In the second quarter of 2023, a record-high amount of industrial space was under construction in the Czech Republic, with over 60 percent pre-leased. Industrial Research Forum, whose members are CBRE, Colliers, Cushman & Wakefield and iO Partners, announced.
“The Industrial market is still one with a low vacancy – however, this is slowly changing and since Q3 2022, we’ve been witnessing constant growth, up to the current 1.70 percent,” commented Jiří Kristek, Head of the Industrial and Retail Warehousing Team, Cushman & Wakefield. “This indicates the sentiment prevailing on the market where we can spot speculative construction as well as a record-high amount of premises under construction (1.3 million sqm). Take-up is driven mainly by renegotiations which create more than half of its volume. A major question is the level of prime market rent which is now relatively stable but some signs of a potential change can be seen, especially from low-margin operating tenants. When renegotiating, they face massive rental growth, and therefore are (where applicable) willing to consider relocation to locations with more favourable conditions.”
TOTAL STOCK & NEW SUPPLY
The modern developer-led warehouse stock in the Czech Republic reached 11.29 million sqm in the second quarter of 2023. A total of 286,600 sqm of new warehouse space was delivered to the market within 19 industrial parks across the country. This represents a 95 percent increase compared to last year and a 32 percent q-o-q increase. Approximately 83 percent of the projects were already pre-leased at the time of completion.
The largest completion in Q2 2023 was a new building in Panattoni Park Pilsen West II (36,400 sqm), which was at the time of completion fully leased to the automotive company Shape Corp. The second-largest completed building was located in CTPark Brno Líšeň (34,000 sqm) and was fully leased by multiple tenants. The third largest completion, a building of 21,300 sqm in Prologis Park D1 Ostredek, remained fully vacant upon completion.
PROJECTS UNDER CONSTRUCTION
At the end of Q2 2023, approximately 1,340,300 sqm of industrial space was under construction in the Czech Republic, representing an increase of 9 percent compared to the previous quarter and a 4 percent increase compared to the same period last year. Almost 25 percent of the total space under construction is situated in the Karlovy Vary region, followed by the Pilsen region with a 14 percent share and the South Moravia region with a 12 percent share.
In Q2 2023, construction of industrial buildings with a total area of approximately 397,700 sqm commenced. The share of speculative construction rose again slightly to 39 percent during the quarter. The IRF expects over 600,000 sqm of warehouse and production space to be completed by the end of 2023, bringing the industrial stock in the Czech Republic closer to the 12 million sqm threshold.
INDUSTRIAL TAKE-UP
During Q2 2023, gross take-up, including renegotiations, reached 597,000 sqm. This represents an increase of 73 percent compared to Q1 2023 figures and a 10 percent decrease compared to Q2 2022. The share of renegotiations increased by 31 percentage points compared to the last quarter and accounted for 52 percent of gross take-up. This was greatly affected by the largest deal of the second quarter, a renegotiation of 136,900 sqm.
Net take-up in the second quarter of 2023 totalled 278,800 sqm, an increase of 2 percent quarter-on-quarter and a decrease of 47 percent year-on-year. Pre-leases accounted for 34 percent of gross take-up, keeping below the 3-year average.
MAJOR LEASES WITHIN TAKE-UP
The largest transaction in Q2 2023 was a renegotiation of 136,900 sqm in Prologis Park Prague – Jirny, signed by an undisclosed logistics company. The second-largest transaction was a pre-lease of 57,200 sqm signed by an automotive manufacturing company in Panattoni Park Ostrov – North. The third-largest deal was a renegotiation of 53,300 sqm in CTPark Bor, signed by a company distributing electronics.
VACANCY
In the second quarter of 2023, the vacancy rate in the Czech Republic reached 1.7 percent, representing an increase of 42 basis points q-o-q and an increase of 43 basis points y-o-y. At the end of Q2 2023, a total of 192,400 sqm of modern industrial space was available on the market for immediate lease. The vacancy in industrial warehouse space in the Prague region and the surrounding area is even more constrained than the national rate, resting at close to 0 percent since Q2 2021.
RENT
Prime headline rents in the Czech Republic decreased slightly, reaching around €7.50-7.80 sqm/month in Q2 2023. Prime rents in selected prime locations outside of Prague have stabilized, reaching a level of around €5.75-6.50 sqm/month. Rents for mezzanine office space stand between €9.50-12.50 sqm/month. Service charges are typically around €0.75–1.00 sqm/month.
