I&L market overview

The exCEEding Borders series of reports by Colliers are aimed at providing a wider regional view on the status and opportunities that the Central and Eastern European markets have to offer. In this edition, for the first time, we have taken a look at the Industrial and Logistics markets and related trends, across 17 countries in the region. These are: Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia and Ukraine.

The first point to mention, similarly with the development and contribution for each of the country’s economies, is that their industrial and logistics real estate markets are all at different stages of maturity, both in terms of size and the pace of development. As a result of this, you will see that data for some markets are detailed at a national level, while others are more focused around the main economic hubs, typically capital or major cities with larger pools of labour. Each of the markets have their own strengths, but also areas for further development.

As the report will explore, some of the key challenges in this sector, revolve around a number of factors that include: the availability of land and property in locations that meet both the developers and end-user expectations, the availability and reliability of utilities (and increasingly data networks) and transport infrastructure, the availability and skills of the labour pool, EU membership and access to investment incentives, amongst others.

Key contacts

Lukáš Hejduk
Lukáš Hejduk
Head of Real Estate, CEE
T +420 296 798 892
Gregor Famira
Gregor Famira
T +385 1 4825 600

Sector trends

E-commerce % Consumer GoodsE-commerce % Consumer Services
Czech Republic14,36%7,70%
Lithuania 4,53%3,80%
Portugal 5,99%3,90%
Spain 8,72%4,50%

source: Eurostat, National Statistical Offices, Statista, 2019

Some of the most frequently asked questions in recent times are, which sectors have been most impacted by the pandemic? And therefore, which companies are most at risk? And, what will this mean for the I&L sector? Well, in short, the most frequent and valid answer to that is that it is quite impossible and still too early to say. There are so many variables at play including the number of sectors, many of which are interlinked with one another, and then we are literally talking about hundreds of thousands of companies globally. To really get an understanding, we would need to dig through order books and financial statements and then run the risk that 6 months may just not be enough time to draw a conclusion. Our view is that we will see more evidence towards the end of year or early next, once government support schemes end, crisis loans need to be repaid and of course, how other waves of the pandemic impact further on industries and the economy as a whole. It is in all of our interests to hope that companies in this sector are well capitalized but, let’s be realistic, 6 months of disrupted supply or distribution, delayed or cancelled orders, inventory building up or perished, delayed payments and cashflow problems, for example, is enough to raise concern over some of the most well established organizations.

Of the sectors raising most concern, there are a few but we had a look at the automotive industry, after all, cars are one of the most expensive items that the many of us will make outside of our homes, and in challenging times we are more likely to delay such large purchases. For CEE, the automotive sector is a big deal, there are more than ten of the world’s major car manufacturers located across the region and then you have the thousands of materials, parts, transport&logistics and dealer companies that employ hundreds of thousands of people. So, as you can imagine, any major fall-out in this sector will have a sizeable economic impact. The automotive industry has not been without its fair share of disruption over the years, being challenged environmentally over petrol and diesel fuelled combustion engines, and the younger generations perhaps preferring to share cars rather than own them. One of the key ones has been the push for electric powered vehicles or other types of innovation around mobility as a service, and autonomous vehicles. We believe it will still take some time to work through the various challenges in this goliath of an industry, and we will continue to watch this space with great interest.

Moving on to a few of the sectors where there has been a lot of buzz and positive headlines, we took a look at the activities of Pharmaceutical, Third Party Logistics and e-Commerce companies around the region.

To offer some high-level summary, the pharmaceutical/life sciences sector is also a big player in this region. Afterall, we all get sick from time to time and they hopefully have the products that make us well again.

There are many administrative locations, but also numerous storage, R&D, production, tech and distribution locations related to all the big pharma names that will be familiar to most, through to the hundreds of companies that are perhaps lesser known to people outside of the industry.

During this health crisis, the whole world is desperately waiting for this group of companies and scientists to come up with a vaccine that will bring our lives back to some level of normality. Once that is done, it will need to be produced, stored and distributed at unprecedented volumes, so we can almost certainly assume that part of this effort will be carried out from CEE.

One sector that has dominated much of the property headlines has been e-commerce and 3PLs (third party logistics). These sectors have been gradually growing over the last decade or more in CEE. In the logistics sector you will find all of the big names from DHL, UPS, FedEx, etc. through to other substantial operators including Arvato, Ceva Logistics, DB Schenker, Geodis, Gefco, Geis, Kuehne+Nagel, Panalpina and Rhenus for example and many more. These groups are involved across all industries but are also involved in supporting the growth of e-commerce.

During the lockdown, the majority of retail was closed, shopping centres in particular, which led to a greater increase in demand for online retail. Initially this was focussed on groceries and essential items but then spread to DIY/hobby, gardening, sports and a variety of electronics and online entertainment. Other sectors such as fashion and footwear have been reported to have not done so well during these times, so much so, that some of these brands are seriously looking at pulling out of physical retail altogether and going online. All of which has meant, or will mean, increased demand for I&L property over the years to come.

Although the data around e-commerce is a little challenging to source and comprehend, the percentage of goods purchased online versus traditional methods is still fairly low in many markets. The adjacent table shows that, of the CEE markets featured, only the Czech Republic had a double digit share of online sales of consumer goods in 2019. Again, this leads to the view that this trend will only grow and the demand for space to accommodate this will also increase.