Industrial parks have yet to meet their potential

RIGA - An industrial park is typically an area specifically zoned and planned for the purpose of industrial development, such as for offices, warehouses, large-scale production units and industry-oriented facilities. Industry parks carry different names around the world. For instance, in the United Kingdom small industrial parks containing multiple units all of the same type are referred to as ‘trading estates.’ On the other hand, in Hong Kong, where development of industrial parks is on the rise to accommodate the surging economy, they are normally known as ‘industrial estates,’ ‘science parks’ or ‘technology parks.’ As a nod to the eco-movement, which is growing stronger year after year, there are also eco-industrial parks aimed at improving environmental quality while increasing economic value for the occupants.

Slightly different versions of industrial parks which are the most popular in Latvia are business parks, or office parks. Such developments have offices and light industrial facilities rather than heavy manufacturing units. Eco-parks and business parks are normally considered more environmentally-friendly than full-scale industrial parks. Most of the EU-based industrial parks are very versatile. The company rosters range from small firms with a few employees to major divisions of Fortune and Global 500 companies that employ hundreds of professionals.

There are more than a few prerequisites for building a successfully functioning business park. In the United States, where the industrial parks were constructed in large numbers in the 1970s and 1980s, many of the developments currently lie abandoned and empty. The main mistake of the unlucky owners of such parks was the assumption that if the park is built, ‘they’ (the occupants) would come. Faced with the lack of demand and a bleak future ahead, those sites turn into ghost towns doomed to a slow disintegration and decay.

More recently, the global economic crisis and the resulting real estate crush has also hit the business park sector globally as well as in the Baltic States. With many construction projects coming to a halt, and many partially finished sites littering the landscape, the owners of the facilities have much to worry about. However, even under those adverse conditions some industry players are surviving, and even thriving. As Ike Heller, one of the largest private owners of distribution space in the United States puts it, “We focus hard, try to operate within our means and we keep our word. Plain, ordinary, common sense thinking.”

According to the industry experts, industrial or business parks should be located along major transportation routes, feature efficient communications networks, well-planned landscapes and convenient amenities. Several other factors contribute to succeeding on the international level: efficiency of transportation infrastructure, regulatory and institutional frameworks and adequacy of distribution systems. Those who are able to construct efficient sites benefit from attracting various international knowledge-based ventures, as well as major players in telecommunications, optoelectronics, biomedicine, logistics, food, financial and multimedia industries. Latvia has historically positioned itself as a hub between East and West, and the construction of business parks will undoubtedly add value to the strategically beneficial geographic location. Moreover, responsible, sustainable development of business centers creates jobs and benefits the communities around them.

Industrial and business parks are just becoming popular in the Baltic countries, in particular in Latvia. Even though logistics, the essential component of the business center industry,  has historically been an integral part in the composition of Latvian economics (according to Reuters, transit, transport and storage contribute as much as 10 percent of the country’s GDP), there is still a massive untapped potential in the industrial development sector.  Just like most of the business operators in the Baltic States, some industrial centers are currently facing diminishing customer paying capacity which is reflected in dwindling profit margins. Last year market players have been facing some of the most difficult market conditions in the history of the Baltic States. However, there are more than a few success stories.

NP Properties is the largest developer and manager of industrial parks in Latvia that features prominently among the market players. There are currently eight industrial parks with a total area of 150 hectares that are managed in the capital of Latvia – Riga - as well as in Olaine, Jelgava, Salaspils, Rezekne and Daugavpils. According to the company Web site, floor space exceeding 412,000 sq. meters is currently being rented out. NP Properties offers its clients production, storage and office spaces along with developed infrastructure and all the necessary utilities and communications, both in reconstructed industrial buildings and newly developed parks located in different regions of Latvia.

Nordic Industrial Park, one of the first industrial parks built in Latvia, is located in Olaine, which is less than 30 km from Riga. The modern property is situated in astrategically beneficial logistic intersection - on the crossroads of the motorways leading to Vilnius, Tallinn, Moscow and Minsk. The premises are home to over 30 companies employing over 500 people. Recently, NP Properties has completed the construction of a new warehouse and production building complex, considerably expanding the current premises of the Park. Despite the economic hardships faced by many Latvian entrepreneurs, Nordic Industrial Park has made a strategic decision to respond to the strong sustainable demand of its customers by investing 4 million lats (5.7 million euros) in  the construction of a new complex.
Nordic Technological Park, situated in the immediate reach of Riga International Airport as well as Riga sea port,  is comprised of production and storage premises, with a smaller area designated for offices.  

Rezekne Business Park stands at the crossing point of international logistics routes and railway lines between St. Petersburg and Warsaw, as well as Riga and Moscow. Since the quality and accessibility of transportation networks is a top concern for most occupants, this particular business park is well placed for a sustainable development going forward.

Jelgava Business Park is located in the former car factory facilities which have been appropriately remodelled to accommodate various businesses that are currently located there. Recently, Smurfit Kappa Baltic, a division of the Smurfit Kappa Group, opened a new plant there. The Group is operating in 31 countries worldwide and in 2008 netted over 7 billion euros in sales. The presence of such large players in Latvia is important for the development of the country as a logistics powerhouse going forward.

For companies on a fast-track development timetable, NP Properties can be extremely attractive. Among the services provided by the company, there is professional management of the buildings and surrounding areas, comprehensive IT coverage and 24 hour security guards and security systems. Constant innovation and development is pivotal to maintaining leadership status in the business park industry. NP Properties became one of the major pan-Baltic business centers thanks to its world-class information and communications infrastructure, combined with a technologically savvy workforce.

A big advantage of industrial parks in the particular market environment is their ability to offer clients integrated customized solutions to their operational problems and deliver tangible benefits that continue to be a source of competitive advantage for the struggling companies, even in difficult times.