Key figures:

• The total supply of modern industrial space in the Czech Republic reaches 11 million sqm
• More than half of the currently under construction space is located in the Karlovy Vary, Pilsen and South Moravia regions
• Of the nearly 1.3 million sqm under construction, approximately 68% is already pre-let
• The vacancy rate increased by 43 basis points compared to the previous quarter but decreased by 23 basis points compared to the same period last year
• The average highest achievable rent in Prague increased slightly to €7.80 per sqm per month

Robert Sgariboldi, Director of JLL's Industrial Leasing Department, comments: "On the one hand, high rents are good news for property owners and investors, on the other hand, they can be a problem for new foreign investors and existing users renewing their leases during this period. Especially in Prague and its surroundings, tenants often face an increase of almost 100% compared to their original terms, so negotiations are often very long and complicated. The good news for the market is the newfound appetite of developers for speculative construction also in regions such as Pilsen, Brno or Ostrava, so tenants can still find new projects

Total supply of industrial space in the Czech Republic

The total area of modern industrial space for lease in the Czech Republic has reached 11 million sqm. In the first quarter, a total of 217,900 sqm of warehouse space was completed in 18 industrial parks across the Czech Republic. This volume represents a 25% increase compared to the previous quarter. However, there was a 26% decrease compared to the same period last year. At the time of completion, approximately 83% of these projects were already pre-leased.

The largest completed project in Q1 2023 was the new building at Panattoni Park Cheb South (42,500 sqm), which was fully let to Autodoc from the e-commerce sector and another undisclosed tenant at the time of completion. The second largest completed building (39,500 sqm) is located in Panattoni Park Chomutov North and is fully leased to the distribution company Jungheinrich. The third largest completed hall (21,900 sqm) is part of CTPark Ostrava Poruba and is almost fully leased to multiple tenants.

Projects under construction

At the end of Q1 2023, a total of 1,287,400 sqm of warehouse and production space was under construction, representing a 5% increase compared to the previous quarter and a 9% increase compared to the same period last year. Almost 25% of the total area under construction is located in the Karlovy Vary Region, followed by the Pilsen Region with 17% and the South Moravia Region with 16%. In the last quarter, new construction of a total of 171,500 sqm of warehouse and production space started. The share of space under speculative construction (without a pre-secured tenant) during the quarter was 32%. By the end of 2023, we expect approximately 900,000 sqm of additional space to be completed, in which case it is possible that the total area of modern industrial space for lease in the Czech Republic will approach the 12 million sqm mark this year.

Realized demand

In Q1 2023, gross take-up (including renegotiations) reached 344,400 sqm, a slight increase of 1% compared to the previous quarter and a decrease of 52% compared to the same period last year. The share of renegotiations decreased by 15 percentage points compared to the previous quarter and accounted for 21% of gross take-up. Net take-up in the first quarter of 2023 totalled 272,900 sqm, a 24% increase on the previous quarter and a 25% decrease on the same period last year.

Significant leases within the demand

The largest new transaction in Q1 2023 was the 52,600 sqm pre-lease of CTPark Blučina signed by Inventec. The second largest transaction completed was a pre-lease at CBPI Business Park, where UCT Fluid Delivery Solutions pre-leased a total of 26,500 sqm. The third largest new transaction was a pre-lease at Panattoni Park Pilsen West II, signed by Panasonic for a total area of 24,700 sqm. The largest renegotiation (14,100 sqm) in the first quarter was concluded by an undisclosed company in the retail sector at the Prologis Park Prague-Úžice industrial complex.

Vacancy

At the end of Q1 2023, the vacancy rate in the Czech Republic reached 1.4%, representing a quarter-on-quarter increase of 43 basis points. Compared to Q1 2022, the vacancy rate decreased by 23 basis points. Overall, there is currently only 150,000 sqm of modern industrial space on the market ready for immediate occupation. The vacancy rate for industrial warehouse space in the Prague region and the surrounding area is even lower than the national rate and has been near zero since Q2 2021.

Rents

Prime headline rents for industrial and logistics properties in the Czech Republic reached €7.70 - 7.90/sqm/month in Q1 2023. Some special offers, especially in Prague, start at €8.50/sqm/month. In selected locations outside Prague, rents are now around €5.75 - 6.50/sqm/month. Rents for office buildings are as high as €9.50 - €12.50/sqm/month. Typical service charges are between €0.75-1.00/sqm/month.