The pace of warehouse occupation is slowing down. The main reason is concern about the development of the automotive industry

One figure remains surprisingly constant: the activity of developers, who continue to announce 1.32 million sqm of logistics and production halls under construction. Total industrial space for lease reached 11.758 million sqm after 319,000 sqm of new space was completed in the third quarter. "We see a lot of caution on the part of tenants in view of the uncertain development of the automotive industry, which applies to both the Czech Republic and Germany. This is partly related to the transition to electric cars, where traditional car companies are facing increasing competition. This is evidenced by the release of the first industrial space around Mladá Boleslav, which we have not seen for a long time," says Jakub Holec, Director of 108 REAL ESTATE.

Perhaps also in view of the significant volume of industrial space under construction, 108 REAL ESTATE consultants noted in Q3 the willingness of developers to offer parts of halls for lease and to accept shorter lease terms. We see the market subdividing larger spaces into units of around 2,000 sqm and leases of 3 years. This is a big change," says Matěj Indra, Head of Industrial Leasing at 108 REAL ESTATE. In the case of subleases, logistics companies most often vacate space for third parties.

Landlords have been hit by a combination of several negative factors in recent months. Among the main ones is the persistent drop in demand from domestic consumers and customers. This has been reflected in a decline in net demand, with almost 54% less industrial space leased quarter-on-quarter in Q3, down 42% compared to the same period last year.

Consultants from 108 REAL ESTATE also register a decrease in the volume of tenders from logistics companies. "Apparently, the Czechs are saving the most of all EU countries. We cannot yet estimate whether this is postponed consumption or a long-term trend where products will no longer find their buyers," explains Michal Bílý, Head of Market Research at 108 REAL ESTATE. Other negative influences clearly include the high competition of the Polish market. It is more flexible, more attractive in terms of space and costs associated with renting, has a modern transport infrastructure, which also receives additional investment, and has a workforce.

All this leads to a growing vacancy rate of industrial space in the Czech Republic. It is not yet a dramatic, leapfrog increase, but it is again a signal of a change in the market. The vacancy rate reached a total of 2.68% at the end of September, including shell & core space, which represents 314,827 sqm of modern industrial space. Excluding shell & core space, the vacancy rate totalled 2.19% with 258,563 sqm. Landlords' concerns are also reflected in a more accommodating pricing policy, despite the still high cost of credit.

In the Czech Republic, rent growth has essentially stopped, but even so, the market is currently unable to compete on price with Poland. Average rents in the Czech Republic reached EUR 6.07 per sqm. The highest rents in the capital city of Prague are up to EUR 8.00 per sqm. "However, regional and quality differences are significant. In some places the highest rents have fallen, in others the lowest - this is evident in the South Bohemia, Karlovy Vary or Pardubice regions. On the other hand, warehouse space in the vicinity of Plzeň, Olomouc or Ústí nad Labem, for example, went up slightly," calculates Michal Bílý.