The Czech industrial and logistics market reached the 11 million sqm mark at the end of the first quarter of 2023. It has grown by more than 1 million sqm over the past 12 months. During Q1 2023, a total of 217,900 sqm of new industrial space was completed, representing an increase of 25 % quarter-on-quarter (Q4 2022 vs. Q1 2023). Approximately 1.23 million sqm of industrial space is currently under construction, 34 % of which is being built on a speculative basis. Despite the high volume of new completions, the vacancy rate remains low, at the level of 1.4 %, JLL reports.
“Despite the challenging macroeconomic situation, the Czech industrial market confirmed its strong position in the first quarter of 2023. After a weaker fourth quarter, both net demand and absorption increased, and a majority of projects that are under construction already have pre-secured tenants. Therefore, we do not expect a noticeable increase in vacancy rate this year. The significant growth in rents that we witnessed last year when headline rents grew by 30 % year-on-year, has come to an end. Even so, rents are the highest in market history. The construction of projects that aim for sustainable standards continues. These projects are able to bring their tenants the benefit of energy savings, which is a very welcome factor these days," commented Blanka Vačkova, Head of Research at JLL.
Greater Prague region remains the largest submarket with 31 % of all industrial and warehouse space. However, its share is gradually declining as markets in other regions develop. Five years ago, its share stood at 39 %. Now Prague is followed by the Pilsen region with 15 %, the South Moravian region with 12 % and the Moravian-Silesian region, which is close to 10 %.
In total, 217,900 sqm was completed across 18 industrial parks in Q1 2023. The largest completed projects included: Panattoni Park Cheb South (42,500 sqm), Panattoni Park Chomutov North (39,500 sqm) and CTPark Ostrava Poruba (21,900 sqm). Construction activity in the Czech Republic remains high.
"The volume of projects under construction has been above the one million square meter mark for the sixth quarter in a row. And although the project delivery time is being extended, by the end of the year we expect the completion of another almost 800 000 sqm, which is currently under construction. We see that the appetite of developers to build new projects has not waned over the last few months. And importantly, despite all the challenging economic factors, developers remain positive about the future development of the Czech market. This is particularly evident with the level of speculative construction which accounts for one-third of the projects under construction on the market in Q1 2023," said Lenka Jezberová, Senior Consultant, in the Industrial Leasing Department at Jones Lang LaSalle.
During the first quarter of 2023, approximately 272,900 sqm of new leases were recorded, which is 24% more than the previous quarter, but 25% less than the above-average first quarter of 2022. Excluding undisclosed transactions, net demand was driven mainly by manufacturing companies, accounting for 67% of the volume, followed by 3PL companies with a 19 % share and distribution companies accounting for 11 % of new deals. Pre-leases accounted for the largest share of take-up, accounting for 63 % of the total volume of transactions.
Due to strong demand, the average vacancy rate in the Czech Republic remained at a historically low level of 1.4 %. At the end of Q1 2023, full occupancy was recorded in the regions of Karlovy Vary, Liberec, Pardubice, South Bohemia, Zlín and Vysočina. In Prague and its surroundings, the vacancy rate reached 0.7 %, mainly due to the vacant office components within industrial buildings.
Limited availability of vacant industrial space, strong demand, high construction costs and higher financing costs led to a significant increase in rents in 2022. However, this year rental growth did not continue and remained at €7.50/sqm/month for prime space in Greater Prague. Prime headline rents in the leading regional markets outside Prague stood at €5.00 – 6.75/sqm/month.
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