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Industrial vacancy rates tighten capital city markets, Colliers International releases its latest research report

Industrial vacancy rates for select capital city markets in Eastern Europe are beginning to trend downwards but the shift is yet to translate into any significant rental growth according to recent research released today by Colliers International. Moscow region is the market leader among 9 capital cities by vacancy rate at the lowest level of 0.3% since the post crisis period.
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 %, down from 9.3 % the same time last year. 

Moscow’s vacancy rate is the lowest of all these markets at 0.3 %, while the remaining city markets range between 7.5 % in Bratislava to a high of 22.8 % 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 % to 16.6 % 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 3 and 5 % 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 sq m; primarily dominated by development activity in Moscow. 

Around 91 % of new development is under construction in Moscow, followed by almost 3 % in Kiev and Warsaw, 2 % in Prague, and less than 1 % 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 %. 

“Industrial stock distribution remains heavily weighted towards Moscow, which holds around 44 % 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”,  commented Damian Harrington, Regional Director of Research for Colliers International, Eastern Europe.

Vladislav Ryabov, Director of Warehouse, Industrial and Land at Colliers International Russia, said: “The shortage of industrial space will not be addressed during H2 2013 despite the increase of industrial pipeline in 2013 to its pre-crisis level. The majority of constructed premises have already been absorbed. By mid-2013 only 40% of constructed industrial premises remain available. We expect that these premises will be absorbed before completion, bearing in mind the high demand for quality industrial premises. As a result, the current shortage of supply in the industrial market in Moscow Region will remain and will contribute to the developers and landlords significance in negotiations”.