Production returns to Europe: pandemic opened an extraordinary opportunity for Lithuania

In turn, the head of the Klaipeda Free Economic Zone, Eimantas Kiudulas, says that the aspiration of Western producers to return production to closer regions is an extraordinary opportunity for Lithuania.

“We have great talent, infrastructure, political and fiscal stability and, most importantly, a strong ecosystem, a community, and successful cases of Western investors already operating here,” he said.

However, the pandemic did not sow optimism in all logistics companies. As Gintaras Juocys, a Westtransit representative, informed Delfi, they planned to reach 7,000 in Klaipeda. Construction of a square meter warehouse has been suspended until now.

“Due to the pandemic, we are freezing investment in the construction of the warehouse. Postponed to next year,” he said.

Last year he was especially active

Audrius Šapoka, General Manager of real estate agency Ober-Haus, said 2019 was very active in the development of storage facilities.

“In the Vilnius, Kaunas and Klaipėda regions, in 2019, 7 projects (stages) of various purposes were completed, in which 93.8 thousand. kv. m of storage space for construction. This is almost as much as it was built in 2018 and 19 percent. more compared to 2017, “he said.

A. Šapoka taught that in early 2020, it was planned to build at least 4 new larger storage buildings in the Vilnius region, of which about 47 thousand. kv. m of storage space.

“Until now, after the quarantine, we have seen no signs that the construction of these projects is suspended or is not implemented,” he said.

According to the latest comment from the Ober-Haus commercial property market, the projects in Vilnius are implemented by Transekspedicija, Baltic Sea Properties and Lietuvos Paštas.

No new projects are planned in Kaunas in 2020, and in Klaipeda Stonus Invest (Vlantana), Retal Baltic, V. announced plans to develop storage projects. Paulius & Associates Real Estate (Baltic Logistics Center), Telmento transportas, Transnest, Westtransit, Gedlito transportas and Vingės logistika.

“Despite the low level of vacancies in modern storage facilities, which in 2019 in the Vilnius region increased by 3.9 percent. “Up to 4.1%, developers rarely begin construction of new projects without prior agreements with tenants for at least part of the facility, therefore, it appears that this year there should be no change to this new storage offering.” A. Šapoka commented.

He also said that he has not yet registered significant changes in storage prices.

“However, it is difficult to see the growth prospects. In Vilnius, newly built storage premises are offered for rent for 4-5 euros per m2. M, and the old one – for 1.9–3.5 euros / sq. M. Meter New warehouses in Kaunas – 3.5–5 euros / m2. M, old – up to 3.5 euros / sq. M. M, and new warehouses in Klaipeda – 3.5–5 euros / sq. M. M, old – up to 3 , 3 euros / sq. M. M “, – called A. Šapoka.

Going forward

Vaida Budrienė, Head of the Department of Corporate Affairs of the Lithuanian Post, said the completion of the construction of the Vilnius Logistics Center had already been announced.

“We are moving fast with the project. The installation of the equipment is currently beginning. Currently, more than 8 million have been invested in the logistics center. The total investment will be 24 million euros. Euros Activities in the new logistics center will begin this fall, and fully automated distribution for the whole of Lithuania will already take place in the first half of 2021, ”he said.

A spokeswoman for the state-owned company also said that construction work on the new logistics center had not stopped during the quarantine.

“On the contrary, everything happens much faster than planned. The first conveyor, currently installed, is designed for the distribution of light shipments (up to 5 kilograms), which will be able to distribute more than 10,000 packages per hour: 6 are required full-time employees to manually distribute such packages.

The logistics center environment was also managed: a guarded parking lot for service vehicles and employees was placed, the Lithuanian logo was hung on the building, two electric car charging stations were installed and two electric minibuses are currently being purchased. “V. Budrienė said.

The projects are not abandoned.

Unlike the aforementioned Westtransit, Klaipėda’s company, Vingės Logistika, does not abandon the storage area development projects approved and started last year.

“The plans to duplicate our area in Klaipeda FEZ in various stages have not changed,” Algimantas Bluškis, director of the company, told Delfi.

He said the virus outbreak had slowed down or even stopped some of the procedural work on the project, but now everything is moving at full speed again and continuing.

“Some of the first work on this project should start in the near future. We intend to start major and major construction works this year, as soon as the construction permit document is received in accordance with the agreed project.

Despite the pandemic, we see many positive signs in the logistics market, including the increased demand for online commerce, the rapid movement of goods in warehouses after the necessary preparation.

The need for additional storage space increased during the pandemic not only in the western markets, which was more pronounced in the German market, but also in Lithuania. We also expect and forecast a fairly rapid recovery in the same Russian market. For these reasons, in the face of a pandemic, we have not stopped our investment plans and we are planning development, ”he explained.

Transnest also continues to carry out the work. The company’s CEO Alexander Troitskiy said that his planned object has several functions: metal processing and storage.

“So we take the internal adjustment and design procedures related to the selection of production equipment. The municipality made the adjustments on time, despite the more complex teleworking environment. The building’s zero cycle works have begun, the reconstruction of the railway branch is underway, we hope to complete the construction works in the second half of 2021.

The building will meet our needs, so we believe in our future “child’s” job prospect, “he said.

Shorten supply chains

There are seven free economic zones in Lithuania: Akmenė, Kaunas, Kėdainiai, Klaipėda, Marijampolė, Panevėžys and Šiauliai.

They were unevenly affected by the coronavirus pandemic. For example, according to Birutė Navickienė, Deputy Head of Akmen District Municipality’s Investment and Project Management Division, no new storage projects appeared with them.

At that time, Klaipeda FEZ signed a contract with a new client during quarantine. “Its development was dictated by the decision of a previous client in Scandinavia to return the production of certain components from China to Europe and specifically to Klaipeda. It is true that we will publish more details about this client in the coming weeks,” said E. Kiudulas, director of Klaipėda FEZ.

He commented that in the years leading up to the COVID-19 pandemic, there was a mood among Western companies to move production from East or Southeast Asia closer to “home.”

“There are many reasons for this, such as accelerating product development, supply and life cycles, cultural similarities and differences, and changes in costs. This trend undoubtedly became even more pronounced during the pandemic, Kiudul said. – Regarding the logistics sector, it is worth analyzing its main clients: manufacturing and commercial companies.

It is obvious that Lithuania’s transport and logistics sector would win for almost all new established manufacturers in the country, but the volume and investments in the production area will be determined not only by Lithuania’s efforts to attract investment, but also by global economic trends and consumer expectations. “

According to E. Kiudulis, the commercial sector has experienced extraordinary months.

“For some, they meant large flows of buyers, while others faced consumer anxiety and uncertainty. In both cases, smooth and efficient logistics is of great importance, both in handling large volumes and in achieving efficiency.

I believe that, excluding situations where same-day or few-hour delivery is necessary, the Lithuanian logistics sector has good export potential. Part of the logistics is not only the “storage of goods”, but a whole range of auxiliary services, such as the assembly (or assembly) of final goods from components supplied by different manufacturers, packaging, marking, customs services, etc. . Lithuania’s logistics specialists have excellent experience on these issues, so I am confident that they can export their services, first of all, to Scandinavia, Northern and Central Europe, “said the head of Klaipėda FEZ.

See new opportunities

T. Rauckis, director of Ad Rem Lez, said that during the pandemic, the market for warehousing, third-party logistics services (3PL), or customs warehousing services declined in parallel with the commerce and manufacturing sectors.

“When most of the physical outlets were closed and producers were forced to reduce or even stop production entirely. Growth was only sustained by e-commerce, but its counterweight was not as strong and uncertainty about future prospects forced end buyers to refrain from more expensive purchases, “he said.

Mr. Rauckis said that although 3PL or eCommerce required approximately 2-3 times more warehouse space, no development was currently planned.

“However, we are actively analyzing the market and seeing new opportunities in the Western European or Scandinavian markets. The need for customers to be closer to local markets, have higher inventory levels, reduce costs and shorten times. -term delivery services can benefit the warehousing logistics market and adjust our development plans in a positive direction.The warehousing services market in western Lithuania has its own specifics and relies mainly on cargo transportation through the port. Klaipeda, ferry connections to neighboring markets, so we would appreciate it increase, “he said.

Ad Rem Lez chief also said he had started a successful partnership with a large Swedish retailer a few years ago.

“At Klaipeda, we collect and prepare all the products for the company’s customers, which in less than a day we deliver by sea to the local courier service, which already performs the” last mile “delivery to the final buyer’s headquarters.

We believe that flexibility has become extremely important for the commercial sector in northern and western Europe today, that is. and. the ability to work without strict obligations, pay according to the fact of actual work, the ability to integrate information technology systems. All this can be perfectly ensured by the logistics sector in our country, which is not inferior to the logistics specialists of Western Europe, and which often even exceeds its flexibility and competencies, “said T. Rauckis.

Giedrius Valuckas, representing Šiauliai and Kėdainiai FEZ, is seeing new opportunities.

“Because Lithuania is in the role of a ‘growing economy’, each crisis opens up new opportunities,” he said. – After the supply divisions of international companies “get out of the comfort zones,” Lithuanian entrepreneurs have greater opportunities to bid and sign contracts. “

According to the interviewee, due to digitization and robotization, investments in fixed assets are gaining importance.

“Therefore, a nearshoring trend is emerging, opening opportunities for Lithuania to attract new new investments from companies relocating China’s production capacity.

Furthermore, Lithuanian entrepreneurs and the investment environment have the opportunity to attract new clients in terms of production projects and investment projects not only due to the prevailing pandemic situation, but also due to continuous trade wars, as companies International companies are shortening and diversifying supply chains. delivery terms, “Valuck said.

However, according to him, the biggest problem is the reputation and image of Lithuania.

“For Lithuanians, it is difficult to persuade us even to evaluate ourselves as potential representatives of the supply chain or partners in investment projects, and crisis situations like this help to get us to the top of the list.

The general situation in the industry is such that with existing customers in many areas of the engineering industry, orders are reduced but the potential increases with potential new customer orders. Our advantage is flexibility and speed to reorient production capabilities, services and markets, therefore those companies that can react quickly and correctly accordingly will do well in the future, “predicted G. Valuckas.

Finally, Rokas Krivonis, director of Panevėžys FEZ, said that he does not have any new warehouse projects yet, but instead focuses mainly on production projects, which often have a distribution center.

“The prospects are good, because the pandemic experience has caused many challenges for some companies.” As the time after the pandemic is still short and companies still face internal problems, we hope to receive more attention in the future by establishing storage or distribution centers in Lithuania, which would serve European markets.

We have the majority of opportunities in projects that relocate more operations such as assembly or the like. If there is only storage, we can lose in terms of geography, proximity to markets, because this component can overcome other advantages, “he said.