INDUSTRIAL PROPERTY MARKET - Q3/2020

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.  

Overall market view 

At the end of the third quarter of 2020, the Czech premium industrial real estate market attained a total area of 9.04 million sq m. In the period from July to September of this year, over 130,000 sq m of new storage premises was completed. Completed construction this year has already caught up with the figures for the whole of last year, and now has the potential to show growth again for the first time in several years.   

Vacancy rate 

The vacancy rate continues to grow slightly, and is now 5.52 %. According to ongoing information, we’re expecting a decrease in the fourth quarter of 2020. Speculative construction is gradually finding tenants, and the vacancy rate should therefore decrease slowly next year too. 

Construction 

387,500 sq m of new premium premises is currently under construction, which is a similar value to that in the previous quarter. However, Prague and its environs is still a region characterised by a lack of new space for the wider development of new premises, even though the growth potential here is great. Future improvement of the situation regarding industrial development opportunities must be preceded by better collaboration among companies, local authorities and other government institutions. The greatest attention is still devoted to regions which border Germany and the South Moravian and Moravian-Silesian regions. 

Rent 

The average rent for modern warehouse space in Prague fluctuates around 4.30 – 5.00 EUR/sq m/month. In Brno, it fluctuates within a range of 4.00 – 4.80 EUR/sq m/month. During the year 2020, average rents increased only very slightly. The average for the Czech Republic in the third quarter is 4.34 EUR/sq m/month. 

Demand 

Gross demand reached 316,948 sq m in the third quarter, while net (without prolongations) reached 199,806 sq m (972,127 sq m gross and 555,190 sq m net for Q1-Q3 2020). The largest transactions in the third quarter took place in the Plzeň Region. Short-term leases once again reached a value of around 43,000 sq m. 

Outlook for the next period 

“We already see many signals indicating further market growth, in terms of not only space but also transactions and new development opportunities. Although the industrial real estate market was affected by the pandemic to a certain extent in the year 2020, its importance for ensuring supply to the end consumer provides it with resistance against short-term fluctuations,” says Michal Bílý, an analyst in the real estate consulting company 108 AGENCY.