This article was published in Logistic News magazine 05/21. 

1. Before the outbreak of the coronavirus crisis, there was a large vacancy rate on the Czech industrial real estate market. What is the situation now and what factors influence the current situation the most?

The vacancy levels have dropped over the last year pushing rents up, especially around larger cities such as Prague and Brno.  This has been exacerbated by of closures of shops and traditional shopping outlets moving retail sales online as well as the lack of suitable expansion opportunities by developers. We believe the surge in e-commerce related demand to lesson over time, however we believe vacancy levels in prime locations will remain low as it remains difficult to expand existing rental locations further. Competition will remain for the best locations and some companies will have to accept secondary locations due to lack of space, or ability to pay higher rents. Otherwise demand from automotive producers is recovering in regional areas, however a shortage of microchips which are increasingly used in the production of cars is at present slowing demand for industrial space.

2. The industrial sector is a "winner of the coronavirus crisis"…

But it is a trend that has been building for years as sales have steadily grown online. We believe that while other sectors will bounce back, the industrial will continue to be an attractive sector as more consumers move online, but perhaps not on the same trajectory as during the crisis.

3. What further development (progress / forecast / trends) is expected? Demand is still strong, but are there still vacant and high-quality spaces available? Is the brownfields development, for example, the solution?

There is still strong demand and there is still high quality space on the market. However, we are seeing that many of the modern buildings in the best locations are starting to age, tenants will be asking their landlords to do more for them in terms of upgrades, renovations and in terms of sustainability. An opposing force will be the growing importance of location as businesses try to improve their services by being as close to customers as possible. They will need to compete with other companies who want to do the same thing and may have accept except buildings as they are to secure a desired location should new development not be possible.

4. How has the coronavirus crisis changed the requirements and expectations of tenants in the segment of industrial and warehouse space leases?

We expect that as consumers purchase more types of goods and services online they will have better choice in the products they buy, and will increasingly decide for environmentally friendly and healthy options vs. those which are not.  We believe this will push businesses to improve their focus on sustainability in terms of building features, design and operation, while also placing higher demand on finding the right locations closer to customers.

5. How does the Czech industrial real estate market stand in a European or global context?

The Czech market has always staked up well in terms of solid market fundamentals such central location, strong history of manufacturing, well developed infrastructure, skilled and professional industrial development environment as well as comparatively lower costs than in Western Europe. A recent study published by Savills has shown that even after decades of development and rising wages, the Czech Republic still has some of the best value in terms of warehouse cost in in the world. In Europe it is only second to Belgium and some regions of Poland.