Czech Republic Overview of the Czech warehouse market

Currently, we monitor a structural change in demand. The importance of manufacturing companies has been growing with over 40 pct share on take-up throughout 2022-2023, slowdown in demand from e-commerce and 3PL companies is evident in total numbers which is not surprising as these two sectors are quite connected. Prime rents are currently stable, and we expect only a slight inflation-driven increase next year mainly in the case of new leases as renegotiations are under different rental frameworks. In some competitive regions, we might experience a downward pressure on rental levels. There is also a shred of evidence for a slowdown in demand caused by the decision-making of clients due to uncertain economic outlook.
Jan Hrivnacky, Head of Industrial Agency, CBRE

Total stock & new supply

The modern developer-led warehouse stock in the Czech Republic reached 11.70 mln sqm in Q4 2023. A total of 271,600 sqm of new warehouse space was delivered to the market within 15 industrial parks across the country. This represents a 56 pct increase compared to last year and a rise of 49 pct q-o-q. App. 84 pct of the newly delivered projects were already pre-leased at completion.

The most significant completion in Q4 2023 was a new building in CTPark Brno (30,500 sqm) occupied by multiple tenants from 3PL and manufacturing. The second largest completed building was in Arete Park Rokycany II (29,500 sqm), which was fully leased to Duvenbeck Logistik, a company from 3PL. The third largest completion was in Garbe Park Chomutov (29,100 sqm), which German optics company Fielmann fully leased.

The most significant completion in 2023 was the completion of building C in GLP Park Brno Holubice (45,500 sqm) leased by multiple tenants.

Projects under construction

At the end of Q4 2023, app. 981,200 sqm of industrial space was under construction in the Czech Republic, representing a decrease of 30 pct compared to the previous quarter and a 20 pct decrease compared to the same period last year. As already mentioned, only 271,600 sqm were delivered this quarter, ca. half of the space that should have been delivered; this is the result of speculative construction, which started last and this year. Nearly 200,000 sqm due to be delivered in Q4 2023 are now halted just before completion, where developers wait to lease the buildings before construction (a state called "Shell & Core"). In addition, over 100,000 sqm were already in Shell & Core before Q4 2023; as such, these buildings do not affect the current construction, new supply, or existing vacancy.

Since Q1 2023, the share of speculative space under construction has slowly risen. In Q3 2023, it grew to 41 pct, but in Q4, it dropped below 30 pct. At the same time, developers commenced new construction of only 130,500 sqm of modern industrial space in Q4 2023, with over 70 pct of this space speculative.

Industrial take-up

During Q4 2023, gross take-up, including renegotiations, reached 396,900 sqm. This represents an increase of 109 pct compared to Q3 2023 figures and a slight increase of 16 pct to Q4 2022. The share of renegotiations increased by 17 percentage points compared to the last quarter and accounted for nearly 40 pct of gross take-up. Net take-up in the fourth quarter of 2023 totalled 242,600 sqm, an increase of 72 pct quarter-on-quarter and a minor increase of 10 pct year-on-year. Pre-leases accounted for the largest share of demand, with 47 pct of total gross take-up.

Overall, both gross and net industrial demand have slowed during 2023. This was expected after the previous strong years, which were supported by several XXL transactions. For the entire year, gross take-up reached 1,520,600 sqm, representing a decrease of 31 pct compared to 2022 and a reduction of 38 pct compared to 2021.

Major leases within take-up

The two most significant transactions in Q4 2023 were signed in Karlovy Vary region. The first was in Panattoni Park Karlovy Vary, where Wacker pre-leased over 30,000 sqm. The second lease was also signed with Panattoni in Ostrov South, where an undisclosed company pre-leased nearly 27,000 sqm. The third largest new transaction happened in CTPark Cerhovice, where an undisclosed manufacturing company pre-leased 21,000 sqm. The largest renegotiation Yusen Logistics signed this quarter in P3 Prague D1, where they renewed their 24,700 sqm premises.

Vacancy

In Q4 2023, the vacancy rate in the Czech Republic reached 1.75 pct, representing an increase of 34 basis points q-o-q and an increase of 94 basis points y-o-y. At the end of Q4 2023, 205,400 sqm of modern industrial space was available for immediate lease. This is the most significant volume of space available for immediate occupation since Q1 2021 when nearly 270,000 sqm were vacant. Given the enormous volume of space being built, the vacancy rate is particularly susceptible to changes in the delivery of speculative projects currently under development. The vacancy rate in industrial warehouse space in the Prague region and the surrounding area is more constrained than the national rate, which has been stable at close to 0 pct since Q2 2021.

In addition, we monitor a large amount of shell and core space without planned delivery. The current amount of vacant space in shell and core exceeds the amount of vacant existing space by over 100,000 sqm. As of Q4 2023, there is some 300,000 sqm of vacant space in shell and core, waiting for a suitable tenant.

Rent

Prime headline rents in the Czech Republic are stabilised, reaching around EUR 7.50-7.70 sqm/month in Q4 2023. Prime rents in selected prime locations outside of Prague follow a similar development, achieving around EUR 5.70-6.60 sqm/month. The rent for mezzanine office space is between EUR 9.50 and 12.50 sqm/month. Service charges are typically around EUR 0.75–1.00 sqm/month.

Industrial Research Forum

The Industrial Research Forum was established in 2010 with its aim to provide clients with consistent and transparent data about the Czech Republic industrial real estate market. The members of the Industrial Research Forum, CBRE, Colliers, Cushman & Wakefield and iO Partners, share non-sensitive information and believe the establishment of the Industrial Research Forum will enhance transparency on the Czech industrial market. JLL has entered into a partnership agreement with iO Partners in the Czech Republic, as of July 1, 2023.