Navigating the Shifting Landscape of Czech Industrial Real Estate

For businesses seeking industrial space in the Czech Republic, the market dynamics are changing favorably. According to real estate consultancy Prochazka & Partners, real vacancy rates for industrial properties are increasing, and rental prices have been on a downward trend for the second consecutive year. This cooling period signifies a significant shift, moving away from the previously red-hot market and creating new opportunities for businesses looking to expand or optimize their operations.

Key Trends Shaping the Czech Industrial Property Market

Decline in Demand and Sector Shift

Since 2023, the Czech industrial real estate market has experienced a notable slowdown in demand. Furthermore, the nature of this demand is evolving, shifting away from logistics and e-commerce sectors, and increasingly towards manufacturing. Currently, real vacancy rates hover between 8-10%, indicating a growing availability of industrial units.

Regional Nuances and Emerging Opportunities

The market slowdown is not uniform across the country. Petr Narwa, Head of Transaction & Consulting Services at Prochazka & Partners, highlights significant regional differences. While prime locations like Prague and its surroundings, and the Brno region, still maintain relatively high interest, other regions are experiencing a noticeable drop in demand. This disparity is leading to the emergence of vacant units that struggle to find tenants, with many halls remaining in a "shell & core" state or merely in the permit approval phase. This presents a prime opportunity for businesses to secure advantageous deals in less saturated, yet potentially strategic, locations.

Adding to the complexity, the Czech market faces strong competition from Poland, which is successfully attracting a portion of the industrial demand previously directed towards the Central and Eastern European (CEE) region.

Rent Reductions and Tenant Incentives

The decrease in demand has directly led to a decline in effective rents, which now frequently include incentives and benefits for tenants. In the Prague area, nominal rents, which once reached up to €8 per square meter per month, have now fallen by approximately 20% to around €6.70. For less attractive locations, new industrial properties have seen rents drop from a maximum of €6 to roughly €5.20 per square meter per month. These deals are often sweetened with extended rent-free periods or other landlord-offered incentives, making it an opportune time for businesses to negotiate favorable lease terms.

Evolving Property Specifications

The character of demand is also changing. Manufacturing companies, in particular, are increasingly considering "build-to-own" solutions, constructing custom-built facilities for their own ownership. Another significant trend is the more efficient utilization of land, with new halls being built with higher clear heights. Previously, a standard clear height was 10 meters; however, today, it is common to see structures being built with heights up to 12.5 meters, catering to the evolving operational needs of modern businesses.

What This Means for Your Business

The current state of the Czech industrial property market offers distinct advantages for businesses. With rising vacancies and competitive rents, it’s an ideal time to explore options for new warehouse or manufacturing space. Whether you are looking for cost-effective solutions in emerging regions, seeking more attractive terms in premium locations, or considering a purpose-built facility, the market trends suggest greater flexibility and negotiating power for tenants. Engage with a reputable real estate consultant to navigate these changes and secure the best possible conditions for your next industrial property lease.

Source: systemylogistiky.cz