Published 27. 11. 2014

Industrial market: investments in the Czech Republic, development in Poland

Whereas Czech industrial property developers invested their energy primarily in buying and selling their portfolios this year, Poland’s developers focused on building new stock instead. As a result, the Czech Republic has the highest share in this year’s investment in industrial property in Central Europe (January to September 2014). Industrial facilities worth a total of EUR 690 million were sold here while the total for the whole of Central Europe amounts to some EUR 1,270 million.

“The Central European market as a whole has bounced back from the bottom faster than the Czech market. New development in the region has doubled over last year (January – September) while increasing by twenty per cent here. Halls were built primarily thanks to strong demand. The consumer market is growing, online retailers are expanding and the economy is increasing overall – and these factors are behind the current rejuvenation,” says Ferdinand Hlobil, Head of Cushman & Wakefield’s Central European Industrial Team.

“Comparing the amounts of rents fifteen years ago when the industrial market in the Czech Republic started developing with today, we see a one-third decrease. Prices decreased steadily during the first ten years. Since 2009 the rent has decreased just a few per cent. This shows the maturity of the local market. For next year, we expect prices to remain stable, though this obviously depends on the location,” Mr Hlobil adds.

Developers were able to reduce prices slightly in the past few years because they were building in massive quantities, thus achieving bulk discounts. The average size of the biggest transactions is interesting. It has been growing in the long-term perspective. When leasing a large area, tenants obviously negotiate better terms (see Graph 1). This being said, we are talking single-digit percentages; a rent decrease in tens of percent is not likely in the near future. We also expect more major leases to continue being signed.

Outlook for 2015
“The industrial market develops in three-year cycles: developers build their portfolios for roughly three years and then sell them. We have seen this in the past eight years as 2008, 2011 and 2014 were much stronger in terms of investment than the other years (see Graph 2). Hence, we expect developers to channel their time and energy primarily into building new parks next year,” Mr Hlobil says.
“About the only deal that can stir up the market in the months to come is the potential sale of CTP’s portfolio,” Mr Hlobil adds.

The vacancy rate has long remained below ten percent, currently at 6,3 per cent. Cushman & Wakefield expect this indicator to remain stable. The development of new parks continues, seamlessly catering to the strong take-up. Speculative development is relatively low and we do not expect any boom in this respect.

Graph 1: Industrial rents in Czech Rep. in 1999-2014 (modern industrial stock)

Source: Cushman & Wakefield, 2014

Graph 2: Industrial Investment in Czech Rep. in 2008-2014

Source: Cushman & Wakefield, 2014

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