Holec: Most industrial space leasing pre-construction

108 Agency writes that the stock of industrial real estate in the Czech Republic grew by 71,748 sqm in Q2 2021 to 9.33 million square meters, with nearly 550,000 sqm under construction as of the end of June. It’s unclear whether the new space will relieve the pressure of demand vacancy fell 1.35% from Q1 to just 2.72%. Most of the unclaimed space is located in the Moravian and Silesian region and around Pilsen. Vacancy in the greater Prague area is virtually non-existent at 0.04% and there no units of over 10,000 sqm immediately available.

“Development companies are now beginning to build speculatively, but invariably for a a pre-agreed client,” says Jakub Holec, 108 Agency’s CEO. “Speculation then entails constructing a larger building and waiting for other tenants.” Usually, says Holec, the remainder of the space leases out before construction ever begins, especially in the greater Prague and Brno regions. In its Q2 report, the agency writes that Concens, CTP and P3 are currently developing the largest free spaces under one roof currently under preparation are mainly found in the Moravian and Silesian and Ústí nad Labem regions.

Gross take-up (which includes extensions) reached 412,037 sqm in Q2, with 285,122 sqm in net demand. For H1 2021, that works out to more than 1,214,768 sqm in gross demand. “Record demand indicates that tenants do not want to have to deal with relocation right now, but at the same time do not want to jeopardize possible expansion. The rise in prices of rent and a lack of alternatives are putting many tenants off embarking on a drawn-out decision-making process,” says Michal Bílý, analyst at 108 AGENCY. Rents are already high in the Czech Republic (€4.90 to €6.50 around Prague), but 108 Agency warns that rising construction costs are set to send them even higher. Central Bohemian rents are currently between €4.80 and €5.50 per sqm/month while in South Moravia, the range is even wider (€4.6 to €5.9 per sqm).

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