Warehouse prices are starting to correct
Tenants paid half as much for warehouses five years ago than in recent months. The increase in prices affected the whole of Europe, however, in the case of the Czech Republic, the situation was further strengthened by the depletion of available spaces, which logically supported a further increase in their prices.
"The reason why prices hit the ceiling right now is the fact that the current state of dramatic growth threatened the competitiveness of the Czech Republic compared to the falcon states. As it turned out, in some localities the prices were really overheated by excess demand and now they are normalizing. The market has become saturated and we are witnessing price corrections. A rather drastic drop in demand also plays a role, to which landlords are trying to respond," explains Miroslav Kotek, head of the industrial real estate department at Colliers, and adds: "The correction in rental prices is particularly noticeable around Prague, where the best premises reach prices of around €7 per square meter, while in the regions prices stay at around €6."
Short-term rental contracts are a new trend
In the context of the decreasing demand for warehouse space, another key trend is emerging – growing interest in short-term rental contracts. According to Colliers, this trend is due to several factors. First of all, it is economic uncertainty that leads companies to prefer flexibility in order to be able to respond quickly to changing market conditions and minimize risks. Another driver is the problems in the e-commerce sector - the decline in growth and increased costs are forcing companies to reassess their storage capacities and adapt to new needs. Changes in global supply chains and disruptions caused by the pandemic are also contributing to the need for more flexible warehouse solutions so that companies can quickly adapt to fluctuations in the availability of raw materials and products. These factors combine to create an environment in which short-term leases offer the necessary flexibility and adaptability.
"If the tenant demands conditions that differ significantly from the market standard, or are significantly below it, the situation of finding a rental will be significantly more difficult. Developers and owners may not be willing to enter into such contracts even during periods of weaker demand. A shorter lease can logically mean a higher rent or less willingness of the owner to negotiate a discount or the amount of incentives. On the other hand, we note the willingness of landlords to meet potential tenants in other aspects - it can be about furnishing the premises or making the rent more attractive in other ways," adds Miroslav Kotek, adding that by default contracts are concluded for 5 years, but nowadays companies often prefer 3 years .
Future development and competitiveness: The state must also intervene
Going forward, the commercial real estate market, especially in the area of warehouse space, is expected to continue to undergo a gradual price correction. Smaller fluctuations in prices are expected, both upwards and downwards, without drastic changes in the tens of percent. Demand for warehouses will slow down compared to previous strong years, but the need for warehouse and production space will remain stable. In order to ensure the competitiveness of the Czech market, it will be necessary for the state to support further development, for example by adjusting the conditions of employment of foreigners and speeding up the construction of road infrastructure.
“In today's dynamic market environment, it is crucial for companies to plan well in advance and be in constant contact with the market. The ability to make quick decisions and react to new opportunities is essential, because the market changes quickly and opportunities can only be open for a short time," concludes Miroslav Kotek with a recommendation.
