The modern developer-led warehouse stock in the Czech Republic has reached 11.70 million sqm. The Industrial Research Forum has announced industrial market figures for Q4 2023.
A total of 271,600 sqm of new warehouse space was delivered to the market within 15 industrial parks across the country. This represents a 56% increase compared to last year and a rise of 49% q-o-q. Approximately 84% of the newly delivered projects were already pre-leased at completion. The current amount of vacant space in the shell and core exceeds the amount of vacant existing space by over 100,000 sqm. As of Q4 2023, there is some 300,000 sqm of vacant space in shell and core, waiting for a suitable tenant.
The most significant completion in Q4 2023 was a new building in CTPark Brno (30,500 sqm) occupied by multiple tenants from 3PL and manufacturing at the time of the completion. The second largest completed building was in Arete Park Rokycany II (29,500 sqm), which was fully leased to Duvenbeck Logistik, a company from 3PL at the time of completion. The third largest completion was in Garbe Park Chomutov (29,100 sqm), which German optics company Fielmann fully leased.
At the end of Q4 2023, approximately 981,200 sqm of industrial space was under construction in the Czech Republic, representing a decrease of 30% compared to the previous quarter and a 20% decrease compared to the same period last year.
Since Q1 2023, the share of speculative space under construction has slowly risen. In Q3 2023, it grew to 41%, but in Q4, it dropped below 30%. At the same time, developers commenced new construction of only 130,500 sqm of modern industrial space in Q4 2023, with over 70% of this space speculative.
During Q4 2023, gross take-up, including renegotiations, reached 396,900 sqm. This represents an increase of 109% compared to Q3 2023 figures and a slight increase of 16% to Q4 2022. The share of renegotiations increased by 17 percentage points compared to the last quarter and accounted for nearly 40% of gross take-up. Net take-up in the fourth quarter of 2023 totalled 242,600 sqm, an increase of 72% quarter-on-quarter and a minor increase of 10% year-on-year. Pre-leases accounted for the largest share of demand, with 47% of total gross take-up.
Overall, both gross and net industrial demand have slowed during 2023. This was expected after the previous strong years, which were supported by several XXL transactions. For the entire year, gross take-up reached 1,520,600 sqm, representing a decrease of 31% compared to 2022 and a reduction of 38% compared to 2021.
The two most significant transactions in Q4 2023 were signed in Karlovy Vary region. The first was in Panattoni Park Karlovy Vary, where Wacker pre-leased over 30,000 sqm. The second lease was also signed with Panattoni in Ostrov South, where an undisclosed company pre-leased nearly 27,000 sqm. The largest renegotiation Yusen Logistics signed this quarter in P3 Prague D1, where they renewed their 24,700 sqm premises.
In the fourth quarter of 2023, the vacancy rate in the Czech Republic reached 1.75%, representing an increase of 34 basis points q-o-q and an increase of 94 basis points y-o-y. At the end of Q4 2023, 205,400 sqm of modern industrial space was available for immediate lease. This is the most significant volume of space available for immediate occupation since Q1 2021 when nearly 270,000 sq m were vacant. Given the enormous volume of space being built, the vacancy rate is particularly susceptible to changes in the delivery of speculative projects currently under development. The vacancy rate in industrial warehouse space in the Prague region and the surrounding area is more constrained than the national rate, which has been stable at close to 0% since Q2 2021.
Prime headline rents in the Czech Republic are stabilised, reaching around €7.50-7.70 sq m/month in Q4 2023. Prime rents in selected prime locations outside of Prague follow a similar development, achieving around €5.70-6.60 sq m/month. The rent for mezzanine office space is between €9.50 and 12.50 sq m/month. Service charges are typically around €0.75–1.00 sq m/month.
Jan Hrivnacky, Head of Industrial Agency at CBRE, comments on the situation on the market: „Currently, we monitor a structural change in demand. The importance of manufacturing companies has been growing with over 40% share on take-up throughout 2022 - 2023, the slowdown in demand from e-commerce and 3PL companies is evident in total numbers which is not surprising as these two sectors are quite connected. Prime rents are currently stable, and we expect only a slight inflation-driven increase next year mainly in the case of new leases as renegotiations are under different rental frameworks. In some competitive regions, we might experience downward pressure on rental levels. There is also a shred of evidence for a slowdown in demand caused by the decision-making of clients due to uncertain economic outlook.”
