Klaipėda FEZ solutions that increase city’s and Lithuania’s attractiveness for investment

As businesses increasingly compete for the attention of consumers, the ability to move into industrial or office premises at lightning speed and quickly adapt them to their own needs is becoming an important competitive advantage. The Klaipėda Free Economic Zone (FEZ) management company, which noticed this trend some time ago, was quick to take advantage of this insight and focused its attention on a quick launch strategy. The best proof of this is the FlexStart 2 project, completed at the beginning of this year, which is increasing the investment attractiveness not only of Klaipėda but also of Lithuania. INVEGA writes about it in an article in Verslo žinios.

According to Darius Urbonas, Head of Real Estate Project Development at Klaipėda FEZ, the FEZ management company has been developing a quick launch and expansion strategy for almost a decade, which consists of ensuring smooth processes of business settlement in the FEZ territory and taking care of the relevant physical infrastructure.

“Fast and consistent settlement procedures are a key factor influencing the decision of businesses to locate and expand in one or another location. Naturally, a week, a month or two saved in buoyant markets allows users to offer or test new products more quickly, and in quieter times, this allows to streamline operations and prepare for the future. That’s why, back in the middle of the last decade, we noticed the growing need for such infrastructure and decided to invest in pre-prepared, tenant-specific premises that could be adapted to a specific tenant in a short period of time,” says Urbonas.

According to him, the first result of this strategic direction was the completion of the first FlexStart about five years ago, which is a segmented infrastructure of 8,000 sqm for manufacturing, administrative and warehousing activities.

“After leasing the project to foreign investors, we knew we were on the right track, especially as we received international accolades – FlexStart was awarded the world’s first FDI Intelligence Award for quick investor launch. This only served to highlight our speed-oriented strategy – we help businesses get established much faster than elsewhere,” he says.

Responds to the economic interests of both the region and the country

D. Urbonas goes on to say that once the importance of FlexStart in attracting significant investment was established, it was immediately decided to invest in a second similar project. Especially since the success of the first project meant that tenants were interested even before the development of FlexStart 2 had started.

According to him, when looking for potential partners to help realise the vision of FlexStart 2, it was decided to turn to the Public Investment Development Agency (VIPA), which granted a loan of almost EUR 5 million to Klaipėda FEZ.

“One of INVEGA’s functions is to strengthen the strategic development directions of the state and increase Lithuania’s competitive advantage through various financial instruments. Of course, FlexStart projects have a clear business model and a high degree of competitiveness, but the fact that INVEGA can also view them through the lens of Lithuania’s interests helped us to quickly find common ground. In addition, the loan terms offered were more competitive than the alternatives available on the market,” says Urbonas.

He also points out that the granting of this loan has only confirmed the strategy chosen by the company managing the territory almost a decade ago and the financial sustainability of this type of projects.

“The Klaipėda FEZ investor community is a significant part of the coastal and Lithuanian economy. Last year alone, the turnover of all Klaipėda FEZ investors reached EUR 1.76 billion, purchases of goods and services from Lithuanian suppliers exceeded EUR 500 million, and VAT, income and social taxes paid exceeded EUR 100 million. This shows our importance not only in the Klaipėda region, but also at the level of the whole country,” he says.

According to Rūta Mickevičienė, INVEGA’s Head of Private Clients, the FlexStart projects initiated by the Klaipėda FEZ have a great potential, which gives us no doubt about their success.

“FlexStart 2 was the first project we financed under the typical manufacturing building scheme, and it was also the first project to be completed. We are confident that this solution will contribute not only to the prosperity of the Klaipėda FEZ, but also to the strategic interests of the country – increasing Lithuania’s attractiveness to investors and creating the image of a country that is integrating businesses at a very fast pace. And the success of the first projects has led us to finance the third FlexStart building as well, for which we have granted a loan of EUR 5.12 million,” says R. Mickevičienė.

FlexStart 2 – more modern and efficient than the first

According to Urbonas, FlexStart2 is nowadays already enabled as a manufacturing, administrative, warehousing and even commercial infrastructure that can be adapted to the individual tenant’s needs in a matter of weeks or months. He says it is only natural that, with more than five years of experience since the first FlexStart, the second project has been improved even further.

“The development and implementation of FlexStart 2 itself went extremely smoothly, thanks to the smooth, professional and constructive cooperation with INVEGA. We have applied the lessons learned and the second project is more modern, more efficient and more aesthetically pleasing than the first. However, its main function and the value it brings to businesses remains the same – the project creates the conditions for new investors to join our business community at lightning speed, and for existing investors to expand even more quickly,” he emphasises.

The FlexStart 2 building has been fully leased for some time. Among the companies located in the building is UAB Albright Lietuva, a British-based manufacturer of electrical switches, which has been operating in the Klaipėda FEZ since 2007 and has moved its entire soldering activity for electrical contacts to the premises, as well as established a new stamping department. The packaging manufacturer UAB Retal Baltic Films has also already moved into the building, having moved part of the bottle cap production lines to the second FlexStart, thus implementing the expansion plans already envisaged earlier.

However, FlexStart 2 has also attracted new investors, such as Pod Furniture, a furniture manufacturer, and Memel Biotech, a company specialising in research and the production of advanced therapeutic drugs.

“We are extremely pleased with the smooth tenant move-in processes, and internal research shows that the investors themselves feel the same way. Surveys show that absolutely all the businesses operating here would recommend Klaipėda FEZ to their colleagues and business partners, and the overall recommendation index scored 9.4 out of 10 a few years ago,” says Urbonas.

Reliable stepping stone to the market

Agnė Vaitkevičienė, Director of Memel Biotech and Vice President of the Lithuanian Biotechnology Association and one of the companies located in FlexStart 2, also confirms the smooth settlement in the Klaipėda FEZ.

“Our decision to locate in Klaipėda was influenced not only by the excellent conditions offered by the Klaipėda FEZ, but also by the attitude of the company that manages the territory towards cooperation, its well-developed infrastructure, and its ability to attract foreign investments, as we are an American capital company. At present, we have already set up our administrative premises in the Klaipėda FEZ and have adapted them to our work, as well as started the installation of a pharmaceuticals factory, which should be completed by the middle of next year,” says Vaitkevičienė.

According to her, Memel Biotech is the first company that will produce medicines for clinical trials not only in Klaipėda, but also in the whole Baltic region.

“We can see that Klaipėda has untapped potential in the field of biotechnology – Klaipėda University is located here, which is able to prepare talents needed for this field of activity, and Klaipėda FEZ is a very attractive place for foreign investments. We are already seeing a lot of interest in our company, and not only the Klaipėda FEZ, but also other companies and educational institutions operating on the seaside are actively seeking to contribute to our successful launch. This makes us feel even more confident about our move to the port city”, says the company’s director.