Lviv's $150 million IT park
Ukraine’s unofficial western capital of Lviv, the city of 730,000 people more than 500 kilometers west of Kyiv, takes information technology seriously. With talented Ukrainian graduates increasingly pursuing work abroad, and tech businesses in the city facing a real estate squeeze, IT companies in the city have unveiled an ambitious solution to attract and keep tech businesses.
That project is Lviv IT Park — a 10-hectares office park worth $150 million, under construction, according to its website, about five kilometers from downtown Lviv.
Intended specifically for IT firms, the park is the result of cooperation between Lviv IT Cluster, an association of tech companies that advocate for economic and social change. Designed with programmers in mind, it’s meant not just to remedy Lviv’s perennial office space shortage, but also to offer social perks and community to tech workers in the city.
Shrinking office space
Locals have been vocal about Lviv’s underdeveloped business infrastructure for several years, describing most of the office space as “outdated.”
And, says Nick Cotton, a Kyiv-based real estate agent, offices aren’t just old, they’re scarce: demand increases
every year, while new construction has stagnated owing to Ukraine’s exorbitant interest rates on credit.
Scarce, bad offices have helped fuel the brain drain, say Lviv locals. IT companies in particular feel the squeeze: an average tech startup grows by about 20 percent a year, according to Lviv IT Cluster.
Despite this, Lviv authorities were reluctant to provide a strategic solution. So Lviv IT Cluster took the matter into its own hands, said the head of the cluster Stephan Veselovsky to the Kyiv Post.
“Real estate market was stagnating, construction companies didn't want to invest money into projects with long returns,” Veselovsky said. So he decided to do something about it. The first step was to survey Lviv IT Cluster members — 60 tech firms with nearly 10,000 employees –to understand the real demands for office space.
This eventually lead Veselovsky to hire a construction consultancy firm to come up with the project: a massive industrial park called the Innovation District IT Park.
Attracting investment Lviv IT Cluster presented the idea of the innovation park in 2016 during the Lviv IT Jazz Conference and Lviv IT Arena, important annual tech-related events in the city. Investors immediately were interested, says Veselovsky, especially as dozens of companies vouched for the project, promising to occupy offices once it was built.
Property development company Galereja Centre, directed by Volodymyr Zhenchak, who earlier had built the Forum Lviv mall, was the first to back the project. Later, there appeared several other investors, but Veselovsky is not willing to disclose their names yet.
To Zhenchak, who is overseeing the construction site, the project is important for its social impact. A mall or residential building would bring money in much faster, but this one, he says, will bring longer-term profit to Ukaine.
“This project is a social one, it is important for the future of Lviv and Ukraine,” Zhenchak told the Kyiv Post. “Everyone supports tech industry around the globe for it to moves countries further in their technological development (and so should Ukraine).”
That said, Zhechank expects the project to be solidly profitable, given the city’s need for office space.
“There’s a demand in Lviv for such premises and nobody else seems to be eager to fulfill it,” he said. “So I will.”
Social benefits The IT park is to be constructed south of Lviv at Ivana Chmoly Street. It will break ground on June 30, and its first stage is slated to be completed by 2020.
The list of amenities includes impressive social infrastructure. In addition to 100,000 square meters of office space in six office buildings, and two business centers, it will have a sports and shopping centers, a kindergarten, and a university campus belonging to Ukrainian Catholic University for tech-related courses.
Right now Lviv IT Cluster does not disclose the price of a square meter. But Veselovsky says 70 percent of all planned rent space is already occupied. There are 12 tech firms, including Softserve, N-IX, and Global Logic, all which have signed a contract with the IT Park.
Softserve’s Board Member Taras Kytsmey sees the IT Park as “a platform that creates synergy between computer companies.”
He says the park offers plenty of conveniences, and Softserve’s employees would love to work in a place like this — with kindergartens and supermarkets nearby.
Besides, Kytsmey says that there is a positive effect having a university nearby since both companies and students will benefit.
“Companies will be able to compete for the best
students, and the students themselves will be able to start their careers at the country’s best tech firms, right after their graduation,” Kytsmey said.
The IT park is a project with a business model that is expected to generate revenue. But the IT Cluster does not own any equity.
Rather, says Veselovsky, it serves strictly as an evangelist for the project’s development and a bridge between construction companies and tech business.
If the project is successful, says Veselovsky, it will improve Ukraine’s business reputation. The Kyiv Post’s technology coverage is sponsored by Ciklum and NIX Solutions. The content is independent of the donors.
A model of IT Park, which will offer 100,000 square meters of office space in Lviv by 2020. This real estate project is specifically designed for tech companies. (Courtesy)
Stephan Veselovsky, the CEO of Lviv IT Cluster, talks with journalists, presents the model of a real estate project, IT Park, at a tech conference in Lviv in June 2017. (Coutresy)
Lviv IT Park will include a university campus belonging to Ukrainian Catholic University for tech-related courses.