Industrial real estate market in the Czech Republic: Interest is growing rapidly in leasing warehouses and production halls
The Czech Republic has 4,532,000 sq. m. of advanced storage area, of which 8 % (369,200 sq. m. to be precise) are non-occupied. The most sought locations are nearly full and the demand for industrial real estate has been growing rapidly according to CBRE. Developers have also been investing heavily in the purchase of land as investors are interested in leased real estate and developers may even choose among occupiers. “Developers feel that the market has been doing well and if you don’t have land then you do not exist. Clients are not interested in how good the team is and how well the team is able to build. The only thing clients are interested in is an offer,” says Filip Kozák, Head of Industrial Agency CBRE, confirming the growth in demand for industrial real estate.
In the Czech Republic the most popular type of industrial real estate is used for production, comprising about one half of the total area of modern industrial real estate (4.5 million sq. m.). In Prague and its surroundings logistic companies prevail, production halls amount to only about 15% of the total. The statistics in West European countries is a little different - logistics and sale, including on-line sale, account for a larger portion of leasing activity compared to production companies. “It is logical because the Czech Republic is still a destination for production companies that wish to transfer their production lines here. It still pays to move production here from Germany, France or Belgium, the saving is incredibly high,” adds Kozák. In particular for German producers, the Czech Republic is attractive due to its proximity and relatively good transport accessibility.
The land for constructing warehouses which is running most short is along the D1 motorway close to Prague. “We are approaching the situation where growth is no longer possible in well-established locations. Land may be available but it will take some time before the land use plan is amended and infrastructure prepared. In some locations opponents may even prevent further growth,” says Kozák explaining that rents in some of the most exposed locations, in particular in Prague - East (Horní Počernice and land along the D1), might even go up as demand is higher than supply. In case of signing a lease contract for a term of at least five years and with a size of 10,000 sq. m., according to Kozák, “a good occupier” pays today EUR 3.15 – 3.25 per sq. m. per month. “I think that in one year the figure may be up to EUR 3.50,” says Kozák explaining that the rents in Prague, in Horní Počernice and along the D1, might be even higher.
Just along the D1 motorway, in the Nupaky municipality, land was purchased by the developer CTP who already owns real estate in a number of Czech cities (Brno, Ostrava, Mladá Boleslav). Although CTP has not yet acquired all the necessary permits for the construction, which should commence next year, the demand for the future area on the part of occupiers is already high.
On the other side of Prague, near the airport, the multinational developer Prologis has purchased a project for a large logistic centre from Skanska and commenced speculative development on an area of approx. 30,000 sq m. Prologis operates five large logistic parks in Prague and its surroundings, the total leasable area of which approaches 540,000 sq. m.; at the end of June 93 percent of this area was occupied.