Key figures for Q2 2023

• With over 286,000 sqm of new space delivered to the market in Q2 2023, the modern industrial stock reached almost 11.3 million sqm
• Construction of cca. 397,700 sqm commenced, an increase of 138% q-o-q and 75% y-o-y
• Speculatively built industrial space amounted to 39% of the over 1.3 million sqm currently under construction, this number corresponding with the trend of the last few quarters
• Renegotiations accounted for 52% of gross take-up
• The vacancy rate increased by 42 basis points compared to the previous quarter, albeit remaining low at 1.7%
• Prague’s average highest achievable rent has slightly decreased, reaching around €7.50-7.80 per sqm per month

Commentary

Jiří Kristek, Head of the Industrial and Retail Warehousing Team, Cushman & Wakefield said: "The Industrial market is still one with low vacancy – however, this is slowly changing and since Q3 2022, we’ve been witnessing constant growth, up to the current 1.70%. This indicates the sentiment prevailing on the market where we can spot speculative construction as well as a record-high number of premises under construction (1.3 million sqm). Take-up is driven mainly by renegotiations which create more than half of its volume. A major question is the level of prime market rent which is now relatively stable, but some signs of a potential change can be seen, especially from low margin operating tenants. When renegotiating, they face massive rental growth, and therefore are (where applicable) willing to consider relocation to locations with more favourable conditions.”

Total stock & new supply

The modern developer-led warehouse stock in the Czech Republic reached 11.29 million sqm in the second quarter of 2023. A total of 286,600 sqm of new warehouse space was delivered to the market within 19 industrial parks across the country. This represents a 95% increase compared to last year and a 32% q-o-q increase. Approximately 83% of the projects were already pre-leased at the time of completion.

The largest completion in Q2 2023 was a new building in Panattoni Park Pilsen West II (36,400 sqm), which was at the time of completion fully leased to the automotive company Shape Corp. The second-largest completed building was in CTPark Brno Líšeň (34,000 sqm) and was fully leased by multiple tenants. The third largest completion, a building of 21,300 sqm in Prologis Park D1 Ostredek, remained fully vacant upon completion.

Projects under construction

At the end of Q2 2023, approximately 1,340,300 sqm of industrial space was under construction in the Czech Republic, representing an increase of 9% compared to the previous quarter and a 4% increase compared to the same period last year. Almost 25% of the total space under construction is situated in the Karlovy Vary region, followed by the Pilsen region with a 14% share and the South Moravia region with a 12% share. In Q2 2023, construction of industrial buildings with a total area of approximately 397,700 sqm commenced. The share of speculative construction rose again slightly to 39% during the quarter. We expect over 600,000 sqm of warehouse and production space to be completed by the end of 2023, bringing the industrial stock in Czech Republic closer to the 12 million sqm threshold.

Industrial take-up

During Q2 2023, gross take-up, including renegotiations, reached 597,000 sqm. This represents an increase of 73% compared to Q1 2023 figures and a 10% decrease compared to Q2 2022. The share of renegotiations increased by 31 percentage points compared to the last quarter and accounted for 52% of gross take-up. This was greatly affected by the largest deal of the second quarter, a renegotiation of 136,900 sqm.

Net take-up in the second quarter of 2023 totalled 278,800 sqm, an increase of 2% quarter-on-quarter and a decrease of 47% year-on-year. Pre-leases accounted for 34% of gross take-up, keeping below the 3-year average.  

Major leases within take-up

The largest transaction in Q2 2023 was a renegotiation of 136,900 sqm in Prologis Park Prague – Jirny, signed by an undisclosed logistics company. The second-largest transaction was a pre-lease of 57,200 sqm signed by an automotive manufacturing company in Panattoni Park Ostrov – North. The third-largest deal was a renegotiation of 53,300 sqm in CTPark Bor, signed by a company distributing electronics.

Vacancy

In the second quarter of 2023, the vacancy rate in the Czech Republic reached 1.7%, representing an increase of 42 basis points q-o-q and an increase of 43 basis points y-o-y. At the end of Q2 2023, a total of 192,400 sqm of modern industrial space was available on the market for immediate lease. The vacancy in industrial warehouse space in the Prague region and the surrounding area is even more constrained than the national rate, resting at close to 0% since Q2 2021.

Rent

Prime headline rents in the Czech Republic decreased slightly, reaching around €7.50-7.80 sqm/month in Q2 2023. Prime rents in selected prime locations outside of Prague have stabilized, reaching a level of around €5.75-6.50 sqm/month. Rents for mezzanine office space stand between €9.50-12.50 sqm/month. Service charges are typically around €0.75–1.00 sqm/month.