Support Russia Insider - Go Ad-Free!

German Corporate Titans Forge Ahead With Major Russia Investments

VW bets big on Russian growth, while hyper-retailer Globus secures record-breaking, gigantic plot in surburban Moscow

MORE: Business

This article originally appeared in The Moscow Times

Major German retailer Globus Group, which owns the Globus hypermarket chain in Russia, has leased a 45,000-square-meter plot at an industrial park in the Moscow region.

The company will use the warehouse space at the Kholmogory industrial park as a distribution center, according to real estate firm Jones Lang LaSalle (JLL) which advised Globus on the deal.

It is a record-setting deal for an international grocery retailer on the Russian warehousing market, Pyotr Zaritsky, head of the warehouse and industrial department at JLL, said in a statement last week.

The value of the deal remains confidential, JLL said.

Globus has operated on the Russian market since 2006 and has 10 hypermarkets in Russia. The company plans to open its largest outlet yet in the town of Pushkino in the Moscow region this year.

The Kholmogory industrial park is located 30 kilometers outside Moscow. The total area of the complex is 250,000 square meters.

According to industry analysts polled by the Vedomosti business daily, the 45,000-square-meter lease is the largest deal on the warehouse property market involving a foreign company in two years.

The absolute record belongs to Swedish furniture giant IKEA, which in 2013 leased 71,800 square meters in the Moscow region logistics park Logopark Sever, according to Vedomosti.

A year earlier, German sportswear retailer Adidas leased 65,000 square meters in warehouse complex PNK Chekhov-2 in the Moscow region, Vedomosti reported.

In the first eight months of 2015, eight out of 45 warehouse lease deals in the Moscow region involved foreign companies. In total they rented about 103,000 square meters out of the 460,000 square meters of warehouse space rented out, Vedomosti reported, citing Vyacheslav Kholopov, director for office and warehouse property at real estate consultancy Knight Frank.

This article originally appeared in The Moscow Times. Click here for the Reuters report

Volkswagen AG started production at a newly built engine plant in Russia on Friday, aiming to cement its position in a market which it sees as offering long-term potential despite its recent contraction.

Sited next to Volkswagen's vehicle plant in Russia's car-manufacturing centre Kaluga, 150km south of Moscow, the factory has the capacity to produce 150,000 engines a year. It will make engines for the Polo and Skoda Rapid models that are assembled in Kaluga and will later service the Volkswagen Jetta, Skoda Oktavia and Skoda Yeti models.

"We need to continue and strengthen our partnership (in Russia) despite the current situation," said Volkswagen board member Thomas Schmall. "We are doing everything in our power to strengthen our market position in the long term."

After a decade of annual sales growth in excess of 10 percent, the Russian car industry has been hit hard by an economic crisis caused by lower oil prices and Western sanctions over Moscow's actions in Ukraine.

Domestic car sales have halved from their peaks in 2012-2013, when during some months the country ranked ahead of Germany as Europe's largest car market by sales, and eighth biggest in the world. It now ranks only fifth in Europe and 12th globally.

Russia has sought commitments from foreign carmakers to boost local production and wants 60 percent of manufacturing costs spent domestically by 2020. In return, producers enjoy lower import duties on car components.

Volkswagen announced plans in 2012 to spend around 250 million euros on the engine plant, in line with Russian government targets to equip at least 30 percent of vehicles produced in Russia with locally-made engines by 2016.

Russian sales of the VW brand fell 44 percent year-on-year in the first seven months of this year and the company in March cut jobs and working hours at the Kaluga factory. But it says its investment plans are intact due to the market's longer-term prospects.

Ford Motor Co's Russian venture, Ford Sollers, also opened a $275 million engine plant in Russia this week. General Motors Co, by contrast, quit the market in March, winding up its Opel brand there and shutting its plant in St Petersburg.

Support Russia Insider - Go Ad-Free!
MORE: Business

Our commenting rules: You can say pretty much anything except the F word. If you are abusive, obscene, or a paid troll, we will ban you. Full statement from the Editor, Charles Bausman.