IT companies in Minsk, Belarus are leasing 245k m2 or a third of all available office space in the capital. Moreover, there is a big demand for a modern office space which is already in scarcity. The interesting thing is that IT industry is booming and someone has to solve the supply-demand problem. We at Grupeer are actually looking ahead, that’s why we have scouted lucrative deals for our investors to invest in this promising country and their commercial real estate. This article will explain why IT industry is booming and how we can benefit from it through commercial real estate!
Silicon Valley of the Eastern Europe
Many think that Belarus is an old-fashioned state, or the last dictatorship in Europe. However, it is technologically advanced, the Wall Street Journal even called it a “Silicon Valley of Eastern Europe”. What are the roots of such allegory?
Well, first of all Belarus ranks 2nd in CIS in Doing Business ranking and named 4th in Top Outsourcing destination of 2016 by GSA UK for its skilled and educated workforce.
Belarus is a former Soviet State and some foreign investors are appalled by the political system, however its legal system offers a solid protection for foreign investors. Moreover, it took the direction of innovation- in 2005 the president Alexander Lukashenko signed a decree “On the High Technologies Park”. The Hi-Tech Park, a 123.5-acre heaven for IT companies in Minsk was built in 2011. The president might hold the country it tight hands, but he understood this is a true direction for economic growth and competitiveness, as Belarus is neighboring with such economic heavyweights as Russia and Poland.
For a country of 9.5 million people this was a very important question and everyone knows that such incubators and ecosystems help to boost innovation, offer a creative and productive atmosphere and generate innovative start-ups. Additionally, the Hi-tech park offers tax breaks.
Now, the Hi-tech park has 164 occupants with more than 25,000 employees. It also has own success stories- the Game Stream a Minsk-based company that develops Wargaming Group’s, “World of Tanks.” The game had nearly 12 million monthly active users.
The big success is attraction of foreign companies, that work in Artificial intelligence field from actual Silicon Valley, China, Norway, Israel, UK, Austria, France and Russia. What has contributed to growth, was another decree signed in 2017 by president Lukashenko on “Development of Digital Economy”. The decree aimed to liberate the IT sector even further and boost the development of Blockchain technologies. Some elements from British law were adapted that even has allowed development of “driverless” cars.
The deep roots
Despite the recent rapid development, the IT industry has deep historical roots in Belarus – more than 40 years of scientific research in high-tech fields. Even during the Soviet times Belarus produced highly skilled engineers in informatics and radio electronics. Moreover, the population in Belarus is one of the most educated. Besides that, the quality of Belorussian IT education is known all over the world. The 52 local universities produce 16,000 IT-graduates annually. This is very attractive to world tech giants- they outsource many Belorussian IT specialists. Another competitive advantage is better proficiency in English of Belorussian specialists over Russian. The IT professional in Belarus from the beginning are export oriented and think outside the box. The research shows that per capita income from IT-Services Export in Belarus exceeds that of Russia and Ukraine.
Belorussian (role) models
The efforts didn’t end up seamlessly. The “land of potato” has produced such world known start-ups, that any country could be proud of. The start-up Flo, founded by Belorussian has attracted $18 Mln in funding from Mangrove Capital and Flint Capital. The application is used on Android and iOS, 60% of users live in US and Europe. Another famous start-up Viber – a messaging app was sold to a Japanese investor Rakuten in 2014. In 2016 the pictures and videos filter app MSQRD was acquired by Facebook in a multi million deal. And there are many more! Another notable company, provider of software engineering was founded by Belarus natives in 1993- EPAM. It is currently headquartered in Newton, Pennsylvania, listed on NYSE and has revenues of over $1.4 Billion!
The effects on the property market
Are you convinced yet that Belarus is a promising IT nation?
This has translated to a big deficit of quality office space – types A, B1 and B2 according to research conducted by international property company Colliers International. More than 60% of all available offices space (class A and B1) are occupied by IT companies and the demand keeps rising! Currently, the total gap between demand and supply of office space is estimated to be 110k square meters in Minsk. More than half of the excess demand is attributed to IT companies alone. The problem in Minsk is that even if there are available square meters, they are not concentrated in one place and they are not suitable for the needs of the large IT companies, but are spread between many different locations.
Last year (in 2018) IT companies have leased 42k square meters of prestigious office spaces- that is 70% from total spaced rented out! The biggest tenant of rented offices is before mentioned EPAM Systems, occupying 65k m2 in Minsk, while the second and third places are going to Game Stream and IBA Group respectively. Besides the rental demand for big office spaces or whole building in Business Centers, there is another tendency- a demand for smaller workplaces, as there is a huge growth of small start-ups (5-7) people. These start-ups require offices of around 70-100 m2, while as they grow, they will need a bigger office in the near future.
Grupeer has spotted the trend long before it became apparent by others. That’s why we are placing amazing investment opportunities into projects of the Minsk office spaces. We want to bring our clients the best return from all over the world and hottest trends. So, enjoy and invest away!