According to Savills latest report the record take-up levels and no speculative completions caused the national vacancy rate to plummet 70 bps to a new low of 1.75%, one of the sharpest quarterly declines observed in the market in the last five years. The total volume of modern industrial space available for lease across the country fell from 226,700 sq m in June to 165,000 sq m in September.
New industrial developments that were completed in Q3 2021 totalled 136,400 sq m. Although this was slightly down in y-o-y comparison, Q3 was the strongest quarter this year in terms of new deliveries. The national stock of modern industrial space intended for lease expanded to 9.5 million sq m, of which 329,400 sq m was brought onto the market this year.
Of all 14 regions, 11 had industrial projects under construction at the close of Q3 2021, contributing to a record-high pipeline of 1,072,600 sq m. Speculative developments, which could potentially increase the extremely low vacancy rate, account for 30% of the total pipeline. 88,500 sq m of space in the development pipeline had the shell & core structure completed and all of that space was available for lease within 3-5 months after lease signature. The largest share of this space was located in Ostrava and its vicinity, where brand new industrial space totalling 65,900 sq m was available across two buildings.
Lenka Pechová, senior research analyst, Savills CZ&SK, comments: “A record 17 facilities of 20,000 sq m+ are under construction, the largest being the multi-story distribution centre with a total lettable area of 186,800 sq m built by Panattoni for Amazon. Overall, the Olomouc region accounted for the largest share of development with 280,500 sq m of space underway at the end of Q3. Moravia-Silesia fell to the second place, with construction underway on 265,300 sq m, and Prague placed seventh (out of 11), with 74,500 sq m under construction.”
Total tenant activity in Q3 remained robust, although not as high as in Q1 2021, and posted the highest third quarter results in the market's history. Third quarter gross take-up amounted to 526,100 sq m, being 90% up y-o-y and 14% higher q-o-q. Lease renewals made 14% of the total leasing activity, being one of the lowest quarterly shares seen in the past five years.
Net take-up has set a new bar, increasing to 452,700 sq m in Q3 2021. This was 192% up y-o-y- and a 47% increase against the previous quarter. The share of pre-leases sky rocketed to 75% of the net take-up in Q3 2021. The Olomouc region accounted for the lion's share of total demand with the overall tenant activity recorded in Q3 2021 reaching 197,260 sq m, being 37% of the market total and 44% of the total net take-up. The second best performing submarket, based on net take-up volume in Q3 2021, was Central Bohemia (41,800 sq m), and the Ústí nad Labem region placed third with 35,300 sq m of new demand. Net take-up was fuelled by e-commerce (51% of the third quarter net take-up), followed by logistics (20%).
Chris LaRue, head of industrial agency, Savills CZ&SK, adds: “The Czech industrial market remains on an impressive trajectory of record-shattering take-up levels, high construction activity and record-low vacancy. However, despite the record volume of space under construction occupiers in expansion mode, and especially those with immediate occupancy requirements, continue to face a critical shortage of options in majority of Czech submarkets. Rent levels are expected to stabilize around their current levels, with mild increase potentially seen in the regional markets as market prices adapt to new increased costs.”