However, the quarterly analysis of 108 AGENCY, the real estate consulting company, indicates that there are signs of this very strong demand cooling off. For example, the interest of companies in the field of e-commerce is decreasing. This may be due to, among other things, rising rents and decreasing household consumption. Some manufacturing companies are also limiting their activities due to prices hikes in energy, fuel and other products. “We notice that a significant number of large and medium-sized companies are postponing decisions on relocation or expansion until the next year,” says Jakub Holec, CEO of 108 AGENCY, adding that uncertain economic development is also affecting the industrial space market.
Developers responded to the fundamental excess of demand over available supply last year. Currently, 108 AGENCY registers 1.29 million sq m of new industrial space at the implementation phase. A total of 197,381 sq m of modern industrial space was delivered to the market in the second quarter, which is a quarter-on-quarter increase of 128.83%. However, most of the new projects are already contracted to future tenants. Therefore, the rapid increase in space will not have much effect on the overall vacancy rate. Due to a number of negative economic factors, an increase in the share of speculative development adding to the total increase of new space is not expected.
Despite the aforementioned caution on the side of tenants, the cooling of the global economy and a number of negative factors at national level, demand remains high. Gross demand reached a total of 631,849 sq m in the second quarter. Without contract renegotiation it was 489,685 sq m. “In both cases, this is a better performance than in the previous quarter. However, if we were to remove the record transaction in Panattoni Park Cheb, it would be a decrease compared to the last quarter,” says Michal Bílý, 108 AGENCY analyst, confirming the slight slowdown of the industrial market.
The first signs of cooling come at a time when there is practically no open space available in locations around large cities. At the end of June, in terms of availability, the largest number of free industrial areas were in the Pilsen Region, the Olomouc Region and the Vysočina Region. Due to the lack of development space, the interest of developers in the regeneration of brownfields is growing. Brownfield construction will become more and more frequent due to gradually diminishing heavy industry and production with a high carbon footprint. Therefore, the potential of projects of this type will continue to grow.
The lack of vacant space leads to a continuous increase in rent prices. In most regions, the average rental price exceeded €5 per sq m – the national average is currently €5.50 per sq m. Space is available below the average amount in the Jihočeský, Karlovy Vary and Ústecký regions. In the capital city of Prague, the average rent rose to the level of €7.25 per sq m. In the second quarter, the South Moravian Region reported an average rent of €5.80 per sq m. Rent growth in the regions will probably not slow down until the end of this year at the earliest. In the vicinity of large cities, where demand still significantly exceeds supply, rent growth will continue next year. However, this will not shift as dynamically as last year.
Unless the market cools down significantly in the second half of the year, this year could equal last year in terms of the volume of leased warehouse and production space, according to 108 AGENCY analysts. During 2021, lease transactions covering 2.39 million sq m were concluded.