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Czech Industrial Market Development and 2021 Forecast

Where did the Covid crisis impact the industrial and production market the most?

Theodor Pokorný, Research Analyst’In first part of 2020, production was restricted or stopped and that put the tenants into a difficult situation as far as paying rent is concerned. The biggest change occurred in demand with the quick shift in retail from brick and mortar stores to e-commerce which requires more industrial space.’

Harry Bannatyne, Partner and Head of Industrial Agency:’We have also seen severe disruptions in supply chains causing problems in production.’

Kevin Turpin, Head of CEE Research: ’Overall, the I&L markets actually did quite well and adapted, despite the disruptions, resulting in greater demand over 2019. Supply chains were indeed disrupted and will leave quite a lot of questions/challenges for the industry to resolve over the next few years. We expect Czech and other CEE markets to benefit from these changes with some nearshoring of these supply chains closer to Europe markets where appropriate.’

Lukáš Svobodník, Senior Associate, Industrial Agency: ‘Simply put, the Coronavirus crisis has had a positive impact on the industrial market. The demand is stable and, in some sectors such as e-commerce and production, it has been increasing. That indicates that the series of lockdowns and restrictions forces more people to shop online. E-commerce reacts to that by bigger demand for industrial space. In automotive, a very strong and important sector in the Czech Republic, we see the rise of electromobility and the supply chains connected to it.’

What about the role of pre-leases?  

Theodor Pokorný’Speculative construction has lost its appeal as it involves many risks, so no one wants to build a hall just to leave it empty. It is much less risky to wait for the right tenant and start the construction after a pre-lease is signed. Bigger share of pre-leases is a sign of a mature market. The unwillingness of developers to risk speculative development has only been increased by the pandemic. 

Harry Bannatyne: ‘Yes, in general all Industrial developers are trying to solve the initial permits so that ground works can be carried out giving less risk on building delivery timing.’

Lukáš Svobodník: ‘For instance projects connected to electromobility are definitely pre-leases. The supplier first has to win a tender and then they can commit to a long-term lease.’

The rise of e-commerce increases the demand for industrial space of distributors and big companies. Can we estimate how long this trend is going to last?

Theodor Pokorný: ’That depends on the willingness of retail customers to go back to traditional ways of shopping. It is probable that some retailers who moved their operation online, will stay there after the pandemic ends as it is more convenient for the customers.’

Lukáš Svobodník: ’We can definitely expect the demand for e-commerce space to continue. We see a rise of e-commerce supply chains at the expense of retail supply chains. Thanks to the central location of Prague, the demand logically concentrates here.’

Is the client’s interest moving away from Prague to other regions?

Theodor Pokorný: ’It is and there are many reasons for it. Less developed regions of Pilsen and Ostrava are becoming more attractive as there are developers can offer more space there and there’s also qualified workforce available. That’s why the focus is shifting away from traditional locations like Prague and Brno. The developers naturally follow the demand and right now, 50 % of premises under construction are location in the Pilsen and Moravia-Silesia Regions.’

Harry Bannatyne’Permitting in recent times is also more complicated and a longer process to complete within Greater Prague.’

Where is the biggest concentration of planned development? 

Lukáš Svobodník’The biggest potential in new development is currently in the Moravian-Silesian Region.’

Harry Bannatyne: ‘We believe that developers will be concentrating on newer locations such as Usti region, where we will see demand growing due to the proximity to the German market.’

Will the trend of nearshoring help the Czech Republic?

Theodor Pokorný’We certainly hope so as it would be good news not only for the Czech Republic, but for the whole CEE Region as well.”

Harry Bannatyne: ’This will take time but we firmly believe that all major companies are currently reevaluating their supply chains so that they are not so affected by external factors. Being closer to their end consumer and customer base.’

City logistic is on the rise in Western countries. Any plans to focus on city logistics here?

Lukáš Svobodník: ’Yes, this is a trend with a huge potential. City logistics and last-mile delivery is gaining on momentum. However, due to the problematic infrastructure and the transport accessibility of new potential locations for development of industrial space, there are still many problems. In other words, there are suitable plots for this kind of development, but as they are often location in built-up areas in the cities, their accessibility for trucks is limited. That’s why the solution often is distribution by means of smaller vehicles like vans, bikes etc.”

Harry Bannatyne: ’Most developers are also looking at brownfields closer to the major cities but pricing can be very high due to the fact that they will compete with residential developers who can afford to pay higher premiums on the land.’

Kevin Turpin: ’Compared to the size of some western European cities, Czech cities, even Prague, are not so big. However, some innovations in city logistics in Prague have already been tested or are in practice by several of the logistics companies to help provide a faster but also more environmentally friendly solutions, such as the solution under the bridge near to Florenc.’

To find available industrial space, go to our website www.warehousesmap.cz


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Kevin Turpin

Regional Director of Capital Markets | CEE

Prague

Kevin joined Colliers in October 2019 as the Regional Director for Research in CEE and has been working in the Commercial Real Estate industry in the field of property market research and consultancy for over 15 years. The research and consultancy team consists of 16 research analysts, covering numerous markets across the CEE region. Kevin’s role is responsible for the delivery of market research and insights to both Colliers clients and its business lines. Kevin and team research and advise on all market sectors with a key focus on Offices, Retail, Industrial & Logistics and Investment. Kevin's previous roles have been in the HR consultancy, Information Technology and Public sectors, where he has gained valuable international experience working with people, technology, business and finance.

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Theodor Pokorny

Analyst | Research

Theodor has joined Colliers in January 2020 as a Junior Analyst and is working for the Market research team and sometimes assists in Valuation as well. Theodor‘s path to the Real Estate lead through architecture, which he studied and practiced in China for three years.  Working for the Real estate development firm ignited a spark of interest in Theodor for the financial side of buildings. After some period of working as a freelance architect and consultant he decided to pursue his passion for real estate economics by studying Real Estate Development at the University of Westminster in London. Now Theodor would be happy to help you with market research and real estate development of any kind.

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