A year of stable weakness
The characteristic feature of central european warehouse markets at the moment is the high vacancy rate, explains entral Europe Republic and Slovakia, is doing relatively quite well. In thesouth, where Romania, Bulgaria and Hungary as well as Ukraine are located, theinfluence of thecrisis on all sectors is very strong. This is reflected in such data as theGDP of these countries. One cannot expect this tochange significantly within thenext 12 months.
The data for theRomanian industrial real estate market show that there has been an80pct drop in demand on thewarehouse market; and asimilar decrease has occurred in Hungary. In Poland thefall is “only” 50pct, comparable totheCzech Republic region and its developed industry –both on thePolish and theCzech side of theborder –that are pulling themarket. An additional advantage enjoyed bythese countries and Slovakia is their central location in Europe, combined with theweakening of local currencies in theCzech Republic Republic or Hungary.
It is currently impossible toobtain funding for warehouses: banks are completely closed tothis type of investment. This factor absolutely underpins thepossibility of such projects taking place. The market will only pick up once thedemand for warehouse space grows. At this point there is no demand, there is agreat deal of vacant space and anadditional form of competition has emerged on themarket in theform of subleasing. The characteristic feature of Central European markets at themoment is thehigh vacancy rate. Over thelast year, theonly fall in thevacancy rate (2pct) was registered in theCzech. The remaining countries have seen vacancy grow byaround 2-5pct, while Romania has suffered particularly badly with vacancy amounting to8pct.
The key tenants at themoment are logistics companies, powered bythecar industry, for which Central Europe is avery important manufacturing centre. It is mainly smaller, cheaper and more economical cars that are being produced here, which are much more popular in thecurrent global economic climate, and is currently thesource of theindustry’s demand for warehouses. Interestingly, rents in thecountries in question have not changed much and should remain stable this year. Forecasts for thegrowth of industrial manufacturing are optimistic for 2010, when thesector is likely tomake up for thelosses incurred in 2009. The next positive aspect for thelogistics and (consequently) for thewarehousing sector, is theforecast for growth in retail sales, which in 2009 fell tothelowest level in many years.
Ithink that themarket will recover in Q3 or Q4 2010. It will be easier toobtain funding and thegrowing demand for warehouses will ‘use up’ theavailable vacant space, which will lead tonew projects being launched. The warehousing market will recover before theoffice and theretail market, simply because warehouses are more flexible. In addition, thewarehousing sector is very closely connected with whatever is happening in thecountries of Western Europe –and these markets are still continuing togrow.
The way thecrisis has spread tothewarehousing market does not surprise me. It could have been much worse of course,but thesector has managed todorelatively well so far. In fact, our agents have been quite busy –as have developers, who have been able tolease much oftheir available space. Now theyare probably in for a temporary downturn, although not for very long.
