News Article Czech Republic industrial manufacturing report Savills
by Property Forum | Industrial

Since the second half of 2022, Savills has seen an increase in demand from manufacturing companies for modern warehouse space in the Czech Republic, accounting for 57% of the total space leased in the first quarter of 2023. One of the reasons why demand from this sector is growing is "nearshoring", i.e., the shift of production from Asia back to Europe. During Covid-19, demand was significantly driven by the e-commerce sector, which at its peak in Q3 2021, accounted for up to 62%. However, over the last three quarters, e-commerce activity has declined significantly and, as of Q1 2023, is now at 6%. Given uncertain energy supply and costs, and thanks to government support of renewable energy, demand from this sector is also growing significantly.

"Due to persistently high inflation and the rising cost of living, people are spending less on surplus goods and have partially returned to regular stores, as a result of which demand for warehouse space from the e-commerce sector in the Czech Republic is declining," says Ondřej Míček, Senior Industrial Consultant at Savills. In the long term, Savills expects to see strong demand for warehouses of 10,000 sqm or more, but there aren’t enough of these units on the market in the required timeframe.

"The increase in demand from the manufacturing sector that we are currently seeing can partially be explained by the fragility of supply chains, which was evident during the Covid-19 pandemic and again after the Russian invasion of Ukraine. This is why more manufacturing companies are moving their production back to Europe, to try to be as close to their customers as possible. Another reason may be that environmental aspects are now increasingly being taken into account. We are seeing a significant increase in companies looking for space to store solar panels, heat pumps or wind power components," adds Ondřej Míček.

"Due to decreasing sales, some e-commerce companies no longer need previously let large warehouse space but are still having to pay for it. However, we can solve this situation by letting the space to a new tenant," concludes Ondřej Míček.