The demand for industrial and logistics parks is changing. It will be mainly driven by manufacturing companies, the analysis shows

"There are several reasons for structural changes in demand, including uncertainty regarding further economic developments and geopolitical changes. However, the most important factor is the end of the large-scale expansion of online retailers, who during the covid pandemic demanded a record amount of logistics space in connection with the enormous increase in e-commerce," said Jan Hřivnacký, head of industrial real estate leasing at CBRE. Although online shopping will continue to grow, it will not return to that pace, he said. "Thanks to this, manufacturing companies will come to the fore this year," he said.

In terms of leases "under one roof", 2021 and 2022 are considered record years. During that time, the two largest leases in domestic history were also signed. Specifically, it was 233,700 m2 in Panattoni Park Cheb - 2022, where the tenant is a fashion clothing retailer. And 186,700 m2 in Panattoni Park Kojetín - year 2021, the tenant is the world's largest e-shop originating from the USA. CBRE was the intermediary in both cases. In addition, the lease of the German company Tchibo in Panattoni Park Cheb (year 2021) also exceeded the imaginary threshold of 100,000 m2.

"The results confirm Panattoni's strong position on the industrial development market in the Czech Republic. I am glad that we can build even the biggest and most demanding projects and fulfill the needs and requirements of any clients who need a specific space for their business. If we look at the individual Panattoni Parks and their tenants, it also shows that we can attract really big global brands to the Czech Republic," emphasized Panattoni CEO for the Czech Republic and Slovakia Pavel Sovička.

According to him, the fact that the entire industrial development sector in the Czech Republic is very sustainable compared to the Central European region plays a big role in this. "Thanks to this, we are still an interesting location for investments by companies that have clearly defined goals in this area. Due to the low vacancy rate and limited construction possibilities, we expect a high demand for projects that are at least in an advanced permitting process in the coming years," said Panattoni's director for the Czech Republic and Slovakia. It built the four largest industrial and logistics buildings in the Czech Republic to date.

Logistics, illustrative image. Photo: Wikimedia Commons (CC-BY-SA-4.0)

Anyway, after good years, last year the domestic market experienced a slowdown in demand, which corresponded with similar developments in other European countries. In 2023, demand fell by 36% year-on-year to 938,400 m2 of newly leased space, almost 70% of which was pre-leased. The average size of the newly leased area was 6,300 m2. Eleven leases exceeded 20,000 m2, but no new contracts were concluded for spaces larger than 60,000 m2.

Total leasing activity, including renegotiations, reached 1.53 million square meters last year, which represents a 30% year-on-year decrease. The share of extended existing contracts increased to 42%, compared to 35% in 2022. Starting this year, CBRE experts expect the demand for new premises to be at the level of 800,000 m2, which corresponds to the average of the last ten years before the pandemic.

"We are currently preparing offers mainly for clients focusing on locations with good access to the German and Austrian markets, where there are both large end-use markets and other supply chain networks. For large demands, the height of the building is a very important factor, which allows more efficient use of space and is also related to greater robotization of processes. As a result, we increasingly encounter requests requiring a higher net height of the hall than the standard 10 meters," explains Jan Hřivnacký.

A new phenomenon: Vacancy

Almost 922,000 m2 of new space was completed in 2023, the second best result in tracking history. 87% of these are already occupied, confirming the continued strength of demand. On the other hand, developers responded to its slowdown with more limited construction in subsequent years. Currently, 980,000 m2 are being implemented and only 600,000 m2 are to be approved this year.

Also for that reason, the overall vacancy rate increased slightly at the end of the year. It still remains very low at 1.75%, but it is an increase of 55 basis points year-on-year.

At the same time, a new phenomenon is creeping up on the market in the form of gray vacancy. These are objects in the shell-and-core state, i.e. spaces in the final stage of construction, which, however, are formally considered unfinished by the developers until they find their tenants. It is currently more than 300,000 m2. In addition, the market is struggling with an increasing number of sublets. All of this together may contribute to an increase in the vacancy rate above the still low level of 3% this year.

Rents in premium spaces are currently around 7.55 euros per square meter per month, but large differences are evident between individual regions and between older and new construction. The highest rents can be achieved especially with renegotiations in premium locations. CBRE experts expect increased pressure on new leases