Over the past few weeks, there has been a sharp rise in the price of crucial commodities in construction, mainly of steel, plastics and wood. Prices are soaring in retail and in the industrial buildings for manufacturing or logistics sector, and these are having a marked impact on already high rental costs.
The first quarter of 2021 saw record low vacancies in the greater Prague region, affirming consistent high interest in industrial premises in premium locations. High demand is pushing lease prices upwards, with lease prices having grown by 25 % per sq m year-on-year within the Prague cadastral district, for example. The Czech industrial real estate market is being impeded by drawn-out approval processes and a lack of new options in areas with the greatest demand.
The Czech real estate consultancy, 108 AGENCY, has published the first edition of an original project. Its report provides an overall summary of the most interesting data and information from the industrial real estate market from the perspective of individual development companies and owners. An updated report will be issued regularly twice a year.
In the commercial real estate market, there is currently a shortage of industrial and logistics premises, as well as land suitable for their construction. This is mainly due to growing demand, and the fact that local governments aren’t motivated by tax benefits to construct them. The situation is most evident in the vicinity of large cities, and also affects the growth of rent levels. Moreover, it has also caused a new trend in the form of the extension of rent contracts. The first new projects of over 20,000 sq m can only be expected in the second half of 2022.
The fourth quarter of 2020 closed a year full of changes and upcoming trends, also reflected within industrial real estate. Despite the pandemic, the industrial segment proved stable, and there was a significant acceleration in the development of e-commerce, and specifically the digitalisation of the entire retail sector. There remains a high demand for premises on the market from investors and clients, and this interest puts pressure on prices, which will increase significantly at premium locations in 2021.
Interest in outsourcing logistics services is growing in the industrial real estate market. Primarily due to flexibility, customers no longer have to make a long-term commitment, and they can adapt the scope of the storage and related services to their current needs. In today’s dynamic times, this is proving to be an interesting competitive advantage. As a response to this trend, 108 AGENCY established a new division which is exclusively responsible for the brokering of logistics services.
The pandemic, and the measures relating to it, had only a limited effect on the industrial real estate rental market, in particular with regard to the importance of the logistics sector, supply chains and production for the end consumer. In the third quarter, developers and tenants were catching up with the impact of the lockdown, and the situation in the fourth quarter will tell us more about business models in the coming year.
The survey was realised by the SKLAD (Association of Competent Logistics Providers and Suppliers) association in collaboration with the Ipsos research agency. The result is an extensive study which maps the trends shaping the logistics market in the Czech Republic. 123 managers operating in retail and wholesale company logistics, e-commerce, the automotive industry and manufacturing also took part in its creation.
108 AGENCY managed to mediate the sale of Business Park Vlčie hrdlo – a site suitable for redevelopment together with two office buildings in Bratislava. The Czech developer CONTERA has purchased it from the Natland investment group, which had managed the former brownfield with an area of 33,420 sq m since 2020. It wants to continue in modernization and revitalization of the premises and create the so-called small business units concept there.
