Czech Industrial market excels in the first half of the year

‘Companies leased 70 percent more space in industrial properties in the Czech Republic compared to  same period last year.’ according to a new report from Cushman & Wakefield,  the world’s largest privately-owned real estate adviser .  A total of 472,000 sq m of industrial space was leased in the first half of this year, compared with “just” 265,000 sq m in the same period last year. Supply more than tripled to 97,000 sq m in the period.

“The Czech industrial space market saw a record-breaking first half of the year on the demand side, exceeding even the boom year of 2007 in this respect. The construction of new stock still lags behind the take-up, the growth of which can nevertheless be seen as a positive trend,” said Mr Jaroslav Kaizr, Head of Cushman & Wakefield's Industrial Leasing Team.

“It is apparent that this rapid pace will not last throughout the year. For the second half, we expect a slight slow-down in activity on the demand side and stable developments on the supply side. The expected slow-down is connected with the economy cooling off and the resultant uncertainty,” adds Jaroslav Kaizr.

Take-up of industrial stock
The take-up of prime industrial space amounted to 277,000 sq m in the second quarter of 2013. The largest transactions of the second quarter included Faurecia’s new leases in Nyrany near Plzen (25,000 sq m) and in Bezdecin near Mlada Boleslav (26,000 sq m), the prolongation of CEVA’s lease in Bor u Tachova (17,000 sq m) and DAMCO’s lease in Dobrenice near Hradec Kralove (13,000 sq m), and the expansion of the space leased by ND Logistics by another 9,000 sq m in Divisov near Benesov.

“As in the first quarter, 60% of take-up in the second quarter was attributable to new projects and expansions, and 40% of the take-up in the first and second quarters was attributable to prolonged leases. This ongoing trend is another sign of the healthy potential of the Czech industrial property market,” Mr Jaroslav Kaizr adds.

Supply of industrial stock
The most active developer was CTP, building a 26,000 sq m hall for Faurecia near Mlada Boleslav, followed by Panattoni with a 25,000 sq m hall built for Faurecia near Plzen and VGP who supplied a more than 8,000 sq m hall near Brno. Overall, 67,700 sq m of prime industrial space was built in the Czech Republic in the second quarter.

“Developers only start building most new projects on the basis of pre-lease. A new trend is the purchase of an existing facility from its former owner and subsequent lease, resulting in a jump in prime industrial stock available for lease. CTP purchased a hall in Zatec from its original owner and leased it to Grammer, and then CTP applied the same approach in Ostrava, leasing a purchased hall to UFI, a manufacturing company,” says Mr Jaroslav Kaizr.

Vacant space
The vacancy rate has been stable and low since late last year, currently amounting to 6.8 percent. A total of 289,000 sq m remains vacant in the Czech Republic.

“This is quite a low figure which should motivate developers and their financiers towards new development and investments. Speculative development, on the whole, is still not taking off at a fast pace and we expect the vacancy rate to remain very low, since occupiers tend to prolong their existing leases and new projects occupy the available space,” Mr Kaizr adds.

Market outlook
“The expectations of all market players deteriorated after the announcement of the data on the Czech economy and, as a result, the previously positive mood on the industrial property market cooled down at the beginning of the second half. Despite this sudden slow-down, we expect this year’s results to exceed 2012 in terms of both take-up and new development, making 2013 one of the better periods in the market’s history,” Mr Kaizr says.