by Property Forum | Report

JLL´s Czech Supply Chain Activity Index marks further strong growth in Q3 2017, supporting continued robust occupier demand. The Index rose by 1.1% in Q3 2017, significantly above its long-term trend. As such, it maintained the strong growth patterns seen over the past three quarters.


Warehouse take-up in the Czech Republic in Q3 2017 remained above its long-term trend as well, pushing the Q1-Q3 aggregate take-up 14% higher y-o-y. This confirms the warehousing demand has maintained its strong momentum, with quarterly change mainly driven by the usual market volatility.
 
The Index’s Q3 growth was supported by robust growth rates in both GDP and trade in goods in the Czech Republic. Economic sentiment and retail confidence also made positive contributions to the Index's growth over the quarter, both remaining significantly above their respective long-term average.
 
Expected record values of realized demand
 
Looking ahead, the Index should record further gains over the next six months, albeit at a slower quarterly rate of growth of between 0.5% and 0.6%. The slowdown in the pace of quarterly expansion is the result of an expected slight moderation in both GDP and trade growth, albeit both will continue to make healthy gains. Meanwhile, economic sentiment and retail confidence are seen to remain at current levels over the next two quarters. The Index forecasts warehousing take-up to accelerate in the final quarter of 2017. This could total 2017 take-up levels to around 700,000 sq m, ending the year at near record levels.
 
"The continued index growth in Q1 2018 shows the continuing strong demand from the tenants for the next year as well. According to the forecast, it is likely to reach values higher than its five-year average," said Blanka Vačkova, Head of JLL Research Department.
 
JLL’s market analysis confirms continued high warehousing demand driven by the need to implement new operation modals including further rising online fulfilment. Indeed, there is no indication the combination of growth and change in the market to slow down any time soon. A continued robust level of speculative developments in the market should help to facilitate the conversion of the implied demand into actual take-up.
 
Attractive market for investors
 
Investor appetite for Czech industrial and logistics assets will remain robust. Transaction activity remained healthy over the first three quarters of 2017. Considering market fundamentals are expected to remain buoyant and a continued strong flow of new modern facilities added to the market, the Czech Republic is set to remain a market highly favourable for investors.
 
"Occupier activity in the year so far remained in line with our expectations. Indeed, we remain optimistic to end 2017 ahead on the strong 2016. Looking ahead to 2018, we expect the occupier side to remain under pressure to future-proof their warehousing operations, in particular building increasing capacity for rising online fulfilment activity. This should keep warehousing demand on continued robust levels," said Harry Bannatyne, Lead Director, CEE Industrial and Logistics at JLL.