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Q1 2022: The highest new supply in history, the total supply of modern industrial real estate is just under 10 million sqm
TOTAL STOCK & NEW SUPPLY
The modern, developer-led warehouse stock in the Czech Republic has almost reached 10 million sqm. Given the number of projects under construction, it may surpass 11 million within a year. Approximately 307,000 sqm was newly delivered to the market in Q1 2022 within twenty industrial parks across the country. This represents a 309% increase compared to the same period last year, when the slowdown in construction activity from 2020 was most pronounced. Even quarter-on-quarter, it is a 106% increase. This is the highest result in the history of the Industrial Research Forum. Similar or even higher project completion volumes are expected in the next four quarters, although any predictions are difficult especially in the current era of shortages of construction materials and related labour.
The largest completed industrial hall is a 42,300 sqm building located in the industrial Contera Park Ostrava D1. At the time of completion, it was fully occupied. The second largest completed building is located in CTPark Cheb (34,300 sqm), the warehouse was fully leased to 3PL company DHL and bicycle manufacturer Cube Bikes at the time of completion. The third largest completed project in Q1 2022 is an extension of a building at CTPark Bor for an unspecified e-commerce company (25,400 sqm).
PROJECTS UNDER CONSTRUCTION
At the end of the first quarter of 2022, a record amount of space was under construction, a total of 1,130,000 sqm of warehouse and production space, a 2% increase compared to the previous quarter and a huge 103% increase compared to the first quarter of 2021. Approximately 23% of this space is located in the Olomouc region, another 14% in the Moravian-Silesian region and another 13% in the South Moravian region. During Q1 2022, development works commenced on a total of 270,300 sqm of industrial space. The share of speculative space under construction rose slightly to 25% during the quarter. By the end of 2022, we expect about 1 million sqm of warehouse and production space to be completed. Combined with the first quarter, this would be the largest amount delivered to the Czech market in one calendar year.
During Q1 2022, gross take-up, including renegotiations, reached 724,300 sqm, a 12% increase compared to the previous quarter. This is the second highest volume after the still record-breaking first quarter of 2021, compared to which gross take-up was only 5% lower. Renegotiations accounted for 47% of gross take-up, up from 30% in the previous quarter.
Net take-up in Q1 2022 totalled 384,100 sqm, showing a decrease of 15% quarter-on-quarter and quite a notable increase of 28% year-on-year. Logistics companies had the largest share of net take-up (excluding confidential deals) in the first quarter, accounting for 42% of the total, followed by manufacturing companies, which accounted for 37% of net realized demand. Distribution companies were farther behind with a 19% share of the total volume.
MAJOR LEASES WITHIN TAKE-UP
The largest new transaction in Q1 2022 was a 36,400 sqm pre-lease at Panattoni Park Pilsen West II, signed by an undisclosed production company. The second largest new transaction was a new lease at Panattoni Pilsen Park West of 30,500 sqm. The name of the tenant has not been disclosed yet, but it is a company from the logistics sector. The third largest new transaction was at Ostrava Airport Multimodal Park, where Česká Pošta pre-leased 28,000 sqm. The largest renegotiation (61,500 sqm) in the first quarter was concluded at Prologis Park Prague-Jirny industrial park, where the retail company Globus signed an extension of its existing contract with Prologis.
At the end of Q1 2022, the vacancy rate in the Czech Republic reached 1.8%. Compared to the previous quarter when the vacancy rate was revised to 1.3%, this is an increase of 47 basis points. This marks the end of the decline in the vacancy rate after almost two years, as indicated by a 133 basis point year-on-year decline and a 244 basis point decline in the two-year comparison. A total of 175,300 sqm of modern industrial premises is available for immediate occupation. The vacancy rate in the Greater Prague region was just 0.9% at the end of Q1 2022. If we exclude vacant office space from the vacancy rate and focus only on empty warehouse space, we find that in some regions, particularly in Greater Prague, the vacancy rate is several tens of basis points lower and is almost zero.
The prime headline rents for modern industrial and logistics properties in the Czech Republic reached €6.40 per sqm/month in the first quarter of 2022. Some special offers, especially in Prague, start at €8.00 per sq m/month. Rents for mezzanine office space stand between €9.50 - 12.50 per sqm/month. Typical service charges range between €0.65-1.00 per sqm/month.