The fourth quarter of 2024 did not bring any significant change to the industrial and logistics real estate market. While demand has returned to almost pre-Q1 volumes, the amount of new project completions has remained low. Only 106,700 sqm of new space was delivered: the lowest amount in three years. The vacancy rate increased by 3 basis points to 3.13 percent and prime rents stabilised at around €7.50 per sqm. With many projects planned for this year having been postponed, developments for 2025 nonetheless look significantly more positive, given that 870,300 sqm of new space is expected to be completed. This is according to the regular quarterly survey conducted by Colliers.
The volume of newly delivered space was again below average in the fourth quarter of last year. Only 106,700 sqm was delivered to the market: the lowest amount in the last three years. In total, 517,900 sqm was added for the full year 2024, 45 percent less than the previous year. Total space on the market reached 12.28 million sqm, a 4.6 percent increase from the previous year.
Even though many projects planned for this year have been postponed, the development for 2025 looks much more positive so far: 870,300 sqm of space is currently scheduled for completion and a further 384,700 sqm are in shell & core status – potentially available within 3-6 months. “While the volume of completed space has not reached the long-term average, new construction and plans for future development have been on the rise for more than a year,” says Josef Stanko, Director of Market Research at Colliers, adding that there are currently 2.7 million sqm of projects whose permitting process has been completed and 3.2 million sqm in potential projects that are in various stages of permitting, not including permitted projects. The total potential planned area therefore stands at around 5.9 million sqm at the moment.
Pre-completion and sublet spaces continue to obscure the true vacancy rate
In Q4, the vacancy rate in the Czech market increased by 3 basis points to 3.13 percent, ending the year at its highest level since Q4 2020. “Throughout the year, sublease activity contributed to the vacancy rate, increasing the overall rate. Taking this into account, we can estimate that the real vacancy rate in the market would exceed 6 percent, mainly due to the 3 percent vacancy rate ‘hidden’ in the shell & core space, where properties are almost completed but are waiting to secure a lease before announcing completion,” explains Josef Stanko. The real vacancy rate in the Czech market is therefore, according to him, much closer to the trend observed across other Central European countries, where the official rates quoted by neighbouring CEE markets were around 8-9 percent in Poland and roughly 5 percent in Slovakia.
Demand: optimism about future developments is justified
In the fourth quarter of 2024, gross realised demand was similarly encouraging as in the second quarter of last year. This indicated a recovery following a relatively weak year. 438,400 sqm of new space was realised, bringing the total to almost 1.45 million sqm. Demand for the full year was at its lowest since 2018 and was down 20 percent compared to the five-year average volume. This slowdown is a global trend that has been felt across the EMEA region. Still, there is reason for cautious optimism as net demand accounted for 61.3 percent of volume in 2024, broadly in line with the previous five-year trend and showing that new demand is still dominating the market.
The three largest transactions in the fourth quarter totalled 94,500 sqm. The largest transaction was the pre-lease of a 52,000 sqm building in CTPark Brno to electronics manufacturer Hitachi Energy Czech Republic, followed by a 21,300 sqm renegotiation at Prologis Plzeň II with consumer goods manufacturer VAFO. The third largest transaction was the renegotiation of 21,100 sqm at Prologis Park Prague Airport with an undisclosed distribution company.
The highest rent achieved has stabilised at around €7.50 per sqm/month
According to the Industrial Research Forum, the highest achievable rents in the Czech industrial market remained stable at €7.00 – €7.50 per sqm/month. The highest achievable rents have remained at the same level for three quarters now, although tenants increasingly have stronger bargaining power. This is reflected in increasingly favourable incentives offered by landlords across regions. Office rents are between €9.50 and €12.50 per sqm. Service charges are typically €0.75 to €1.00 per sqm.
The bad times are not over yet, but hope is on the horizon
“Despite the economic uncertainty of the past year, the market continues to show resilience. Although demand is lower than in previous years, investments in infrastructure are expected to reduce logistical obstacles,” predicts Josef Stanko. The Czech industrial sector remains strong, as evidenced by significant investment by large manufacturers. Although competition from surrounding foreign markets is changing the supply and tenant/landlord dynamics in some regions, market sentiment is improving after previous pessimism.
