Colliers International has recently analysed select capital city industrial markets within Eastern Europe for the first half of 2013 including Budapest, Bucharest, Bratislava, Kyiv, Moscow, Prague, Sofia, Warsaw and Zagreb. With the exception of Prague, demand for industrial space has driven down vacancy rates within these selected capital city markets since the first half of 2012.
There are good indications that vacancy is tightening with the overall vacancy rate of the nine selected capital city markets now at 7.8 per cent, down from 9.3 per cent the same time last year.
Moscow’s vacancy rate is the lowest of all these markets at 0.3 per cent, while the remaining city markets range between 7.5 per cent in Bratislava to a high of 22.8 per cent in Budapest.
Sofia is the stand out of these markets after recording the most significant decline in overall vacancy since H1 2012, which saw it fall from a high of 26 per cent to 16.6 per cent in H1 2013. The vacancy rates also declined in Bucharest, Warsaw and Moscow.
Despite lower vacancy rates being recorded in many of these capital city markets and apparent tenant demand, rental growth remains subdued.
Individually growth rates are a bit choppy and in some cases, such as Prague, Warsaw, Bucharest and Budapest, prime warehouse rents have contracted between three and five per cent since H1 2012.
The decline has been driven by speculative development and lower priced rentals to attract tenants.
According to the analysis the active pipeline of new construction at the end of the first half of 2013 was 1.973 million square metres; primarily dominated by development activity in Moscow.
Around 91 per cent of new development is under construction in Moscow, followed by almost 3 per cent in Kiev and Warsaw, 2 per cent in Prague, and less than 1 per cent each in Sofia and Bratislava.
Overall stock levels within these city markets have increased from 18,145,010 sq m in H1 2012 to 19,565,910 sq m in H1 2013, an increase of approximately 8.0 per cent.
“Industrial stock distribution remains heavily weighted towards Moscow, which holds around 44 per cent share of this total. Although there is some evidence that Prime yields have begun to tighten in some of these city markets, the overall outlook remains stable”. Damian Harrington, Regional Director of Research for Colliers International, Eastern Europe commented.