Central European industrial market grew by 30 per cent

27 Feb, 2009, Warsaw

• Poland was the primary driver in 2008
• Hungarian market expanded by more than 100 percent
• Czech market dropped by one third

The total Central European industrial stock reached 10,5 mil sqm last year. The figures grew by 2.5 million square metres (a 31 per cent increase) between January and December 2008.

Most of the new industrial space was built in Poland (1,283,000 sq m), 17 per cent more than new construction in 2007. Hungary also performed very well with 253,981 sq m newly built, which means a 106 per cent increase in construction compared with 2007. Slovakia retained the level of supply at over 275,000 sq m. Following a number of record-breaking years, the Czech Republic slowed down by 30 per cent with 646,211 sq m newly constructed last year.

“Given its size, the Polish market is still unsaturated and can in medium term absorb a large quantity of new space. The Hungarian market tended to stagnate in the previous years and it made up for the previous uninspiring results last year. Slovakia has upheld its construction thanks to the inflow of foreign investments and logistic shifts. However, we don’t expect the Central European countries to break the previous years’ records,” says Ferdinand Hlobil, head of the CEE industrial team at Cushman & Wakefield.

“The Czech market started to slow down in the first half of 2008 mainly as a result of the reduced inflow of foreign investments, with the global crisis added on top of that in the second half of the year. Yet the construction exceeded the results of 2006 when more than half a million square metres of modern industrial space were built in this country. For this year, we expect a further decrease, as many projects have been cancelled or put on hold until later,” Ferdinand Hlobil says.

Demand
The demand for lease grew mostly in Slovakia, more than doubling to 297,603 sq m (a 56% growth compared with 2007). The volume of leases in Hungary grew one third to 308,318 sq m. Demand for new space in Poland also grew by 13 per cent, to a total of 1,588,000 sq m leased. The Czech Republic recorded an almost one-third decrease in lettings (32%), to 581,501 sq m.

Vacancy rate
“Given the market slowdown, it is not surprising that the vacancy rate grew the fastest in the Czech Republic – from 6 per cent at the end of 2007 to 13.7 per cent in December 2008. The vacancy rate also grew in Slovakia, from 8 per cent to 11.8 per cent. It increased slightly in Poland (from 10 per cent to 11 per cent). Thanks to a strong rejuvenation of the market, the rate dropped slightly from 18 to 17.3 per cent in Hungary. For this year, we can expect a slight decrease of the vacancy rate depending on the slump in the development of industrial space,” Ferdinand Hlobil says.

Outlook for 2009
As a result of the financial and economic crisis, Central Europe will experience a marked drop in construction and a suspension or postponement of foreign investments and the inflow of logistics and production. Leases in each particular location will be based on supply and demand, and regions with a growing vacancy rate can certainly offer attractive lease terms.

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