INDUSTRIAL STOCK & SUPPLY

During Q3 2019, developers in the Czech Republic completed industrial premises totalling 160,500 sq m (29% increase on the previous quarter). With these new completions, the total modern industrial stock in the country reached 8.25 million sq m, 3.06 million sq m of that is located in and around Prague. Only 11% of the Q3 2019 new supply was remaining vacant at construction completion. The largest building delivered to the market in Q3 was the custom-built warehouse for ViaPharma in Panattoni Park Prague Airport II (22,900 sq m).

The development activity brought the year-to-date supply to 466,500 sq m, which is still 18% down compared to the same period last year, but at around the same level as in 2017. The largest volume of all year-to-date completions was located in the Moravia-Silesia region (24%), followed by Prague (20%) and South Moravia region (14%).

A further 651,300 sq m of industrial space was under construction across the country at the end of Q3 2019 and of that up to 245,000 sq m was scheduled for delivery in the final quarter of 2019. Construction activity in regional submarkets continued to outperform Prague. 19% of the development pipeline volume was under construction within the Moravia-Silesia region and the same share also applied to the Pilsen region. Prague ranked 3rd, very closely followed by Ústí nad Labem region.

VACANCY

Unoccupied premises within existing grade A industrial buildings totalled 329,300 sq m at the end of Q3 2019. This made up a countrywide vacancy rate of 4.00%, which was the same as in the previous quarter this year and 53 basis points above the vacancy rate reported in Q3 2018.

Most of this unoccupied space is located in Prague (91,600 sq m), the Southern Bohemia region (85,200 sq m) and Pilsen region (69,200 sq m), however some of these units are under short-term lease commitments of less than 12 months.

The vacancy rate in Prague increased slightly from 2.6% at the end of Q2 2019 to the latest 3.0% (being 61 bps below Q3 2018) and the volume of unoccupied grade A industrial space increased to the above-mentioned 91,600 sq m. Larger industrial units are very scarce in Prague. At the end of Q3 2019 there was only one single unit exceeding 10,000 sq m available for immediate occupation in the city.

Smaller regional markets in Eastern Bohemia (Hradec Králové and Pardubice), South Bohemia and the Zlín region remained with zero vacancy.

DEMAND

In the course of Q3 2019, industrial tenants signed lease commitments for premises totalling 380,300 sq m, which was 10% below the results of the previous quarter but an 11% improvement year-on-year. A big portion of this quarter's gross take-up was made up by lease renewals concluded in Prague (19%), followed by pre-lets in the Pilsen region (10%). The year-to-date gross take-up reached 1,114,700 sq m, which is 5% above the leasing activity logged during the same period of last year.

Net take-up in Q3 2019 reached 231,100 sq m, showing a 6% decline compared to the Q2 results but an increase of 4% year-on-year. 60% of the Q3 net take-up was concluded in the largest Czech industrial submarkets - Prague, South Moravia region and Pilsen region.

Manufacturing companies continued to drive new demand for modern industrial space in the Czech Republic also in Q3 2019, standing behind 35% of the total net take-up volume, followed by logistic services providers who accounted for 32% of this quarters' new demand.

Total net take-up for the first three quarters of 2019 came to 685,900 sq m, 10% above the new demand recorded during the same period last year.

RENT LEVELS

Headline rents remain unchanged, starting at around €3.65 per sq m a month in tertiary locations and climbing to around €4.90 in Prague. Headline rents for smaller units (around 1,000 sq m or less) are in the range of €5.10 – €5.60 per sq m a month across the country.

Mezzanine office space is typically leased for €8.50 – €9.50 per sq m a month.

Monthly fees for service charges commonly reach €0.55 - €0.70 per sq m, but might come to €0.90 – €1.00 in case of small business units of around 500 sq m.

Incentives offered by landlords are mostly in the form of rent free periods or fit-out contributions and on average result in a 5% discount on the headline rent.

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