Demand significantly exceeds supply. This phrase has recently become more pronounced in the case of flats, where new construction does not manage to catch up with extremely high demand. However, the situation is similar in another real estate segment.
What is the market situation at the moment with this type of industry? Can the market feel the rapid growth of e-commerce on the market?
Harry Bannatyne: Demand is outpacing supply. The CR has seen the lowest vacancy in history. Yields have compressed, the assets in industrial are sought-after due to many factors such as longer leases, higher rents, fully sustainable green parks & buildings and the lack of products.
E-commerce is constantly growing in the CR and throughout CEE; the YOY turnover in e-commerce was 18%, and we see this trend continue. Even local ecommerce companies, eg Sportisimo or Rolex.cz have accelerated their businesses extensionally, especially during the Covid crisis.
Sportisimo has been a record deal for Colliers, not only in terms of its size, as it is the biggest, agent involved transaction on the Czech market, but also in terms of its record height. One of the halls, with a built-up area of approximately 90,000 m2 will thanks to a five-storey mezzanine boast a a usable area of approximately 140,000 m2.
In addition to modern robotic systems, the speciality of the hall is the above-standard clear height of a part of the hall, the so-called "High Bay", which will reach up to 25 meters. The clear height of up to 25 meters is a rare feature in the Czech Republic. Sportisimo is one of the pioneering project proving that this type of changes propelled by automatization needed especially for e-commerce have materialized.
Not only automation, but also full green solutions are being required by developers, landlords and tenants alike. Every developer in the Czech Republic has recently set carbon neutrality and sustainability as one of their main goals.
The changing warehouses also brought a change in the lengths of the lease due to the rise of the costs internally. Now (mainly) the e-commerce companies require 10-15 years’ long contracts, which is better for investors and developers; fully automatized warehouses are needed with internal automation racking systems, that increased the cost as they are very expensive. A longer lease offsets the cost long term. These are all BTS halls.
The vacancy rate is ca 2% only… and the process of permitting here is still one of the longest ones in CEE, which makes the development still very difficult; depending on the stage of the land, if its zoned or not – even on an industrial zoned land, it takes 1-2 years to get a building permit; the price of the construction cost has been detrimental to developers with such costs rising from 20-50% during the Covid crisis throughout the CEE and the whole Europe; supply chains have been broken; and yet the Industrial sector remains the absolute darling of all real estate sectors
In your opinion, will warehouses pay off from an investment point of view? Does it make sense to invest in them?
Harry Bannatyne: "Yes, definitely – and these are getting much smarter – they are more sustainable and smarter in terms of technology, they not just “sheds” anymore. Their longevity is much longer. The overall standard of the A-class premises in the I&L sector and warehousing is very high in this country and very competitive compared to the rest of Europe."
Does the construction of new warehouses sufficiently respond to the high demand?
Harry Bannatyne: "Like I said, Demand is still outpacing supply, but obviously all developers are working to solve this, constantly looking for new landlords, bringing some speculative development back to the market."
See Colliers interactive Warehousesmap with Industrial and Logistic properties available on the Czech market