Industrial property in the Czech Republic is still under pressure from negative factors
The rise in interest rates has had a painful impact on the European property market. And even after optimistic forecasts for their reduction, it is too early to talk of a rapid recovery. At the same time, the situation in several EU countries remains less catastrophic. In the Czech Republic, industrial property is performing well. Since the beginning of 2024, there has been an increase in activity. Analysts expect this trend to continue until the end of the period.
Outlook for the industrial property sector
The experts at 108 REAL ESTATE believe the Czech property sector is on the road to recovery. Activity in the development construction segment has increased. Thanks to lower interest rates, tenant demand is also rising. Analysts note activity from both companies and households.
The total prime industrial space available for rent in the Czech Republic is 11.98 million square metres. It grew by a record 1.08 million sqm in 2023. The sector continues to recover. Developers’ and owners’ policies play a key role in this. They are pursuing a relatively flexible strategy, which allows them to react quickly to changes. In addition, market players are coping well with growing demand and competition from other countries. This is especially true in Poland, where developers are willing to take various steps to attract foreign companies.
According to Jakub Cholec of 108 REAL ESTATE, a price correction is likely in the Czech market. This, in turn, could positively affect the sector, reducing the impact of both domestic and global risks. However, the rapid decline in vacancy rates could become a limiting factor.
Challenges for the Czech market
In 2024, the situation in the industrial property sector is as follows:
– total gross demand has reached 485.15 thousand sqm, including expansions;
– analysts estimate net demand at 311.38 thousand sqm;
– subletting accounts for a significant share of the total.
At the same time, the market is still feeling the effects of the negative factors that were at work in 2023. In the final months of the previous period, the sector came under pressure from rising tenant costs. In addition, there was a downturn in automotive activity and a decline in e-commerce.
All of this led to a significant number of warehouse leases being terminated. Moreover, all of them had to be let on a long-term basis.
Notably, the decline in e-commerce activity did not affect all sectors. New online shops appeared, and large retail chains expanded their activities. These trends have offset some of the losses resulting from the increase in vacant space.
The rent increase led to some companies withdrawing from the Czech market. This situation has benefited Poland, where rents are significantly lower. As a result, many tenants prefer to locate their businesses in neighbouring countries.