Lasting demand for Czech industrial property
Following Plzen, an exceptional situation has also occurred in Ostrava where no space is currently available for lease.
The almost non-existent supply of prime industrial halls ready for immediate lease has become reality in some parts of the Czech Republic. Last year saw a strong take-up, but new halls were not built at an adequate pace. Logistic firms and manufacturers are forced to choose from lower quality assets or wait for newly built space. This is true primarily in Ostrava, Olomouc, Liberec and Hradec Kralove.
“These days, those seeking prime space have to wait for at least six months after the signing of the lease agreement before the developer has built their “tailor-made” premises. Or they have to settle for third-category premises as even second-class space has almost all been taken up in Ostrava. The situation is very difficult especially for companies seeking space ranging between 1,000 and 2,000 sq m. Developers usually build halls starting from 4,000 sq m,” says Jaroslav Kaizr, head of the Industrial Letting Team at Cushman & Wakefield.
The vacancy rate dropped to nil in Ostrava towards the end of 2011. Yet just a year earlier, 15% of space built for lease in the city was vacant. In effect, Ostrava is copying Plzen where available halls built to European standards were already in short supply in 2010.
775,000 sq m of prime industrial space was leased last year. 2011 was the third strongest year in the Czech Republic’s history (the record-breaking 855,000 sq m was leased in 2007).
“A total of 191,000 sq m was leased in the fourth quarter of 2011. The figure for the preceding quarter was 292,000 sq m. The quarterly average for the last two years has also increased to 245,000 sq m. The lower realised take-up is typical of the end of the year,” says Jaroslav Kaizr.
All information contained in this release only includes the space that companies took up and accepted for moving in (i.e. this sum does not include pre-lease). Prime projects of European standards are included only.
Developers built 130,000 sq m of prime industrial space in the last quarter. As a result, the new development for the entire year amounts to approximately 323,000 sq m. This represents a major year-on-year increase of 70 percent, over “only” 195,000 sq m built in 2010.
New assets were built primarily in Brno this year, compensating for no development in the last three years. CTP was the most active developer, accounting for 47% of this year’s total development volume.
Rents can differ materially in various locations. ProLogis currently offers the lowest rate at EUR 2.5 per sq m per month in its Uzice park just north of Prague. Conversely, finding prime space priced below EUR 4 per sq m per month is difficult in Brno. The insufficient supply of space in Ostrava and in the Plzen area puts the growth of prices in those locations under pressure as well.
The percentage of vacant halls continued to decrease in the last quarter – just 6.3% of all space intended for lease was vacant at the end of the year (a national average).
“The reason is the continuing demand overhang and this trend should continue this year. Rents will go up slightly in locations with the highest demand. Occupiers can avoid increased costs, though, by searching for new space with tendering processes well enough in advance,” says Jaroslav Kaizr.