Latest market trends in sector of commercial Real estates (primarily concerning the Offices, Warehouse and logistic premises and Shopping malls) are sourced from Colliers International providing regular market forecast and research on this topic.
The Year 2021
Industrial market overview 1Q2021: With 68,000 sqm of newly completed warehouse space in Q1 2021, the total stock in the Czech Republic now stands at 9.17 million sqm. By the end of Q1 2021, vacancy stood at just 3.6%, which is 61 bps lower than in Q4 2021. The total volume of available space reached 329,100 sqm. Gross take-up in Q1 2021 reached a new all-time high of 765,600 sqm, registering a 44% increase on the previous quarter, and an incredible 147% increase YoY. Prime industrial rents in larger Czech cities remained nearly unchanged. Approximately 557,500 sqm of warehouse space was under construction at the end of Q1 2021. In Q2 2021, we expect 293,400 sqm of space to be delivered to the market, a continuous increase in size of new space entering the market. This trend proves that the Czech Republic is still one of the most sought-after countries within Europe for the development of new industrial and logistics properties.
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Office market 1Q2021 Report: In the first quarter of 2021, just two developments were completed and added a total of 3,500 sqm to the market. This represents one of the lowest levels in the market’s history. The current modern office stock in Prague decreased slightly to 3.69 million sqm, due to the exclusion of several buildings which were no longer offered for commercial leasing. The expected level of supply for the remainder of 2021 is just 65,800 sqm, from which over 55% is already pre-leased. On the more optimistic side, many projects have entered construction phases in recent months, including the long awaited Masaryčka by Penta, with approximately 25,000 sqm, and PORT 7 by Skanska with 30,600 sqm. Both projects are scheduled for delivery in 2023. As for current vacancy, we are experiencing a slow, but increasing trend. By the end of Q1 2021, approximately 7.6% of modern offices in Prague were vacant, representing 280,600 sqm. Gross take-up accounted for 90,200 sqm, an increase year-on-year of 30%. Although vacancy is rising slightly, demand is still solid and occupiers who are currently looking for new offices have a wider range of choices. Thanks to this fact, landlords are offering higher fit-out contributions and slightly longer rent-free periods, than we were recording in previous years.
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The Year 2020
Industrial market overview 3Q2020: With 145,700 sqm of newly completed warehouse space in Q3 2020, the total stock in the Czech Republic currently stands at 8.99 million sqm. By the end of Q3 2020, vacancy stood at 4.4%, which is 14 bps lower than in Q2 2020. The total available space reached 398,300 sqm. Despite this seemingly high number, the availability of larger space is slightly worse than in previous quarters, with just 10 properties offering space in excess of 10,000 sqm. Gross take-up in Q3 reached 289,400 sqm, registering a 22% decrease on the previous quarter, and a 21% decrease y-o-y. Net take-up reached 146,100 sqm, which is 24% down q-o-q and a 39% decrease y-o-y.
Prime industrial rents in Prague and Brno stand in the range of €4.50 – €4.85/sqm/month. Other soughtafter regions such as Ostrava, Plzeň and Ústí nad Labem have rents in the range of €4.00 – €4.35/sqm/month. The previously common incentives of one month rent free per year of lease is no longer the standard and developers now provide incentives based on location, lease size and length, plus the tenant profile also plays a big role in negotiations.
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Office market 3Q2020 Report: From the scope of the modern office market, the impact of the pandemic is starting to be more visible in some areas, but longer-term market predictions remain uncertain. During Q3, three new developments added 21,100 sqm, bringing the total modern office stock to 3.73 million sqm. The vacancy rate in Prague increased for the second time in a row after a period of uncertainty in the spring. The current increase of 90 bps Q-o-Q to 7.0% is the first significant growth seen in recent years.
Total take-up increased by 9.0% Q-o-Q to 86,200 sqm, but net take-up dropped significantly by 41% Q-o-Q to only 26,500 sqm, as the trend of renegotiations from last quarter continued. Net take-up for Q1 to Q3 2020 is down by 31% compared to the previous year. In terms of net absorption, Q3 was negative for the first time since 2015, yet in a YTD perspective 2020 remains positive with approximately 56,000 sqm. Prime headline rental levels remained stable between €22.50 and €23.00 per sqm in the city centre. Inner city prime rents range between €15.50 and €17.00 and outer city from €13.50 to €15.00. Landlords are able to provide much more generous incentives in hope for attracting new occupiers.
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Investment market 2Q2020 report: For the first half of the year, the investment volume totalled ca. EUR 1.95 billion, boosted by the EUR 1.3 billion Heimstaden/Residomo deal, resulting in a YoY increase of 9.6%. Without this transaction, the transaction volume would have been down by ca. 60% Y-o-Y. Despite limited transactional evidence, Colliers softened prime yields for High Street properties by 25 bps to 3.75% and Shopping Centres by 50 bps to 5.25%. For offices, further 25 bps shift outwards to 4.25% has been applied.
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Colliers Office market 2Q2020 report: Despite the lockdown restrictions for the majority of Q2, developers managed to deliver 5 new buildings and fully refurbish a further 2 with a completions total of 88,000 sqm, so the total modern office stock currently stands at 3.71 million sqm. Vacancy rate in Prague increased by 70 bps Q-o-Q to 6.1%. This represents roughly 226,000 sqm of modern office stock. Pessimistic estimates were not fulfilled, and the Prague office market is in a good condition with healthy levels of vacancy and overall stable leasing activity.
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Colliers Office market 1Q2020 report: The current volume of modern office stock in Prague is ca. 3.67 million sq m. In the first quarter of 2020, there were 20,800 sq m of new developments completed. On the other hand, the overall market vacancy rate dropped by 10 basis points to 5.4%, which represents almost 197,300 sq m of available office space. Future impacts of the current crisis should be more visible during Q2, as the most restrictive measures were adopted just before the end of Q1. Rents remained stable over the quarter with prime office rents in the City Centre of Prague ranging between €22.50 and €23.50 per sqm / per month, with the possibility of some “trophy” assets asking for rents nearing €30.00. Inner City prime rent are at €15.00-€17.00 and Outer City prime rents are at €13.50-€15.00.
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Colliers Industrial market 1Q2020 report: With 211,100 sq m of newly completed warehouse space in Q1 2020, the total stock in the Czech Republic stands at 8.62 million sq m. By the end of Q1 2020, vacancy stood at 5.5%, which is 144 basis points higher than in Q4 2019. Prime industrial rents in Prague and Brno stand in the range of €4.50 €4.85/sq_m/month. Other soughtafter regions such as Ostrava, Plzeň and Ústí nad Labem have rents in the range €4.00 – €4.35/sq m/month.
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Colliers Investment market 1Q 2020 report: Investment volumes for Q1 2020 were dominated by the Swedish investor Heimstaden’s acquisition of the Residomo residential portfolio, in the region of Ostrava and its surrounding, with a transaction volume of almost €1.3 billion. Largely thanks to this deal, the total investment volume for Q1 2020 exceeded €1.65 billion. When speaking about other transactions, there are a further two, that exceeded €100 million, namely the Carlo IV Hotel which was sold to French investors Covivio and the Kotva department store in Prague 1 which was acquired by the real estate fund of Generali. The office and industrial sectors, with typically strong investment volumes, were rather quiet during first quarter of 2020.
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