“Despite slightly increasing vacancy rates and low volumes of realized demand in the first quarter of 2024, rental levels in major markets continue to show resilience and no correction towards pre-Covid levels is taking place. The first signs of more competitive rents are appearing on the market, but so far only in specific business cases in areas with generally weaker demand. The main causes of high rents are mostly associated with high interest rates and expected returns. Going forward, we expect vacancy to gradually increase and, unless demand picks up during 2024, we can expect a slight correction in rental costs, but probably not significantly,” said Robert Sgariboldi, Head of Industrial Leasing, iO Partners.
The total offer of industrial premises in the Czech Republic
The total area of modern industrial premises for rent in the Czech Republic reached 11.87 million square meters. A total of 148,100 m2 of warehouse space in 10 industrial parks was delivered to the market. This represents a 32% decrease compared to the same period last year and a 48% decrease compared to the previous quarter. At the time of completion, approximately 89% of the projects were already pre-leased.
The largest industrial hall completed in the first quarter of 2024 was the new building at Panattoni Park Cheb East (60,600 m²), which was fully leased to an undisclosed manufacturing company at the time of completion. The second largest completed project was the extension of Contera Park Ostrava D1 (21,600 m²), which was partially leased to the retail company Sportisimo. The third largest completed project is located in CTPark Ostrava Poruba (11,300 m²) and was leased by pharmaceutical distributor ViaPharma.
Projects under construction
A total of 918,100 m2 of warehouse and manufacturing space was under construction at the end of Q1 2024, a 3% decrease from the previous quarter and a 26% decrease from the same period last year. Almost 35% of the total area under construction is located in the Karlovy Vary Region, followed by Prague and the Central Bohemian Region with a share of 18% and the Pilsen Region with a share of 11%.
The share of speculative construction fell to 25%. During Q1 2024, 138,100 m2 of modern industrial space was under construction, with almost 39% of this space being speculative.
Realized follow-up
Gross realized demand (including renegotiations) reached 160,400 m2 in the past quarter. This represents a significant decrease compared to the previous quarter (-62%) and the same period last year (-53%). The share of renegotiations decreased by 3 percentage points compared to the previous quarter, but still represented the largest share of the total gross realized demand (36%).
Net demand totaled 100,000 sq m in Q1 2024, representing a 60% quarter-on-quarter decline and 63% year-on-year decline. Compared to the five-year quarterly average, this result is 65% lower.
Significant leases within demand
The largest new transaction in the 1st quarter of 2024 was a 29,500 m2 pre-lease in Garbe Park České Budějovice, which was signed by an undisclosed company from the automotive industry. The second largest new transaction was signed in Prologis Park Pilsen-Štěnovice, where an undisclosed logistics company leased a total of 11,800 m2. The third largest new transaction was the pre-lease in CTPark Prague North, which was signed by the logistics company Fulfillment for a total area of 8,400 m2. The largest renegotiation (12,400 m2) in the first quarter was concluded by CzechPak Manufacturing in the CTPark Teplice industrial area.
Vacancy
At the end of the 1st quarter of 2024, the vacancy rate in the Czech Republic reached 2.0%, representing a quarter-on-quarter increase of 28 basis points. Compared to Q1 2023, the vacancy rate increased by 79 basis points. In total, 241,000 m2 of modern industrial premises are currently on the market ready for immediate occupation. This is the largest volume since Q1 2021, when there was almost 270,000 sq m of space available for immediate lease on the market. Vacancy of industrial warehouse spaces in Prague and the Central Bohemia region is lower than the national rate and reached 1.5% at the end of the 1st quarter of 2024.
Rent
The highest achieved rent for industrial and logistics properties (so-called prime headline) in the Czech Republic was stable in the first quarter of 2024 and reached the level of EUR 7.50-7.70/m2/month. In selected locations outside of Prague, rents follow a similar trend, currently at around EUR 5.70-6.60/m2/month. The amount of rent for office buildings reaches 9.50-12.50 EUR/m2/month. The usual amount of service fees is between 0.75-1.00 EUR/m2/month.
