The Czech industrial real estate market grew faster in the first quarter of this year than in previous periods and stopped just below 10 million m2. "Already in the last quarter, we witnessed a record number of new premises delivered to the Czech market. 22 new buildings were completed, adding 306,600 m2 to the market. The result is a 71% increase in the volume of newly completed premises compared to the five-year average and even a 106% increase year-on-year, ”says Josef Stanko, an analyst at Colliers. Given the fact that most projects have been forced to postpone completion due to supply chain problems, this number is surprisingly high. The volume of construction in the Czech Republic is finally beginning to satisfy the hunger for new premises. Most new projects were completed in the Moravian-Silesian Region, followed by the Pilsen Region and the wider Prague area.
Vacancy and rental prices have risen
Despite high demand, industrial vacancy rose slightly in the first quarter of this year, by 47 basis points to 1.76%. Its highest rate is currently in the Olomouc and Pilsen regions, the lowest traditionally around Prague and Brno. Even a large number of new completed projects did not reverse the sharp increase in rents in most of the Czech Republic. The highest achieved rent is traditionally in Prague, where it is around 6.40 euros per m2 per month, but in some areas it climbs up to 8 euros per m2 per month. Rents also rose in other regions, where they average around 5.20 euros per m2 per month. Service fees are in the range of 0.65 to 1 euro per m2 per month.
Logistics and production predominated in demand
Gross realized demand reached a total of 724,300 m2 in the first quarter of this year, almost equaling the record value from the beginning of last year. Although net realized demand increased year-on-year, it decreased by 15% quarter-on-quarter and reached 384,100 m2. Renegotiations followed the largest demand, followed by pre-leases and new leases. The largest activity was recorded in Prague and in the Pilsen region. The composition of realized demand in this quarter was dominated by logistics and manufacturing companies, the share of e-commerce decreased compared to last year. "The biggest surprise for us are companies from the automotive industry, whose realized demand increased by 147% year-on-year. During the first quarter, these companies already leased 69% of the total realized demand that this sector reported for the entire previous year, "says Josef Stanko, adding:" Although the automotive industry has faltered from the problems caused by the coronavirus pandemic, we expect the effects of the war in Ukraine's supply chains are likely to be felt for the rest of the year. "
Growth will continue, but…
The market of modern industrial and logistics real estate in the Czech Republic will grow rapidly in 2022. "At the end of March 2022, 1.2 million new premises were under construction, and unless there are significant delays, the market will exceed 11 million square meters this year. The market absorbs almost all new premises very quickly and developers are thus increasingly open to speculative construction, ”explains Josef Stanko. However, according to him, the full effects of the crisis in Chinese ports and the war in Ukraine will not manifest themselves until the course of the year and may potentially slow down the pace of construction. Prices of energy and materials will continue to rise, which will be reflected in rising rents. The market will also be affected by the ESG and Green Deal areas. Many large developers are already aware of the pressure from legislation and tenants and are trying to prepare their portfolios in advance. They are looking for alternative energy and electricity sources for their older properties and, due to the lack of building materials, also for recycled materials with a lower carbon footprint, informs Colliers.
