Although many companies are trying to find premises outside the Czech Republic or are suspending their planned expansions, the Czech industrial real estate market is showing the first signs of recovery. “Differences in rents and incentives offered in neighboring markets have deterred many potential clients. As a result, we are increasingly seeing landlords reducing rents and increasing incentives in an effort to increase competitiveness," explains Josef Stanko, director of market research at Colliers.

Market growth has slowed

Despite the better mood in the market, there was still a slight slowdown in the third quarter. The volume of new premises delivered to the market totaled 161,500 m2, and the total market volume grew by 6.4% year-on-year to 12.2 million m2. However, compared to the five-year average of premises delivered to the market during the first nine months of the year, this is a decrease of 29%.

Many projects that were originally supposed to be completed this year will not be put on the market until 2025, and a number of other projects have been preserved in a state close to completion (shell & core). There are currently almost 400,000 m2 under construction awaiting tenants. However, compared to the same period last year, the number of premises that are due to come on the market in the near future is still quite low.

"Although the number of new premises being put on the market does not reach the level of the long-term average, the number of newly planned projects is paradoxically increasing. Currently, approximately 1.4 million m2 is still under construction, and another 2.5 million m2 of planned projects have valid building permits and are awaiting the start of construction," says Josef Stanko.

Vacancy is rising slightly

The vacancy rate rose 33 basis points to 3.11% in the third quarter of 2024. This is the largest vacancy since the end of 2020, but still below pre-Covid levels. While in the past there was a jump in the vacancy rate of newly completed projects with unleased premises, the current increase is more due to the release of existing premises.

"Recently, the number of spaces offered for rent on the market has also been increasing. If we consider these spaces, the actual vacancy rate is around 5%. Another 3% is made up of the aforementioned premises, which are waiting for tenants in a preserved state just before completion. The actual vacancy rate is therefore much closer to the values ​​recorded in other Central European countries," explains Josef Stanko, adding that the official vacancy rate in Poland and Hungary ranges between 8.5-9% and 5% in Slovakia.

Demand is slowly picking up

Gross realized demand reached 355,100 m2 in the third quarter, with a 61% share of net demand (204,000 m2). Pre-leases of vacant spaces under construction continue to dominate.

However, despite the solid results, we expect this year to be significantly weaker overall. Gross realized demand during the first nine months reached 957,100 m2, which is a year-on-year decrease of 16.2%. Net realized demand decreased by 21.7% year-on-year and reached 613,700 m2 (which represents a 64.1% share of total demand). We are observing a slowdown in the market this year across the entire EMEA region.

Most of the companies responsible for the realized demand were from the manufacturing sector (61%). They were followed by logistics and transport companies (23%) and distributors (14%). In this regard, the third quarter of this year was no exception.

The rent is slowly decreasing

According to data from the Industrial Research Forum, rents in the most sought-after areas of the Czech industrial market remain in the range of 7.00 - 7.50 euros/m2/month. "According to the latest market information, these values ​​are starting to gradually decrease. This indicates that the limited supply of new premises in combination with cheaper foreign competition and cheaper older premises is slowly starting to push prices down on the Czech market," concludes Josef Stanko. According to him, the strengthened negotiating position of the demand side can also be seen in increasingly favorable rent incentives.