurry to order new buildings, resulting in a stagnant market.