Czech warehouses and production facilities are getting cheaper. Foreign companies are responding with increased demand for leases
The real estate consultancy 108 REAL ESTATE has been registering an increase in demand for warehouse and production space in the Czech Republic since the last quarter of last year. The increasing interest is mainly due to the activity and flexibility of developers, gradually decreasing rents, greater availability of labour, as well as the still excellent condition of the domestic automotive segment. For some longer-term leases, effective rents, i.e. after incentives, have fallen below EUR 4 per sqm per month. This is a price that the domestic industrial property market has not seen for several years. This is a positive boost for a number of international companies and operators looking for suitable space across the CEE region.
The total area of completed premium industrial properties in the Czech Republic reached a total of 12.43 million sqm in Q4 2024. Of this, 3.93% was available for lease at the end of the quarter, but more than 7% when including shell & core space. A further 501k sqm of space is currently in this state of near completion. Most shell & core space was in the Central Bohemia Region, the Pilsen Region and the Moravian-Silesian Region. The largest buildings in this condition are not found in UDI's Logistics Center Přehýšov or CTPark Prague North and CTPark in Lipník nad Bečvou.
Gross demand totalled 416 thousand sqm, while net demand including only new contracts amounted to 212 thousand sqm. Most of the new enquiries came from companies in the fulfillment and general logistics sector, linked to consumers mainly in Germany and Western Europe, from the manufacturing segment and also from the automotive sector. It is also good news for the Czech economy that the number of contracts signed for industrial space in the 5,000 m2 to 15,000 m2 range is growing.
The largest new contract signed at the end of 2024 concerned CTPark Brno, where Hitachi Energy Czech Republic s.r.o. leased 52 thousand sqm. The second largest new lease took place in VGP Park Ústí nad Labem City. There, a major fulfillment company leased just under 13 thousand m2. The third largest new lease in the last quarter of last year was made by a wholesale company, which leased 12 thousand m2 in Panattoni Park Zdice.
Despite the above rents realized after incentives at EUR 4/m2/month, the national average reached EUR 5.89 before incentives. There are still locations and completed industrial buildings where owners are demanding even EUR 7.5/m2/month. Overall, however, the market is showing a willingness of landlords to drop their demands and meet the demand.
"Developers are reacting to the increasing supply of vacant space by slowing down construction or postponing implementation in time. As a result, just under 120,000 sqm of new space was added to the market in the last quarter of last year. However, there are projects with a volume of over 1 million sqm in various stages of construction," adds Matěj Indra, Head of Industrial Agency, 108 REAL ESTATE.
Recent months also show a decrease in supply and realized demand in the sublease category.
According to the consultants of 108 REAL ESTATE, there is a noticeable change of attitude on the demand side. Despite a number of worrying global factors, from the development of the German economy to the risk of tariffs for the EU from the US, companies expect a gradual stabilisation of the situation and a moderate growth at the level of consumption in the business sector and households. This also explains why demand for warehouse properties is coming mainly from the full-service logistics and automotive sectors. Despite the announced lay-offs of several companies in the automotive sector, the segment as a whole is gradually growing. This is evidenced by the record production in automotive plants in the Czech Republic last year.
"Overall, we assess the last quarter of last year very positively with lease transactions including renegotiations at the level of over 400,000 sqm. The decrease in rents is mainly influenced by the relative abundance of available space, i.e. greater competition among developers. Only in the shell & core phase, there are around 500,000 sqm waiting for tenants," Jakub Holec, Director of 108 REAL ESTATE, summarises the main indicators of last year.
"As far as international tenders are concerned, the Czech Republic's position could be further improved by record investments in the motorway and road network, as well as a more flexible labour market. The next months should be slightly positive and optimistic for the Czech industrial space market. The looming trade war between the US and the European Union could further stimulate a new wave of nearshoring, which would give European industry an additional boost," believes Michal Bílý, Senior Analyst at 108 REAL ESTATE.