June 11, 2018

CBRE expects further increases in rents for warehouse space as high occupancy and strong demand meet

CBRE expects further increases in rents for warehouse space as high occupancy and strong demand meet

CBRE published its latest forecast for Czech warehouse market. Current vacant space is already at 10-year low and is expected to fall even further and approach the 200,000 sqm mark. Tenants should renegotiate to avoid future rent hike.

“We expect demand to remain high as the economy and e-commerce continues to grow. Re-shoring, that is bringing back manufacturing from China is another factor to consider as well as nearshoring from Western to Central and Eastern Europe,“ explains Bert Hesselink, Head of Industrial & Logistics at CBRE Czech. “Supply will remain constrained due to the unpredictable permitting process and little public support in building more warehouses in the Czech Republic.”

Other factors at play are increasing construction costs as general contractors are fully booked and labour costs in the construction industry increasing. The yields at which developers are selling to investors are bottoming out and the yield compression of the recent past can no longer compensate for increasing development and construction costs – this will inevitably lead to rent increases, which will have to paid for by warehouse tenants.

“Although it may not be obvious, this is the right time for occupiers to renegotiate their lease in advance of the contracts expiring, and turn the possible threat into a real business opportunity“ explains Hesselink. "Especially if you have less than 5 years remaining on your lease and your company has a strong credit rating, you can secure or even improve conditions of your lease agreement.“ Hesselink however notes, that caution and professional management of the entire renegotiation process is pivotal as landlords may have other options in current market.

“When you take action now, you can improve your competitive position. Be one of the few who will have been pro-active because the majority of companies will be too busy being busy and will realize they missed the opportunity when it's too late and rents will have increased already. Be ahead of the curve,“ concludes Bert Hesselink.

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