Published 23. 10. 2012

Industrial property - room for more development

The development of new industrial stock is coming to life again. While only two developers launched new halls on the market in the first half of the year, competition is currently growing and more companies are building. Despite that, the overall volume of development is lower than in the preceding years.

New construction
“Our expectations regarding the decrease in new development are being confirmed. Hence, the refurbishment of existing halls and parks has been and will be a major factor. Refurbishment requires significantly lower financial resources while posing a lower risk, especially in well-established locations,” says Mr Jaroslav Kaizr, Head of Cushman & Wakefield’s Industrial Letting Team.

“The life expectancy of modern industrial halls is roughly fifteen to thirty years. Halls built at the beginning of the century are reaching the limits of their lifetime and owners have to invest in them in order to keep pace with competition. Improved lighting, insulation and repaired floors are essential if older halls are being leased, and even so, occupiers request a lower rent than with newer halls. International companies, in particular, are increasingly asking questions regarding green elements in logistic parks,” Mr Kaizr says.

Only CTP and VGP completed new halls in the first half of the year; Goodman made a foray into the supply of new halls in the third quarter with its park in Mladá Boleslav; and Contera built a new hall in Teplice. Raiffeisen – Leasing have recently started construction in Brno, and VGP and CTP are also building there.

More than 43,000 square metres of modern industrial space were built in the third quarter. This is more than in the whole of the first half (30,000 square metres). Still, development is much lower than in the same period in the preceding two years (142,000 square metres in Q3 last year and 82,000 square metres in Q3 the year before that).

More than 440,000 square metres of premium halls have been leased since the beginning of the year, including 177,000 square metres in the third quarter. Last year, 607,000 square metres were leased in the first three quarters, including 302,000 square metres in the third quarter.

Prague was the most in-demand location in Q3 (65,000 square metres) and has been a very stable market in the long-term perspective. Other occupiers targeted primarily the South Moravia and Central Bohemia Regions.

The trend of a decreasing percentage of new deals on the market for industrial space was confirmed in the third quarter. Whereas new contracts amounted to 52 percent of all leases in the first three quarters of last year, the figure is just 40 percent this year. The majority of deals executed are renegotiated and extended existing leases.

Vacancy rate
The percentage of vacant space has grown by almost one percent to 8.4 percent at the end of September (7.6 percent in June). The increase in vacancy rate is due primarily to the reduced take-up.

“The percentage of vacant space is still below the level that can be considered as healthy, which is around ten percent. So there is still room for more development, in particular in locations with vacancy rates lower than the national average,” Mr Jaroslav Kaizr adds.

Read more in Press release section

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