Ukraine is in the perfect geographical position to connect Europe and Asia. With trillions of dollars of GDP and a combined population size of almost 300 million, Ukraine’s neighbors present a potentially huge market to be accessed through the country’s roads, waterways and airspace.
While the pandemic took a big bite out of Ukraine’s logistics market, the trends are positive.
Domestically, large retailers and e-merchants are growing, which is creating more demand for warehouse spaces and speedier and more technologically advanced delivery services.
Meanwhile, increased investments and infrastructure spending are paving the way for further growth.
Freight transportation
Cargo turnover on Ukraine’s railways, seas and rivers decreased in 2020, falling by 11.2%, to 600 million tons.
In 2020, Ukraine’s seaports handled 159 million tons of cargo, 0.7% less than in 2019, according to the Seaport Authority of Ukraine. Exports of cargo however increased by 1.5%, to 123 million tons.
In the first three months of 2021, ships transported 1.8 million tons on the Dnipro River, 66% more than in the same period in 2020, according to the River Information Service of Ukraine.
On the other hand, air transport companies increased cargo turnover by 5.2% in 2020.
Warehouses
Developers added around 85,000 square meters of new warehouses and logistics properties around Kyiv last year, according to real estate firm Cushman & Wakefield. In total, the area of the warehouse and logistics property in Kyiv and suburbs surpassed 2 million square meters.
By the end of 2020, vacancy rates increased to about 3%, but at the beginning of 2021, it’s already back down to around 1.8%.
Demand is growing rapidly. Plans to add 75,000 square meters of warehouses in 2022 may not satisfy that demand, but nearly 300,000 square meters are in the pipeline until 2025. Would-be e-merchants and retailers may have to wait.
Delivery services
The demand for delivery soared during the pandemic, and postal services took advantage of the new reality, investing in their growth.
According to Euromonitor International, grocery e-commerce in Ukraine in 2020 increased by 107% compared to last year’s indicators. Several new food delivery services and apps popped up in Ukraine during the pandemic.
State-owned postal service Ukrposhta closed offices in rural areas but invested in a fleet of 500 vehicles to provide the same services to Ukrainians living in remote places.
The European Bank for Reconstruction and Development granted a 63-million-euro loan to Ukrposhta to construct 1,900 mobile post offices, and the construction of three automated sorting centers.
Nova Poshta, Ukraine’s largest private parcel delivery service opened 1,300 new postal offices in January-October 2020.
A customer receives a delivery at one of e-retailer Rozetka’s branches in Kyiv. E-commerce shows no signs of slowing down in Ukraine. The Payoneer Global Seller Index put Ukraine on the list of top 10 countries with the highest year over year e-commerce revenue growth. (Kostyantyn Chernichkin)
Outlook
Record amounts of government spending and investments in infrastructure, both from international financial institutions like the European Bank of Reconstruction and Development, International Finance Corporation and World Bank and investment firms like Dragon Capital are contributing to the overall of Ukraine’s logistic infrastructure.
E-commerce is inching its way towards a boom. Sales volume in the e-commerce realm in Ukraine reached nearly $4 billion, which is 41% higher than in 2019, e-commerce firm EVO Group reported.
Such demand will require further expansion and investment in warehouses and delivery services. As e-commerce demand grows, Ukraine will need better roads to match consumer expectations of short delivery times.
