Supply of industrial space picks up in the Czech Republic
The second quarter of 2011 has shown a great degree of stability in terms of industrial space take-up at 136.1 square metres. The figure was only three thousand square metres higher in the preceding quarter. New development grew significantly over the first quarter from 14,000 to 47,800 sq m. The vacancy rate, i.e. the ratio of vacant space to all space available for lease, remains the principal indicator. The vacancy rate currently amounts to 8.1 percent, the lowest amount since 2007.
“The vacancy rate is closely connected with rents. If the vacancy rate drops below 10 percent, the limited supply may result in pressure for price increases. And this started to happen in selected locations in the first quarter of this year. Over the recent months, though, rents have started going up across the board and in almost all of the Czech Republic,” says Jaroslav Kaizr, head of the industrial letting team at C&W’s Prague office.
“Locations north of Prague where the supply of available space has been considerable to date and tenants have a good negotiating position are an exception to this rule. The most in-demand locations in terms of lease were Prague and Plzen, in the first and second quarter alike,” Kaizr adds.
Comparison with 2010
In terms of take-up, the first half of this year has been weaker than the same period of 2010. Some 354,000 square metres were leased in the period last year whereas this year the figure is 275,000 square metres. Last year was very strong in terms of take-up – it was comparable with the record-breaking year 2007. The development in the first half of this year is comparable with last year’s at 62,000 square metres.
The most active developers for new construction included VGP (39% of all new space build in Q2), HB Reavis (24%), and Portland Trust (23%). Most new space is built-to-suit, with only VGP starting to build space on a speculative basis (without pre-leases) in some of its parks. Certain other developers such as CTP and Panattoni build new space based on pre-leases, adding speculative parts in the progress.
“In terms of demand, 2011 will be lower than the previous year, and this is also because of the shortage of available space that is starting to appear in certain locations. The vacancy rate will probably drop below 8%, which should stimulate developers to start further construction. We currently see increased activity on the part of developers such as VGP, CTP, Panattoni, and Prologis who are building new space in their parks, including on a speculative basis. The Czech economy’s performance in both the European and global contexts will be the key factor,” Jaroslav Kaizr says.