The volume of newly delivered space was again below average in the fourth quarter of last year. Only 106,700 m² were delivered to the market, the lowest in the last three years. In total, 517,900 m² were added for the whole of 2024, which is 45% less than last year. The total area of ​​space on the market reached 12.28 million m², which represents a 4.6% increase compared to last year.

Given that many projects planned for this year have been postponed, the development for 2025 looks significantly more positive so far: 870,300 m² is currently scheduled for completion and another 384,700 m² is in shell & core condition - potentially available within 3-6 months. “While the volume of completed space has not reached the long-term average, new construction and other plans for future construction have been on the rise for more than a year,” says Josef Stanko, Head of Market Research at Colliers, noting that there are currently 2.7 million m² of projects with a completed permitting process and 3.2 million m² of potential projects in various stages of permitting, excluding permitted projects. The total potential planned area is therefore currently around 5.9 million m².

Pre-completion space and subleases continue to obscure the true vacancy rate

In Q4, the vacancy rate in the Czech market increased by 3 basis points to 3.13%, ending the year at the highest vacancy level since Q4 2020. “Over the course of the year, subleasing activity was reflected in vacancy rates, which increased the overall vacancy rate. With this in mind, we can estimate that the real vacancy rate in the market would certainly exceed 6%, mainly due to the 3% of vacancy rate in the market “hidden” in shell & core spaces that are almost completed but are waiting to be leased before the completion announcement,” explains Josef Stanko. According to him, the real vacancy rate in the Czech market is therefore much closer to the trend observed across other Central European countries, where the official rates reported by neighboring Central and Eastern European markets were around 8-9% in Poland and around 5% in Slovakia.

Demand: optimism about future developments is justified

In the fourth quarter, gross realized demand was similarly encouraging as in the second quarter, bringing a recovery to a relatively weak year. 438,400 m² were realized, bringing the total volume to almost 1.45 million m². Full-year demand was the lowest since 2018 and was 20% lower than the five-year average. The slowdown is a global trend that has been felt across EMEA. Nevertheless, there is reason for cautious optimism, as net demand represents 61.3% of volume in 2024, broadly in line with the previous five-year trend and showing that new demand continues to dominate the market.

The three largest transactions in the fourth quarter totaled 94,500 sq m. The largest transaction was the pre-lease of a 52,000 sq m building in CTPark Brno to electronics manufacturer Hitachi Energy Czech Republic, followed by a renegotiation of a 21,300 sq m building in Prologis Plzeň II to consumer goods manufacturer VAFO. The third largest transaction was the renegotiation of 21,100 sq m in Prologis Park Prague Airport to an undisclosed distribution company.

Highest achievable rents stabilized at around €7.50

According to the Industrial Research Forum, the highest achievable rents on the Czech industrial market have remained stable at €7.00 - €7.50/month/m2. The highest achievable rents have remained at the same level for three quarters, although we are increasingly seeing the strengthening of tenants' bargaining power, which is reflected in increasingly advantageous incentives offered by landlords across regions. Rents for office extensions range between €9.50 - €12.50/month/m2. Service fees are typically €0.75 - €1.00/month/m2.

The tough times are not over yet, but hope is on the horizon

“Despite the economic uncertainty of the past year, the market continues to show resilience. Although demand is lower than in previous years, investments in infrastructure are expected to reduce logistical obstacles,” predicts Josef Stanko. The Czech industrial sector remains strong, as evidenced by significant investments by large manufacturers, and although competition from neighboring foreign markets is changing the dynamics of supply and tenants and landlords in some regions, the mood in the market is improving after previous pessimism.