The Czech I&L market benefits from its central European location as well as its good industrial and transportation infrastructure. One of the most attractive aspects for international companies is the pool of highly skilled labour. As a result, the main I&L hubs concentrate around the major population and educational centres like Prague and Brno.
Greater Prague remains the most sought-after region and continues to be able to supply a qualified workforce and its central location and market size is the biggest driver of growth. Smaller but still highly popular regions for the I&L sector are located around Pilsen and Ostrava. The greatest advantage of Pilsen is the close proximity and good connection to Germany via the solid transportation and highway infrastructure. Pilsen is also home to a good technical university that seeks and supports collaboration with companies in the R&D and other sectors. The Ostrava region benefits from good railway connections, a modern airport and cheaper labour that can also even be sourced from neighbouring countries.
Supply, demand & vacancy
The Czech market is dominated by several international and regional developers such as CTP Invest, Prologis, P3, VGP and Contera. The stock of industrial space has enjoyed exceptional growth of 11% over the last five years and has doubled since 2013. With 317,000 m2 of newly delivered space in H1 2020, the total stock is 8.82 million m2. Around 441,600 m2 of new space was under construction at the end of June 2020.
At the end of H1 2020, the vacancy rate in the Czech Republic stood at 4.6%. Despite this seemingly low number, the availability of larger space is better than in previous quarters, with 11 properties offering space in excess of 10,000 m2.
Take-up for H1 2020, reached 678,200 m2, which was a 13% decrease over H1 2019. The share of renegotiations was 58%. Tenant sectors in terms of operation were led by 3PL (47%).
Rental rates & lease conditions
Lease agreements by type
Prime rents in Prague and Brno stand in the range of EUR 4.5-4.85/m2/month. Other regions such as Ostrava, Pilsen and Usti nad Labem have rents in the range of EUR 4.00-4.35/m2/month. The previously common incentives of one month rent free per year of lease is no longer the standard and developers now provide incentives based on location, lease size and length. The tenant profile/covenant also plays a big role in rent negotiations. Average lease lengths in the Czech Republic range between 5-10 years.
The availability of large units for lease combined with the low average vacancy rate, creates an ideal environment for BTS developments, depending on the availability of land and permits, with landlords remaining in a strong negotiating position. In the coming months of 2020, we expect 268,000 m2 of space to be delivered, a continuous increase in size of new space entering the market. This trend proves that the Czech Republic is still one of the most sought-after destinations within Europe for the development of new I&L properties. The share of renegotiations in lease structure will remain dominant. That is due to both the relatively low vacancy and also the situation in the labour market, where companies prefer to stay in established locations rather than facing the issues of hiring new staff, as long as the countrywide unemployment rate remains low at around 3.5%.
Top 5 lease agreements
|Company name||Region||Park Name||Size (m2)||Sector||Lease Type|
|FAST ČR||Central Bohemia region||Contera Park Říčany||40,500||Retail||Renegotiation|
|Sumisho Global Logistics||Plzeň region||CTPark Plzeň||30,655||3PL||Renegotiation|
|XLMX obchodní||Ústí nad Labem region P||P3 Lovosice||25,060||Retail||New lease|
|Faurecia Plzen s.r.o.||Plzeň region||Pilsen West Industrial Park||22,490||Automotive||Renegotiation|
|MOL Logistics||Plzeň region||CTPark Plzeň||15,500||3PL||Renegotiation|