The capacity of industrial real estate has filled up around Prague and Brno. The market is overheated and the vacancy rate is already below 2%.
The impact of the pandemic, the massive development of e-commerce, but also the partial transfer of goods from long-term closed stores to warehouses – all this is behind an unprecedented situation where the last free meters of industrial real estate disappear around Prague and Brno. The vacancy rate around Prague has already fallen below 2%, in Brno below 2.5%. Nationwide below 3.5%, which is the lowest value in history. At the same time, a year ago, for example, more than 6% of the total industrial space was available in the vicinity of Brno.
“The current market rent of the highest quality industrial real estate around Prague in some cases already significantly exceeds EUR 5, which is an increase of up to 40% compared to 2 years ago. Extremely strong demand together with the current weak supply means that prices are logically rising, while a quick solution is in sight, “says Petr Narwa, Head of Consulting & Transaction Services at Prochazka & Partners, who has long been involved in corporate consulting for clients in the field. industrial.
The situation is similar in all attractive locations, ie around Prague, Brno and partly also Pilsen. However, the situation is different now, for example, in Ostrava, which we reported on at the beginning of March. The local self-government supports the reclamation of no longer used brownfields, in the places of which modern industrial parks can be created. The current demand is then driven mainly by the growth of interest in e-commerce, respectively in warehousing and logistics services.
“Especially Prague suffers the most in terms of the lack of industrial space. Everything that is currently being built is waiting for a queue. The recently built industrial park in the Kladno region was immediately leased. The planned construction around Prague is now at the level of 120,000 m2, but even that will not be enough in the medium term. So those who are considering changing their storage capacity should deal with it well in advance and look not only at the current offer but especially at what is planned to build where, “adds Narwa.
Own construction or moving outside large cities
Some tenants are even considering building their own warehouses on their own, but this is a very long-distance run, especially in the Czech Republic. Although the construction of the warehouse itself can usually be completed within 9-12 months, the whole process from its first intention – largely due to lengthy permitting processes – takes a very long time, sometimes more than five years. In addition, the price for both land and construction work is currently rising.
“Another trend among tenants is certainly considering the need to be close to the most desirable locations. Thus, some companies find that it may be worthwhile for them to take advantage of significantly lower total rental costs compared to including higher transport costs to a more distant, not so attractive location. Another advantage can be the fact that around the largest Czech cities it is no longer advantageous for companies to not only rent a warehouse, but also to find a workforce in it, whose wage demands are constantly increasing, “Narwa describes the current thinking of those interested in warehouse space.
Source: Prochazka & Partners
