The logistics market has proven to be the most resilient asset class and has seen its importance emerge during and after the COVID-19 pandemic. Still, developers are not standing idly by, they are looking for new horizons, in terms of figures, service quality and creativity. These are some of the conclusions of the panel discussion focusing on the Slovak logistics market at the recently organised Bratislava Property Forum 2024.
Alexandra Gačevičová, Commercial Director, Industrial & Logistics at BHM Group, emphasized the growing importance of this sector: „According to the recent survey among investors, industrial and logistics for the first time surpassed office as the most important asset class. First, we had the pandemic that resulted in the surge of e-commerce, and then we had supply chain disruptions and geopolitical tensions, which resulted in nearshoring. Additionally, the war in Ukraine forced many companies to relocate to neighbouring countries, so it really felt like everything bad that happens in the world somehow increases the demand for industrial logistics space in the region. And now, despite some macroeconomic uncertainties, we still see that the sector is remaining resilient. Of course, certain challenges lie ahead such as a weakening economy, tight labour markets, still high financing costs, and unfortunately, the unstable or maybe complicated political situations.“
The way global business is conducted is changing a lot, agreed Ivan Pastier, Business Development Director at CTP Slovakia. „Clients tend to get closer to the end customers. What matters is skilled labour and good infrastructure.“
Tomáš Ostatník, Real Estate Executive at Holland & Company shared the same perspective and pointed out the flexibility of industrial logistic space. For example, in Bratislava, an old-timer museum was created in one of the warehouses, which is rather a creative way to use the space.
Property Forum CEO Csanád Csürös, the moderator of the discussion, reminded the segment slowdown that is expected by experts soon. Is that something already visible among investors in Slovakia?
Martin Baláž, SVP, Country Manager Czechia, Slovakia & Hungary at Prologis, highlighted that tenant demand was as not as strong anymore as it had been during the pandemic. „Right now we see certain corrections. When I look at demand growth, it's single-digit.“ Vacancy rates are growing across CEE, in Poland, it’s now 10% and in Hungary, it’s reaching 18%. As Martin Baláž predicts, this might take 4 or 5 quarters to absorb.
Although macroeconomic uncertainty is one of the challenges that the world is facing, Alexandra Gačevičová explained that this did not have to mean bad news for Slovakia. „A year ago we had the lowest vacancy we have ever had, below 3%. And last year was another record year where more than 800,000 sqm were released and negotiated.“ Alexandra added: „We also receive a lot of built-on requests for new clients, which wasn't so much the case in the past. We are open to building on assumptions.“
Ivan Pastier underlined one more interesting trend: „Most leasing activity happens in the Western Slovakia region. Still, the demand is shifting towards the east.“ The other shift is in Asian companies´ action, they are coming back, reaching up to 10% of the CTP portfolio.
Alexandra Gačevičová also confirmed this trend: „Until now, European companies were looking for cheaper locations with cheap labour and they were offshoring to Asia. But now, as we have rising labour costs in Asia, but also supply chain problems and geopolitical tensions, they have to rethink their strategies. And it‘s all fueling very strong nearshoring trends.“
On the other hand, Tomáš Ostatník brought demographics to the table: „In Slovakia, in general, we‘re losing people, the net migration is not as good as in the United States, just to compare. So, if you have fewer people, you need less real estate in general. Also, the infrastructure in Slovakia is less developed. So once the infrastructure will develop, you will see more warehouses and more industrial real estate along the highways.“
Among various challenges, ESG is an obligatory topic these days. The question was asked whether ESG compliance pressure was coming from tenants. Both Ivan Pastier and Martin Baláž agreed that this was not a decision-making factor before. But now, as they concluded, it is being discussed everywhere, it is everybody´s focus: landlords, customers, asset managers and fund managers.
