When we talk about businesses that move to free economic zones, we imagine large greenfield investments and spacious production or logistics buildings, but in reality, the advantages of the FEZ are increasingly appreciated by the companies that do not require a large space for their operations. As the example of Kaunas FEZ shows, the choice of such companies is greatly influenced by synergy with other businesses already operating in the area, extremely convenient transportation and, of course, the tax relief.
Drawn by the neighboring technology industry and the airport
UAB SKYCO AE, a design and production company focused on aeronautical products, became one of such settlers representing smaller businesses in the Kaunas FEZ.
The company specializes in design, prototyping and manufacturing services and has a wide range of production capabilities, including the production of metal, composite, plastic products in accordance with aviation quality standards. So, it is no coincidence that when talking about moving to the Kaunas FEZ, the company representatives mention the Kaunas airport – located right next to it – as the first thing that attracted them.
“When we were looking for a new location for our development and further growth, we turned to Kaunas FEZ for several reasons. First of all, it was about the opportunity to make use of such FEZ advantages as well-developed infrastructure and tax benefits. But equally important for us was the neighborhood of potential partners and the concentration of minds in one place. In our field, we often have to use the services of specialized companies for processes that would be uneconomical to develop in-house, so the neighborhood of the technology industry is extremely useful for saving time and other resources. The location of FEZ, which is strategic for our industry, had a great influence on our choice. We settled next to Kaunas airport, where the largest aircraft maintenance companies are concentrated. And this means that better opportunities for cooperation open up. Finally, Kaunas FEZ has a really good transport system, and this facilitates the commute of our employees, suppliers, and customers,” Gytis Leonavičius, director of SKYCO AE, names the reasons for choosing Kaunas FEZ.
In addition to collaborating with the neighboring business, the company builds close partnerships with higher education institutions. This spring, it started cooperating with the Kaunas University of Technology (KTU). The company accepts interns, and it suggests topics for coursework and final theses, trying to ensure that the topics correspond to what is currently relevant in the industry and making sure that the projects are developed toward their practical application.
Since aircraft design/production is inseparable from scientific research and experiments, SKYCO AE joins the ranks of companies focusing on R&D activities in the Kaunas FEZ.
“If one direction of our activity – the design and production of commercial aircraft components – requires applied research, calculations, and tests in certified laboratories, then the other direction – experimental light aircraft projects – requires wider scientific and technical research and experimental work (in aerodynamics, strength of composites and technologies, electric and EDF-type power plants and other areas),” Gytis Leonavičius explains. The company that he leads is determined not only to expand Lithuania’s aircraft design and production capacities in accordance with European standards but also to raise the qualifications of aviation specialists and contribute to turning Lithuania into a North/Eastern European aviation center.
Inspired by foreign colleagues
Changes in another company operating in the Kaunas FEZ – UAB Timbela & Ko – were dictated by the pandemic period. Having worked for many years as a wholesaler of wood products for the garden, home, or homestead, the company faced a decrease in sales at the supermarkets during the pandemic, so it had to look for ways to reach the end user and sell products to them directly.
“That’s how we discovered the path to online commerce, and it proved very successful. In 2020 our sales grew by 73 percent and in 2021 by 93 percent,” Vilius Grigaitis, the CEO of the company, says.
Such a drastic increase in sales forced the company to look for new premises as the number of employees, whose comfortable working conditions had to be ensured, also grew.
“For many years, while driving past the Kaunas FEZ, I kept noticing its rapid growth. While visiting business partners in various countries, I noticed that many of them were also located in business zones that allow industry and warehouses to be effectively separated from residential areas. So, when we started looking for a place to expand, it is not surprising that our eyes turned to the Kaunas FEZ. When choosing the office, the focus was on good working conditions, convenient communication and road network, and sufficient parking space for employees’ vehicles. In 2020, we rented office premises in Kaunas FEZ and when the opportunity arose, we bought one of the offices with a warehouse,” V. Grigaitis says.
Currently, Timbela & Ko focuses on DIY-type assembled products that can be conveniently transported to any country and assembled by the user according to the manufacturer’s instructions.
They place a great emphasis on sustainability. The company uses the FSC® certified Scandinavian timber, which, during the production process, due to very effective engineering solutions, barely leaves any waste. This allows the company to operate sustainably and also to offer competitive prices to its customers.
The product range includes more than 200 different types and sizes of wooden garden or children’s playhouses, woodsheds, containers, storerooms, and other products. 92 percent of the Lithuanian company’s products are exported to Europe (mostly France, Germany and Austria, as well as Italy, Spain, etc.).
An attractive real estate investment
REES, the real estate development and consulting company implementing the FEZ business park project, provides such companies as Timbela & Ko with an opportunity to purchase a business facility, which was implemented as a Build-to-Suit real estate. The company had the idea to develop such business-oriented objects after observing the need that was stemming from the market. As the representatives of the company have said, it is easier for businesses to purchase or rent ~800 – 1,000 m2 premises than the smaller ones of ~300-600 m2. Therefore, it was decided to offer a rational solution – high-quality representative buildings built in a strategically convenient location with convenient transportation and a well-developed and reliably maintained infrastructure.
After the implementation of the first phase of the Kaunas FEZ, a total of five buildings of approximately 600 square meters were built, which can accommodate 8 companies. In the planned second phase of this project, the total area of the buildings that will be constructed will amount to 24 000 m2.
The buyers of REES’s first-stage properties consist of both businesses focused on development and companies that invest in and rent real estate. For example, Adampolis Group is one of the largest groups of companies in Lithuania that sells, rents, and services commercial and non-commercial transport and special technology. In addition to the main activities, one of the companies of the Adamopolis Group works in real estate development. The projects under development are fully customer-oriented, as new real estate is built according to the customer’s needs and then rented. In total, this company owns 3 buildings with a total area of 1,500 m2 in the territory of Kaunas FEZ and all of it is leased.
According to the representatives of Adampolis Group, one of the most important factors that encouraged investment in the Kaunas FEZ was the opportunity to quickly find tenants, and tax reliefs that are given only in the free economic zones. Since the buildings managed by the Adampolis Group are intended for rent, these advantages also attract the attention of future tenants.
Until today, Kaunas FEZ has attracted 53 foreign and local investors who apply advanced technological solutions and create innovative products. From the first investor in 2005, until today, more than 7,800 jobs have been created in the territory of Kaunas FEZ and more than 1.2 billion euros of direct investments have been attracted.