Mainly established companies are interested in modern halls
The development of prime industrial space has slowed down in 2012. Almost 30,000 sq m of industrial halls was built in the first half of the year. This is 52 per cent less than in the same period last year and the lowest amount in the last five years. But take-up has remained strong, as a result of which vacant space for lease has diminished:
“Tens of thousands of square metres are being built, whereas leases amount to hundreds of thousands. Apparently, space where leases have just expired is much in demand. The question is, how long will this situation be tenable and when will occupiers’ satisfaction with the standards of halls built earlier come to an end,” says Jaroslav Kaizr, Head of the Industrial Letting Team at Cushman & Wakefield.
“We can expect the refurbishment of existing space to become the new trend, in order for tenants to be able to use it as efficiently as possible and to remain competitive,” Kaizr adds.
The only developer that actually built any space in the second quarter of 2012 was CTP, in its park in Ostrava. Almost 12,500 sq m of new industrial space was built there. CTP built a built-to-suit hall for ABB and decided on a speculative extension with additional space. This year, CTP accounted for approximately 80 per cent of new development and as such it was the most active developer in the first half of the year.
265,000 sq m was leased in the first half of the year, with about one half of that being in Prague. Prague has attracted relatively stable interest in the long-term perspective. The demand for lease in regions outside of Prague has decreased, and a limited amount of lease agreements have been executed aside from locations in Brno and Plzen. In terms of take-up activity, the first half of this year was about twenty percent lower (on a national average) than the same period last year.
“Also, it should be said that very few new occupiers are coming to the market. Contracts are executed mostly by companies that are already active on the Czech market. They are successful, so they move into better premises or expand into other towns. Most lease agreements signed this year represent expansions of the existing business, consolidations into modern space, and lease extensions,” says Jaroslav Kaizr.
The amount of vacant space has slightly decreased again to the current 7.6 per cent. This means that, out of the existing stock of more than 4 million sq m for lease, just 310,000 sq m currently remains vacant. The vacancy rate has dropped in Prague too, in line with the national trend.
“We expect this year to be weaker than the previous two years in terms of both leasing and new development. Firms will seek ways to further streamline their operations and they will carefully consider all options. This applies to the process of industrial space selection as well,” says Jaroslav Kaizr.