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 KAZAKHSTAN International Business Magazine №2, 2005
 An Overview of Warehousing in Almaty
An Overview of Warehousing in Almaty
Stanislav Glazkov, Director General of BG Consulting
Until recently, warehousing was the least developed and the most closed segment of the Kazakhstani real estate market. Over the last five years, offices and shopping facilities have been yielding greater returns than warehouses: the capitalisation rate has always exceeded 50% and investors have looked for the most beneficial terms. Yet, since 2004, the investment attractiveness of industrial facilities has been growing due to the lack of vacant land on which to construct "profitable" buildings.
This article analyses recent trends in the warehousing market of Almaty, the major city in our country.
For easy reference, we have divided all Almaty warehouses into three main categories: (1) complexes with buildings of an area exceeding 1,000 square metres and a land plot exceeding 3,000 square metres located in the city centre (within the block of Raymbek, Al Farabi, Dostyk, and Rozybakiyev streets); (2) complexes with buildings of an area exceeding 1,000 square metres and a land plot exceeding 3,000 square metres located outside the city centre; and (3) built-in and freestanding facilities of up to 300 square metres located in the city centre.
In 2004, rents for warehouses began to grow and this trend continues to escalate. As of the end of June 2005, the maximum rate was US$10 per square metre. Incidentally, the quality of offers is most often not taken into account and the main criterion is good location. Table 1 shows that the highest increase in prices (by 77.8%) was for warehouses located outside the city centre. The reason is that, since the mid-2004, most of such facilities in the city centre have been either leased for the long term or sold out, which is why prices in these two categories are almost equal.
The lowest increase in rents (by 37.9%) was for built-in warehouses, due to the market conditions. These facilities bring more profit when used commercially (as offices, salons, or stores), not industrially. Therefore, the owners of small warehouses in the city centre give them a facelift to further lease them out as offices and receive higher rents. Yet, tenants often dislike such offers, which is why this category of facilities is not witnessing a high rise in prices despite the general increase in warehouse rents (by 46.9%).
The supply and demand in the warehousing market are almost balanced, although their patterns differ greatly (Graph 1). For this reason, consumers prefer purchasing necessary facilities to leasing.
The estimated average demand for, and supply of industrial facilities for rent has reached some 20,000 square metres. But, despite the growing supply of warehouses outside the city centre, this pattern is not likely to change because of a significant increase in similar offers from the outskirts of Almaty.
Over the last year and a half, the purchase of warehouses has been the preferred type of deal in this market, because vacant land in the city is a rare offer.
Currently, a square metre in warehouses for sale in Almaty costs from US$400 to US$1,200. Table 2 shows that the major increase in prices (by 37.5%) was for warehouses situated outside the city centre (just as with leasing). In the first half of 2005, the minimum prices in this category stabilised because of increased offerings from nearby suburbs.
The average price per square metre in small warehouses offered in the city centre decreased by 8.3%. Consequently, by the end of June 2005, the prices in this category almost equalled those for large complexes also in the city centre.
A study of the sale market proves that investors are proactive in purchasing warehouses in the centre of Almaty. These facilities are most often not intended to be used as warehouses: the buyers demolish the purchased assets and construct new profit-making buildings such as offices, stores, or housing. Thus, their spending of US$1,200–2,000 per square metre of a built-up area may return some US$15,000-US$18,000 of gross income.
The supply and demand pattern of the warehouse sale market is not similar to that of the leasing one (Graph 2). Yet, we believe this will change before the end of 2005. Small warehouses, including all built-in facilities, in the city centre will rise in class to become commercial real estate, while the demand for large complexes in the centre of Almaty will go down until this category is fully moved to the outskirts.
An analysis of the demand for, and supply of industrial facilities along Raymbek Avenue proves that the aggregate price for old warehouses is lower than that for vacant land offered in this area. The price is often based on the area of a land plot only without counting the value of buildings.
This means that investors do not wish to use old buildings as warehouses. After obtaining the title to land, they demolish the existing facilities and build new, lightweight structures (sheds) that may be used both for storage and as a production area.
Comparisons of prices for old warehouses and vacant land (per unit of land) reveal that the former are lower by about 15%. Thus, it is evident that the sellers and buyers agree on a certain discount, taking into account estimated costs of demolishing old buildings.
Market Trends
Thus, the following trends may be observed in Almaty’s warehousing market:
1) Warehouses, except those attached to shopping and administrative centres, are moved out of the city centre;
2) The prices for old warehouses along Raymbek Avenue are lower than those for vacant land (taking into account demolition costs);
3) Small warehouses in the city centre are likely to be used as commercial facilities.

Table of contents
Kazakhstan’s Power Market  Askhat Ospanov 
What Do People Work for?  Fatima Chapkhaeva 
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