Published 29. 1. 2014

Industrial developers can supply more stock thanks to new capital inflow

Almost 300,000 sq m of new industrial space for lease was built in the Czech Republic last year. This means a 170% year-on-year increase in development. Such are the findings of regular research undertaken by Cushman & Wakefield’s Industrial Team. The reason behind such an increase is primarily the strong long-term demand for modern industrial halls and better access to capital that developers can invest. For the sake of comparison, 108,000 sq m of modern rental space was built in 2012.

“There are another approximately 200,000 sq m in the pipeline, most of which has been pre-leased. Developers trust the market – there are currently eight of them building, whereas in previous years not more than two or three developers were active at a time. We expect the development of modern industrial space to be strong this year,” says Jaroslav Kaizr, Head of Cushman & Wakefield’s Industrial Letting Team.

“The construction of 200 to 300,000 sq m per year is proving to be balanced and sustainable in the long-term perspective. With such an amount of new development, the Czech industrial market will retain a sufficient amount of modern space available for lease and remain attractive for companies seeking quality for a good price,” Mr Kaizr adds.

Record-breaking take-up: more than a million for the first time ever
Companies leased more than one million square metres (1.22 million sq m) of modern industrial and logistic space last year. “This is a fluctuation rather than a regular occurrence. The reason behind the high figures is the prolongation of contracts from the strong years 2008 and 2010, which expired last year. Based on our calculations, balanced take-up of modern industrial space ranges between 700,000 and 750,000 leased square metres per year,” Mr Kaizr explains.

In the previous years, the market came the closest to one million in 2007 and 2010 when around 870,000 sq m was leased, new leases represented majority of the take up at that time. “From 2009 the share of renegotiated lease contracts on total take up has been increasing and in the last year reached 48%, which is the highest portion in the history. This indicates that the Czech economy so as the industrial property market is a stable environment,” Mr Kaizr adds.

Major deals
The most important transactions of last year included the renegotiation of DHL’s lease at Prologis Park Jirny (99,000 sq m), the renegotiation of the lease and expansion of Tech Data at CTPark Bor (52,000 sq m), the renegotiation of HOPI’s lease at Pointpark D1 (46,000 sq m), FEI’s lease at CTPark Brno (45,000 sq m), and Grammer’s lease at CTPark Žatec (36,000 sq m).

Vacancy rate
Increased demand for industrial space results in decrease of vacancy to 6.0 percent. The market is capable of absorbing the new stock despite the increased development, which means that the demand exceeds the supply. This also leads to slight pressure towards increasing rents, in particular in areas with lower vacancy rates,” Mr Kaizr says.

The most active developers
CTP, VGP, D+D and Panattoni were the most active developers in 2013. In the last few months, they were joined by Pointpark, Prologis, Segro and Gemo. All of the aforementioned developers are currently active and involved in the construction of projects in as well as outside of Prague. “In comparison with previous years the developers have easier access to the capital and stable demand stimulates new construction. In 2014 we do not expect speculative development though,” Mr Kaizr adds.

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