Industrial real estate construction plans in Ukraine already exceed pre-war levels

Following the start of the full-scale Russian aggression, the western regions of the country have become a new hub for the construction of industrial, logistics, and other non-residential real estate.

As a result of the full-scale Russian aggression, industrial construction in Ukraine has predictably decreased, and almost 500 large and medium-sized enterprises have been seriously damaged or destroyed. According to KSE Institute, as of November 2024, direct losses of Ukraine's industrial infrastructure due to the war amounted to $14.4 billion. However, in relatively safe areas of western and central regions of Ukraine, industrial investors have restored activity since 2023.

The indicator of the total area of industrial buildings and warehouses before construction is now 25% higher than the pre-war level of 2021. In other words, investors have significantly increased their plans for the construction of warehouses and industrial real estate, aided by the mass creation of industrial parks.

Restoration of Industrial Construction

Following the start of the full-scale aggression, the commissioning of industrial areas has predictably dropped sharply. According to the results of 2022, the decline was 39% — to 686 thousand sq. m. However, in subsequent periods, recovery began. The indicator of commissioning industrial buildings and warehouses in 2024 increased by 16% compared to 2023 — to 987 thousand sq. m. This is only 12% lower than in the pre-war year of 2021.

It is important to note that construction as a process is stretched on average for a year and more. It involves a long cycle that includes obtaining permits, site preparation, and conducting construction work, and only at the very end — commissioning. This is the final stage, which is characterized by the registration of documents for a specific building. Also, the commissioning indicator of objects partially reflects the favorability of the environment, which allows investors to complete construction.

Regional Aspect

Even before the war, the points for commissioning new industrial real estate shifted from eastern Ukraine toward the west and center of the country. The full-scale aggression only strengthened this trend. Among the leaders in commissioning industrial objects by the results of last year were the Kyiv (31.2%), Lviv (19.1%), Khmelnytskyi (7.2%), Zhytomyr (5.8%), and Vinnytsia (5.5%) regions. The highest growth in the share of the indicator in 2024 compared to the pre-war 2021 was in the following regions:

• Kyiv — up to 31.2% from 23.5%;
• Khmelnytskyi — up to 7.6% from 3.6%;
• Zhytomyr — up to 5.8% from 2.6%.

The boom in the construction of industrial and other non-residential real estate mainly concerns the relatively safe western regions of Ukraine. This is confirmed by the indicator of commissioning hotel objects, which by the results of last year was 36% higher than in the pre-war 2021.

"Currently, Western Ukraine has become a large construction site. We see that active hotel and recreational construction is ongoing in the Carpathians and industrial construction (including in industrial parks) for agro and food enterprises — elevators, various processing plants, etc.," – Vitaliy Prytula, director of the company "Evrometal," previously said in a comment to GMK Center.

Lviv officials are even complaining that almost all industrial park areas in the Lviv region are booked, and there are practically no large free plots left in the region for industrial enterprises.

For understandable reasons, the industrial regions of Donetsk, Luhansk, Kharkiv, and Zaporizhzhia, which were previously leaders, as well as other frontline regions, are currently showing zero indicators of commissioning industrial objects. By the results of last year, the following regions lost their positions compared to 2021:

• Dnipropetrovsk — down to 4.4% from 8%;
• Poltava — down to 1.5% from 4.3%;
• Odesa — down to 1.4% from 3.4%.

Thus, a number of western (Lviv, Khmelnytskyi, Zakarpattia, and Ivano-Frankivsk) and central (Kyiv, Zhytomyr, and Vinnytsia) regions of Ukraine remain attractive for the construction of industrial objects, and in the conditions of war and further relocation, they have been able to grow their industrial potential.

It should be noted that the trend of opening new production facilities in western regions is not new. For example, since the early 2000s, production facilities oriented toward the European market have been opening and expanding in the western part of the country — specifically, cables and other automotive products, and various electrical appliances. Today, many new furniture, building material, and fertilizer production facilities, as well as light and food industries oriented toward the domestic market, are operating there.

Is there an industrial boom?

Currently, we can see an increase in the level of investor interest in launching new industrial and logistics objects already above the pre-war level. The indicator of the total area of industrial buildings and warehouses before construction in January-September 2024 (1.66 million sq. m) was 25% higher compared to the same period in 2021. In other words, current plans for the construction of industrial real estate are higher than pre-war levels. At the same time, the commissioning of industrial areas by the results of last year (987 thousand sq. m) is still 12% lower than the 2021 level (1.12 million sq. m).

Among the large industrial objects commissioned recently, one can note the following:

• Austrian Kronospan launched a new line in the Rivne region worth €200 million for the production of OSB boards.
• A new Philip Morris factory was launched in the Lviv region, with investments amounting to $30 million.
• The French group Saint-Gobain opened its first plant for the production of dry building mixes in the Ivano-Frankivsk region. Investments in production exceeded €11 million.
• In 2024, two biomethane plants began operations in Ukraine: one from the Vitagro group of companies in September, and another from the company "Hals Agro" in November.

Currently, a significant part of new production facilities and warehouses is being built or opened within industrial parks. The leaders in the number of registered industrial parks in 2024 were the western regions: Lviv (6 parks), Zakarpattia (5), and Ivano-Frankivsk (3).

"In Ukraine's industrial parks, as of the end of 2024, 25 plants are being built or have already been built. These are companies in the fields of food production, agro-processing, building materials, woodworking, mechanical engineering, etc. In addition, over 100 thousand sq. m of industrial real estate has been commissioned for relocated and new enterprises," – Valeriy Kyrylyko, CEO of the "Industrial Parks of Ukraine" group of companies, says.

Investment plans look even more grandiose. Among the announced industrial projects, one can note the following:

• "Astarta" is investing $76 million in the construction of a plant in the Khmelnytskyi region for the processing of oilseeds with a capacity of 400 thousand tons per year. Commissioning is planned for 2026.
• In the Ternopil region, construction of a new Knauf plant for the production of gypsum board and dry building mixes is underway. The German company's investment in this project will amount to 150 million.
• Firefighting equipment manufacturer "Pozhmashyna" plans to create a new plant with investments of $15 million in Lviv.

Another 13 plants in industrial parks are at the construction stage. According to Andriy Ropytskyi, director of IP "Bila Tserkva," three plants are currently being built in the park, two of which are for foreign companies, namely the British Unilever (a plant for the production of personal hygiene products) and the Finnish Peikko (capacities for the production of building materials). Another object may be added to this list in the near future.

Despite the war, industrial companies continue to implement their investment plans, although this is happening in the relatively safe western and central regions of Ukraine. It is obvious that investors are acting on the assumption that active hostilities will cease in the foreseeable future.

Yuriy Hryhorenko, GMK Center