Finding industrial space around Prague is becoming increasingly difficult for businesses. The first quarter of 2021 brought record low vacancy in the wider Prague region (ie the capital city of Prague, Prague-East and Prague-West), which confirms the constantly high interest in industrial premises. Strong demand is pushing up rental prices, for example in the cadastre of Prague, the rental price increased by a quarter of a square meter year-on-year. In addition, the Czech industrial real estate market, like the residential market, is hampered by long permitting processes and a lack of new opportunities in areas with the highest demand.
–
The vacancy rate is still declining, even though it is in this region that there are about 3 million square meters of industrial space for rent, and this is the highest area in terms of individual regions of the Czech Republic.
–
“In Prague and the wider area, the situation is beginning to be critical in terms of renting industrial space, also due to the fact that no new projects are planned. We assume that in the time horizon of at least two years, a maximum of units of new larger industrial halls will grow here, “says Jakub Holec, Executive Director of 108 AGENCY.
–
Industrial, commercial and logistics companies are key to the Czech economy and the consumer market.
–
The lack of room to develop their activities now puts companies in a difficult position, along with the economic effects of coronavirus and outages in global supply chains.
–
Brno has new projects in stock
A similar situation with industrial premises is in Brno. In the Moravian metropolis, however, the situation is more positive with a view to the future, as several new projects are planned. The final phase of preparations includes, for example, the expansion of CTP on Černovické terasy, the expansion of Panattoni at Brno Airport or a completely new project by the developer GLP in Holubice.
–
Complex construction process
Shortening the deadlines for their preparation during the permitting process would greatly help the development of the market for industrial facilities.
–
“Permitting industrial construction currently takes several years and is often an activity for the developer with an uncertain result. It’s not just about land use planning, building permits or the assessment of the burden on the environment, “commented Robert Sgariboldi, head of the industrial leasing department at 108 AGENCY.
–
According to him, the removal of areas from the land fund and the often lack of support from local governments is also a problem. Thus, many parties enter into the whole process, the whole process swells with time, complexity and risks, and in comparison with neighboring states, the Czechia clearly loses in this respect.
–
About 108 AGENCY
– 108 AGENCY is a real estate consulting company, which since 2009 has focused exclusively on commercial real estate.
– Since its establishment, “One Hundred and Eight” has traded more than seven million square meters on the Czech, Slovak and Hungarian markets.
– Clients turn to 108 AGENCY regarding the mediation of leasing and sales, investment consulting as well as marketing and management of development projects.
——
Price and demand are rising
According to experts from 108 AGENCY, the vacancy rate for the industrial real estate market is around 5-6 percent. Values below 1% are unhealthy in the long run.
–
Rental prices combined with strong demand continue to rise. Many tenants are aware of this and are now trying to secure space for their business for a longer period in advance, as the situation to improve the market from their point of view is in sight.
–
Existing leases are thus extended by five to ten years. With strong demand, rental prices in the vicinity of large cities are also rising. For example, in the cadastre of Prague, the lower limit of the rental amount in the first quarter of 2020 was around 4 euros per square meter. Today it already reaches the limit of 5 euros per square meter, and this is a year-on-year increase in rental prices per square meter by a quarter.
–
In the locality with the highest demand and lack of land for further development, ie the eastern and south-eastern part of Prague in the vicinity of the D1 motorway, prices are around 6 euros per square meter.
–
There is a further opening of price cuts between the desired localities around Prague and Brno and, for example, border regions, where there is still enough land for new construction, either on a “green field” or in brownfield localities.
–
“In the Ostrava region, for example, due to the high supply and competitive environment, we are seeing a slight quarter-on-quarter decline in prices of 5-10 percent. This may lead some tenants to reconsider their location strategy, especially for operations that supply the entire Czechia or the region of Central and Eastern Europe and are not directly tied to Prague or Brno, ”says Michal Bílý, analyst at 108 AGENCY.
–
An example is the recently announced relocation of Sportisimo’s central distribution warehouse from Rudná u Prahy to Ostrava-Hrušov, which will take place in 2022–2023.
–
Czech industrial real estate market in the first quarter in numbers
At the end of the first quarter of 2021, the total area of modern industrial premises intended for rent in the Czech Republic reached almost 9.3 million square meters. Only 47,046 square meters of premium industrial space was completed, a significant decrease compared to the previous quarter and year-on-year compared to the first quarter of 2020.
–
465,088 square meters were under construction. The continuing trend is the ever-decreasing vacancy rate, which has fallen by 0.87% to 4.07% compared to the fourth quarter of 2020 and needs to be prepared for its further decline. The lack of vacant space is also related to high client demand. Gross realized demand for the first quarter of 2021 exceeded 800,000 square meters, thus exceeding, for example, gross realized demand for the whole of 2011.
—
