Czech and Slovak industrial markets shows strength

The numbers are looking better and better for logistics developers as vacancy rates drop and demand continues rising

Michael Stein 27.1.2011

ProLogis Park Pilsen-Stenovice in West Bohemia has 59,000 square meters in three buildings foto: PrologisČeská pozice

2010 was a near record year for the Czech industrial market, with the deals signed for 845,000 sqm of space falling just short of the boom years’ 2007 peak of 855,000 sqm, according to a Jan. 27 report released  by property consultants Cushman & Wakefield.

The flipside has been the lowest level of new construction since 2004, and the combination of increasing demand and lack of new supply has caused vacancy rates to drop to just above 10 percent.

Jaroslav Kaizr, head of the industrial team at Cushman & Wakefield’s Prague office, said lease renewals made up almost half of all leases — a market first. “Many lease agreements were extended last year, or companies expanded and rented additional space for their existing premises. That did not happen in 2006 and 2007, the record-breaking years, as the prevailing practice was executing new leases at the time. The deals signed during the boom period are expiring now and occupiers often extend them,” Kaizr said.

Around 25 percent of leasing deals were signed with developer CTP Invest, while ProLogis came in second with about 23 percent. VGP came next with around 10 percent of the year’s take-up. VGP was the only developer on the Czech market to engage in speculative development, having built a hall in their Horní Počernice park in Prague as well as starting building in Plzeň, West Bohemia, and Hradec Králové, East Bohemia, all without pre-leases.

Slovak success

In Slovakia the industrial market has seen even lower vacancy rates, yet there is still a hesitancy on the part of developers to build speculatively, though that could be on the verge of changing. ProLogis in Slovakia spent the crisis years focusing on its existing parks and raised occupancy in the country to 97 percent.

“In 2011 we will concentrate on land monetization through BTS (build-to-suit) facilities development. However if the market conditions are good for us and the customer demand stays strong we may consider speculative development,” Martin Polák, leasing manager at ProLogis in Slovakia, told Czech Position.

‘VGP was the only developer on the Czech market to engage in speculative development’

Polák said the company’s most successful park last year was ProLogis Park Bratislava, due to its proximity to the capital and transport connections. The park can accommodate two more buildings totaling 107,000 sqm. Another park near Bratislava that the company may develop further is ProLogis Park Galanta-Gáň, which has the potential for two more buildings of 64,000 sqm.

Industrial transparency

With the Czech industrial market picking up, four of the market’s leading property consultants announced the establishment on Jan. 26 of the Industrial Research Forum for the sharing of non-sensitive information to create a more transparent market. CB Richard Ellis, DTZ, Jones Lang LaSalle and King Sturge will publish quarterly sector figures.

The Q4 2010 figures released by the forum show a slight decrease in gross take-up (including renegotiations) of 7 percent on the previous quarter, while net take-up (excluding renegotiations) showed a quarterly increase of 19 percent. The precise vacancy rate was indicated as 10.4 percent, showing a quarterly decline of 1.5 percent.