CEE region Logistics investment set to rise

The total supply of modern industrial and logistics stock across the 17 countries covered by the report is well over 50 mln sqm in total. Vacancy rates are low being less than 5 pct in most countries.

From this supply, the current availability can be categorised as low, with the majority of markets recording vacancy rates of below 5 pct.

Demand from the I&L sector in the CEE region over the past few years has overall been strong and has been driven by the 3PL, retail and distribution sectors, followed by the light production, automotive and FMCG sectors. During the pandemic and looking forward, we do expect to see some changes to the order and volume of this demand with sectors such as e-commerce, data centres and specialist storage increasing their requirements. Despite this, the CEE region has a long industrial tradition and remains very attractive to manufacturers ranging from the full spectrum of automotive parts, through to aerospace, metals and plastics, complex electronics, home appliances, food, beverages, pharmaceutics and medical equipment. While we expect e-commerce to grow at a more rapid pace and drive demand through these challenging times, we also expect that, over the longer term, we will see greater demand from producers/manufacturers to bring back parts of their supply chain closer to Europe to mitigate certain risks that we have seen in the past few months. In future, this may mean that larger inventories are stored or produced closer to the end consumer which could also translate to greater demand for I&L space.
Kevin Turpin, the regional director of research, CEE at Colliers International.

Rents across the region have been largely stable, with growth recorded in the most sought-after locations, and where availability is limited. This trend is expected to continue, particularly as demand has been good and construction costs have also been on the rise over the past few years. Monthly headline rents usually range between EUR 2.9 and 5.5 per sqm although, markets in earlier stages of development can currently reach upwards of EUR 7.0 per sqm.

Typical land prices across the region vary between EUR 10 and 80 per sqm; however, due to the scarcity of land in the most sought-after locations, particularly those closer to major cities or economic/productive hubs, prices can rise up to between EUR 120 and EUR 150 per sqm.

Typical construction costs for a typical warehouse across the region range between EUR 300 and EUR 600 per sqm. Higher costs have been reported in some markets but overall, a combination of increased labour and materials costs have driven up construction costs by as much as 25 pct or more over the past few years.

Given industrial output is near record levels in most CEE countries, it is undeniable that the region has become a magnet for manufacturing and logistical operations. Countries in the CEE region have attracted significant levels of foreign investment, thanks in part to the region’s well-educated work force, rapidly developing infrastructure and the lower labour costs when compared to Western Europe. In addition, there are bespoke legal incentives available to I&L investors in many countries. Legal advisers can play an important role in not only helping to mitigate risk but in steering investors to benefit from innovation and opportunities to flourish.
Lukas Hejduk, CMS partner and Head of Real Estate in CEE