The Prague area offers some of the most expensive warehouses in Europe

"The results demonstrate the resilience and attractiveness of the Czech industrial space market. Despite Poland's reputation as a country with lower labour costs, the data shows that companies are willing to pay a premium for the advantages offered by Prague's strategic location and well-developed infrastructure,"

Jakub Holec, Director of 108 REAL ESTATE, comments on the results.

The high acceleration of rents in warehouse space in Europe was recorded mainly in 2021 (12.5%) and last year (11.9%). This year shows an average 6.1% increase in rents, but there are large territorial differences: while warehouses in the Benelux, Paris, Warsaw or Birmingham are renting 10 percent or more than in 2022, Prague is one of the logistics cities where rents are stagnating.

"This confirms our earlier statements that the market has hit its ceiling. Cost sensitivity is evident across the market and in sectors that have not been affected by the downturn in demand. Despite the overall resilience and attractiveness of Prague, which competes with Vienna or Berlin in terms of rent levels, landlords have reached the maximum rent levels that tenants are willing to pay at the moment. In addition, we are already seeing a noticeable drop in demand for industrial and logistics space,"

says Matěj Indra, Head of Industrial Property Leasing at 108 REAL ESTATE.

The highest achieved rents in the vicinity of the Czech capital have not been weakened by the persistent decline in retail spending. And although even local purchasing power is still below Western European levels, demand is proving that warehouses in Prague

are key for many types of tenants in the whole Central European region. The expanding motorway network or better and faster rail links to neighbouring countries should also help its importance. The completion of the motorway network and the improvement of the rail network is a necessary condition for maintaining competitiveness in the future.

However, as the study by 108 REAL ESTATE and BNP Paribas Real Estate points out, the rise in rents is not only due to higher demand, but rather to inflation and higher costs for developers, as well as more expensive traffic. The forecast does not assume that growth will stop - even in the face of limited new construction opportunities, which applies across the continent.

The Czech Republic is likely to be no exception in the coming period. With a vacancy rate of 2.68% including shell & core space and 2.19% without it, it is below the current European average (4%). Significantly more vacant space, which would have a direct impact on average asking rents, cannot be expected even after the completion of the 1.3 million sqm of logistics and production halls currently under construction.

"At a time when prices of practically everything are rising, we can't expect industrial rents to fall,"

concludes Matej Indra.

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