If we were to derive the development of the economy from the performance of the industrial space market, any slowdown is not in sight. In the third quarter of 2019, there showed a 17% increase in warehouse and production space rental compared to the same period in 2018.
These figures are exceptional (and very telling) for the entire Central European region. Between July and September, 407,600 sqm of industrial properties were leased in the Czech Republic. New leases, free from renegotiated leases, exceeded 266,000 sqm.
Not even the greatest of optimists, including developers, could have expected such results. In the third quarter 'only' 125,000 sqm were delivered to the market, but the reality is that almost 550,000 sqm are currently under construction.
The enviable condition of the domestic industrial space market is evidenced, amongst other examples, by the fact that the third quarter is the second best performance since spring 2016. At the same time, a visible recovery can be seen in regions which have remained away from the developers and tenants' eye.
As expected, most transactions are carried out around Prague, followed by the Moravian-Silesian and Pilsen Regions. In our recent At A Glance 3Q 2019 report we looked at and compared several basic data points for each region: overall supply, completed construction, vacancy rate, and the highest rental rates achieved.
The South Bohemian Region shows the lowest activity, with approximately 50,000 sqm of warehouse space completed with an 8.3% vacancy rate. Construction in the Vysočina Region is very similar, where there is no 'logistic' measuring data available.
On the other hand, even a 20% vacancy rate is not an obstacle to the construction of another 66,000 sqm of new warehouses in the Ústí bad Labem Region. However, this figure is mainly influenced by the giant project, P3 Lovosice Hall A, with a total area of 60,450 sqm, which is currently under construction.
The second highest vacancy rate at the end of Q3 was in the Karlovy Vary Region - 15%. However, this actually only includes a newly completed hall in the 1st phase of CTPark Cheb (33,270 m²). Despite quite modest demand, developers have belief in this region, and have nearly 40,000 sqm of new distribution centres under construction.
We believe that the Pardubice and Hradec Králové regions deserve special attention. Despite good macroeconomic results, developed industry (especially in Pardubice), and zero vacancies in new production and storage facilities, no one is building. Nevertheless, it can be expected that changes will take place with the completion of the D11 motorway in 2024. The D35 linking Hradec Králové with Olomouc, which is predominantly expected to divert traffic from D1, will also have a positive effect.
The whole report can be downloaded below.
At a glance Q3 2019 - Industrial yield for top properties compressed in Q3 2019
Compared to previous quarter, the vacancy rate stayed unchanged in Q3 2019 and reached again 4.65%. Occupier demand increased, both in comparison to the same period last year and in comparison to previous quarter
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