Harry Bannatyne, Partner and Head of Industrial department and Miroslav Kotek, Senior Associate comment on the highlights of 2020 for the I&L sector and give an outlook for the upcoming year.
Colliers Industrial team had the best year in I&L since we opened the office in the Czech Republic. We also advised on the biggest transaction on the market – a build to suit over 70,000 sqm with one of our confidential clients in Ostrava – which we are very happy about. The Czech Republic as a whole has surpassed a real milestone of 9 million sqm for I&L standing space. I suppose everyone would agree that 2020 was a very good year for I&L, very resilient, especially compared to other sectors on the market, e.g. the retail or the office sector.
In 2020 there was no speculative development done and roughly 85% of all building under construction were already leased. Hence, some developers would have started to build some 30,000 sqm buildings of which 20,000 sqm would have been needed, so there would have been some excess.
Overall, in the whole of the Czech Republic at the end of last year, there was only ten buildings with more 10,000 sqm available and we see this trend to continue this year as there is still no speculative development on the cards. It is becoming more common that the developers are waiting for a pre-lease. Land is becoming scarcer but we see the market is in a good state already. Right in the first quarter of 2021, in the first month of 2021, we are already confident that we would have a similar year to 2020. I think the market looks good and we will see more nearshoring coming back due to the pandemics, and the CR remains to be one of the best locations in Europe for nearshoring.
We will see automation grow in the buildings which has several implications. We already saw it last year. 2020 has accelerated many trends that had started before Covid, buildings getting higher, not only automation – which means there will be less reliance on staffing levels. Buildings had not to be as high as before, but there were also other attributes coming into play. Green power, for example. Can automation be done using green power? All locations have different height levels – near the airport for example or in Ostrava – Ostrava being probably the easiest location to get a permit from. It is very difficult to get a permit in Prague now and there is also a lack of land. This won’t change in 2021. Some permits got even more difficult to get due to the pandemics.
In 2020, the total area of industrial real estate in the Czech Republic exceeded nine million square meters, and last year 670,000 m2 of high-quality modern industrial space to lease entered the market. The largest portion of the new premises was delivered in the Moravian-Silesian Region, then in the Pilsen region and in Prague in third place.
As for this year, we expect a similar scenario this year. There are a lot of buildings under construction that are to be completed this year by the end of the 1st and 2nd quarters. The most active regions are the Moravian-Silesian Region, Pilsen, Ústecký and Pardubický regions. Therefore, we can offer a solution to anyone interested in new premises both in these regions and throughout the Czech Republic. In each region, there is an option under preparation that would satisfy a potential applicant.
We try to adapt the parameters of those projects to demand and trends. As there is a shortage of land in the Czech Republic, it is becoming a trend, where the zoning plan allows, to build taller buildings and automate operations. So when preparing the land, we try to take these parameters into account and allow more than the current standard on the market, i.e. 10 meters clear height. Buildings that have a higher headroom - for example, 12 meters, have about 20 percent more capacity, while the rent is paid per square meter and is only slightly higher than standard, so these buildings have a competitive advantage.
The most flexible in terms of spatial planning is the Moravian-Silesian region, which has recently seen a lot of activity from developers who build many atypical projects for end users.