Having doubled over the past five years, warehouse rents have peaked, according to Miroslav Kotek (Colliers). Available stock was already drying when the pandemic helped drive e-shop occupancy to unsustainable levels. The e-shop fever has broken, however, leading to consolidation in the market as earnings slow. But there are other reasons warehouse rents are subsiding. “The reason why prices have hit the ceiling now is the fact that the previous period of dramatic growth threatened the Czech Republic’s competitiveness compared to neighbouring countries. As it turned out, in some locations prices were really inflated by excess demand and now they are returning to normal. The market is saturated, and we are seeing price corrections. The rather drastic drop in demand, to which landlords are trying to respond, also plays a role,” explains Miroslav Kotek, Head of Industrial Property at Colliers, adding: “The correction in rental prices is particularly noticeable around Prague, where prime space is priced at around €7 per sq m, while in the regions prices are holding at around €6.”
General economic uncertainty is also taking a toll seen most visibly in a reduced appetite for long-term lease terms. When online retail growing at dizzying speed. Until recently, the industrial sector was driven by tenants who were growing so quickly, their biggest worry was they wouldn’t be able to find new space when they outgrew their existing premises. Today, despite Czechia’s miniscule vacancy levels (2%), many occupiers are pushing for shorter lease terms, in case they have to downsize. As Kotek points out, changes in global supply chains and disruptions caused by pandemics are also contributing to the need for more flexible warehousing solutions. But finding developers willing to accept non-standard conditions can be tricky, leading to a lengthier search period. “A shorter lease may mean higher rents or less willingness by the landlord to negotiate a discount or specific incentives,” he says. “On the other hand, we have noticed a willingness by landlords to accommodate potential tenants in other ways – this may involve equipment in the premises or other attractive lease options.”
All of this points to a gradual price correction, predicts Kotek. While warehouse demand will slow compared to previous strong years, the need for warehouse and manufacturing space will remain stable. “In the current dynamic environment, it is crucial that companies plan well in advance and constantly monitor the market. The ability to make quick decisions and react to new opportunities is essential, given the local market often changes quickly and opportunities may only be around for a short period of time.”
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