Inflation is putting pressure on developers to increase rents. Luckily, in some markets, such as the Czech logistics market, buoyant demand is helping drive rental growth. Jakub Kodr, Head of Business Development at CTP Czech Republic talked to Property Forum about the company’s expansion plans, dealing with inflation and changing demand dynamics.
Jakub Kodr is joining a panel discussion on the trends driving the Czech logistics market at Property Forum's upcoming annual event, Prague Property Forum 2022.
What is CTP’s development pipeline in the Czech Republic this year?
CTP’s development pipeline in the Czech Republic is mostly driven by strong occupational demand from our longstanding client relationships and mainly draws on the significant land bank we have secured in established CTP parks. On that basis, we anticipate delivering c. 400,000 sqm in GLA of well-located high-quality assets during 2022 to ensure we can support client growth in the coming years.
What are the most sought-after locations among your tenants right now? Are there any new ones emerging?
We see broad-based strong demand across the country, including Prague, Brno, Pilsen, Ostrava and many other locations. Of particular interest are the regions in western Bohemia, near the German border, in places like Cheb, Bor and Aš.
How are you coping with rapidly rising development costs as a developer?
CTP is better placed than most of our competitors in handling rising construction costs as we are our own in-house developer, so can generally save by not paying additional margins to external contractors. We also have long-standing relationships of many years with our suppliers of building materials which helps us in securing these supplies. Inevitably, however, rising inflationary costs will need to be reflected in the project charges we make to clients, but we try to be as fair and reasonable as we can with these when passing on to our tenants. Inflationary pressures have also been compensated for by rising rental levels on new developments.
What sectors are driving demand for CTP’s Czech projects in terms of leasing activity?
The same sectors as previously, distribution, e-commerce and production, although we are seeing greater demand for value-add high tech, software and science park-type facilities, which is a reflection of the Czech Republic’s growing attractiveness as a location for this type of production.
COVID-19 has caused significant changes in global supply chains. Are you seeing any signs of this bringing nearshoring to the Czech Republic?
As with the pandemic, we see changes in thinking and policies regarding storage capacity. Companies are increasing their capacity because the ‘security’ of supply chains is generally becoming more important than the ‘costs’ of supply chains in many cases, particularly for industries with a wide geographical spread of suppliers. We are seeing tenant demand further strengthen in the region as global occupiers move operations west out of Ukraine, as well as continue to build inventory levels to prevent further supply-side shocks.
Tenants are demanding more flexible solutions in every market segment, including logistics. How are you responding to this demand?
We try to follow that trend and offer flexible solutions in CTParks that can usually meet the changing demands of our clients across CTP’s growing European network. We continue to acquire land, particularly near major cities, due to demand from e-commerce clients who need to be nearer to their end customers. In addition, as supply chains are in flux, we try to find locations for logistics clients who may need multiple locations across the country as they to manufacturers re- or near-shoring operations from other areas.
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