The demand for industrial space has been still below the five-year average in the third quarter of this year, published Colliers in its regular quarterly industrial real estate market report. However, the first signs of market recovery have appeared and the number of concluded contracts has grown slightly.
The total volume of the Czech industrial and warehouse space market grew by 6.4% y/y to 12.2 million sqm, the vacancy rate increased by 33 basis points q/q to 3.11%, and the limited supply of new space (combined with cheaper foreign competition and older space becoming cheaper) started to slowly push prices down.
Although many companies are trying to find space outside the Czech Republic or are suspending their planned expansions, the Czech industrial real estate market is showing the first signs of recovery. "Differences in rents and incentives offered in neighbouring markets have deterred many potential clients. As a result, we are increasingly seeing landlords reducing rents and increasing incentives in an attempt to increase competitiveness," explains Josef Stanko, Director of Market Research at Colliers.
Despite improved market sentiment, there was still a slight downturn in the third quarter. The volume of new space delivered to the market totalled 161,500 sqm. However, compared to the five-year average of space delivered to the market in the first nine months of the year, this represents a 29% decline.
Many projects that were originally due for completion this year will ultimately not come to market until 2025, and several other projects have been booked in a near completion (shell & core) status. There is currently nearly 400,000 sqm of pre-completion space awaiting tenants.
"Although the amount of new space coming onto the market is below the long-term average, the amount of new projects planned is paradoxically increasing. Currently, there is still about 1.4 million sqm under construction and another 2.5 million sqm of planned projects have valid building permits and are waiting for construction to start," says Josef Stanko.
Gross realised demand reached 355,100 sqm in Q3, with a 61% share of net demand (204,000 sqm). Pre-lets of vacant space under construction continue to dominate.
The majority of companies behind the realised demand were from the manufacturing sector (61%), followed by logistics and transport companies (23%) and distributors (14%). In this respect, the third quarter of this year was no exception.
According to Industrial Research Forum data, rents in the most desirable areas of the Czech industrial market remain in the range of €7.00 - 7.50 per sqm/month. "According to the latest information from the market, these values are slowly starting to decrease. This suggests that the limited supply of new space combined with cheaper foreign competition and cheaper older space is slowly starting to push prices lower on the Czech market," Josef Stanko concludes.
