Interest in industrial space in the Czech Republic is driven by strong demand - retail, automotive and manufacturing are thriving

Nearly 190,000 sqm of modern industrial space was let under new leases in the Czech Republic in the second quarter. After taking into account renegotiated contracts, the total realised demand for warehouse and manufacturing space in the Czech Republic from April to the end of June reached 337,625 sqm. In terms of new leases, the past quarter thus surpassed the beginning of this year. The data was published by real estate consultancy 108 REAL ESTATE.

The last three months have brought several other findings in addition to sustained interest. Among the most important is the higher volume of successfully completed transactions despite the persistent uncertainty regarding customs barriers to exports to the US or to countries that are more oriented to the US market than the Czech economy. Clearer terms resulting from the agreement between the US and the European Commission at the end of July could mark the end of this uncertainty. There is also a clear desire by companies from all over the world to be closer to European customers and to open new branches on the continent or to move their entire production to Europe.

"Our analyses also show a growing interest in leasing industrial space by retail companies. In addition to the continued dominance of the main Czech e-commerce players, we are also seeing a boom in Chinese e-shops, which are reducing sales to smaller online retailers while taking some capacity away from logistics providers such as 3PLs. However, we expect that the volume ratios of Czech and Chinese e-shops on the market may soon change again. This will be due to upcoming EU measures, especially against the TEMU platform,"

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

According to him, it is also worth paying attention to the gradual halt of speculative development construction, the number of tenders announced by global logistics companies or the repositioning of the automotive segment due to the stagnation of interest in electric vehicles. There is a noticeable and as yet unrecorded interest of tenants in industrial space with higher technical standards, often in less accessible locations or at higher rents. Rent levels have remained virtually unchanged since the beginning of the year.

The total supply of premium industrial space in the Czech Republic stood at 12.10 million sqm at the end of June. Including shell and core space, it reached 12.65 million sqm. Shell and core space totalled 548,360 sqm. These can benefit from several major tenders from global logistics companies, some of which are also evaluating the speed of completion of modern warehouse space for in-demand warehouses.

In the second quarter, developers completed 138,657 sqm of new industrial space. The largest was a modern hall in Industrial Zone Hruškové dvory in Jihlava for Robert Bosch with more than 40,000 sqm. A similar area was offered by the new part of Panattoni Park Chomutov North for the manufacturer of components for the automotive industry Thermoflex and the logistics operator HOPI. Most of the new space was completed at the end of the second quarter in the Karlovy Vary Region (270 thousand sqm), in the Central Bohemia Region (264 thousand sqm) and in the Moravian-Silesian Region with 262 thousand sqm.

The largest new transaction was the lease of 43,473 sqm in P3 Lovosice Cargo to Yusen Logistics. ROSSMANN drugstore leased 31,000 sqm in CTPark Prague North and 10,978 sqm was taken by AUTO DOCK in Panattoni Park Cheb South. Most new leases were signed by companies from the logistics and warehousing sector, namely 76.6 thousand sqm. This was followed by companies from the wholesale, e-commerce and retail sector with 63 thousand sqm. Manufacturing companies occupied a total of 37 thousand m2 and companies from the service sector 12.8 thousand m2.

The supply of shell and core space decreased slightly quarter-on-quarter due to the greater caution of developers, but still reached 7.40%. This represents a total of 936,716 sqm. Vacancies in these projects can be completed almost as quickly as the process of reviewing and signing contracts for existing space. If subleases are included, the overall percentage would then probably exceed 8%. The vacancy rate for completed space has risen slightly to 4.22%. In absolute terms, this means over 511,000 sq m available for immediate occupation. Most vacant space remains in the Pilsen region.

"In the second quarter of the year, we again witnessed a lower performance of the Czech premium industrial space market, with new leases again reaching below-average values. The first half of the year thus showed roughly the same figures as the first half of last year. Given the competition from Chinese vehicles on the European markets as well as e-commerce in the e-commerce sector, we are seeing a retreat of positive sentiment in the domestic industrial market in combination with the escalation of tariff barriers. Indeed, the two largest transactions account for almost 40% of the total volume of new contracts. After subtracting these, activity in the market is well below average,"

Michal Bílý, head of the market research department at 108 REAL ESTATE, summarizes the latest data. The trend is also visible thanks to the first transactions concluded in July and those to be signed in August and September.