Login | Register
Items in shopping cart: 0 | View
Building of industrial space reflects economySlovakia has the lowest vacancy rate in the region
21 Oct 2013 Jana Liptáková Transport
SLOVAKIA’S industrial space market has the lowest vacancy rate in central Europe. Market watchers say this rate reflects the current economic situation and high competition in the region, and believe prospects are good for building new industrial space along highways around Žilina and Košice.
Real estate consultancy firm Cushman and Wakefield estimates that the vacancy rate, one of the main indicators of the development of industrial space, is about 4 percent.
“This puts Slovakia into a situation similar to 2010 and 2011, when there was only a limited amount of vacant industrial space for new companies or expansion of companies already established [in the existing premises],” Martin Baláž, the head of the industrial and retail warehouse at the Slovak branch, told The Slovak Spectator.
In 2012 over 82,000 square metres of industrial space was built, most of which was built speculatively, i.e. without any pre-lease contracts. Most of this space was rented out in the first three quarters of 2013 and Baláž expects the rest to be leased by the end of 2013 or at the beginning of 2014.
“I expect that the vacancy rate will continue to decrease, since we do not register any speculative construction to be completed in a short period of time,” said Baláž. “The vacancy rate may shortly get close to 2 percent, which is not good for the market at all because companies do not have space to expand and thus they may decide [to go to] neighbouring countries that still have these possibilities.”
In this respect Baláž said that the vacancy rate in the Czech Republic is 6.8 percent, 11 percent in Poland and 22 percent in Hungary. In general, 10 percent is considered to be a ‘healthy’ vacancy rate.
Baláž stressed that the economic situation has a significant influence on the industrial space sector.
“As soon as the economic or political stability worsens, this affects the interest of investors in Slovakia,” said Baláž. “This is even underscored by the fact that Slovakia neighbours countries which also compete for each foreign investment, which creates a difficult competition environment for Slovakia.”
According to Peter Bahník, who handles customer relations at Karimpol International Slovakia, the situation with the industrial space market has not changed significantly over the last few years, and it reflects the economic reality of Slovakia, which is characterised by decreased economic growth, reduced consumption, growing public debt and the inability of the state to create more favourable conditions for the business sector. This results in increased pressure on logistics providers, especially with regard to the price of their services.
“This is the reason why new construction of warehouse spaces has diminished, and we can see a significant decrease in speculative construction, which clearly indicates weak activity in the industrial market,” Bahník told The Slovak Spectator, adding that in spite of this, the logistics sector remains stable.
Martin Polák, the vice president and market officer of Prologis in the Czech Republic and Slovakia, is more optimistic.
“After several years of economic downturn the market is slowly recovering and our customers are more eager to sign long-term leases,” Polák told The Slovak Spectator when describing the current situation of construction and occupancy of logistics parks in Slovakia, admitting that the demand for industrial space across central and eastern Europe varies depending on the market.
For example, in Poland, Prologis recently signed a deal for the fourth built-to-suit project in less than two years in Prologis Park Wroclaw V. As Prologis’ portfolio in the Czech Republic and Slovakia is more than 95 percent occupied, it is focused on further development of its parks in both countries. The developer, which is the leading provider of industrial space in Slovakia, has a land bank with building permits in place and is able to start construction immediately after signing a contract with a customer. Following the decrease in available space in the Slovak market, a 24,500-square metre facility in Prologis Park Bratislava was delivered. This building is now more than 70 percent leased, said Polák.
Peter Bečár, the executive director of PointPark Properties (P3) for the Czech Republic and Slovakia, points out that Slovakia has the lowest number of built industrial premises, totalling about 1.3 million square metres in central and eastern Europe. Poland has 7.4 million square metres and the Czech Republic 4.4 million square metres.
“In spite of the younger market, Slovakia was able to compete with neighbouring countries and draw several supranational distribution centres,” Bečár told The Slovak Spectator, citing Whirlpool and Möbelix. “Out of the neighbouring countries Slovakia has the lowest vacancy rate of warehouse premises of the A category, which caused a revival of the market from the viewpoint of new construction in this segment. After a longer period of time speculative construction to satisfy demand for new halls quickly has also occurred.”
Bahník pointed out that rent levels in the strongest countries, such as Poland and the Czech Republic, are different, and that their size and economic backgrounds enable them to approach completion of their projects differently. Statistics indicators of new construction and vacancy rates in Slovakia indicate that developers are being cautious when investing into construction of new premises without signed pre-lease contracts.
Polák of Prologis expects, in both Slovakia and the whole CEE region, stable growth in the market, i.e. an increase in new development activity – and not only in built-to-suit projects, but also a moderate increase in speculative development.
“Markets with low vacancy may witness a rent increase,” said Polák. “However, we do not expect any significant changes within the market as a whole.”
Among factors that will influence this, Polák listed the mood of the customers, their approach to long-term strategies and the market trend in general. Also, e-commerce market growth and reconfiguration of retailer supply chain networks is one of the main factors driving demand for distribution space.
“The e-commerce sector is steadily growing and is becoming an important driver for distribution facilities development in Europe and worldwide, including Slovakia and the CEE region,” said Polák, adding that his company observed last year that in Europe 20 percent of its build-to-suit activity could be traced back to e-commerce. Also, in the last five years e-commerce sales have risen by 61 percent in western Europe.
With regard to expectations, Bečár pointed to existing differences between countries.
“The development in Slovakia was slower; Slovakia is nevertheless a young market,” said Bečár. “Most warehouse premises have centralised in the Bratislava region, where there are about 80 percent of all warehouse premises. This means that the offer in Slovak regions is lower, there are no stabilised developers nor larger developed logistics parks.”
According to Bečár, Slovakia has, with regards to its locality, prospects for further development within central and eastern Europe, but it is necessary to invest in improvement of infrastructure and improve service for investors from all participating sides.
Bečár ranks the Czech Republic among the most developed countries in the CEE region in terms of logistics real estate, and the number of premises available and their position within the whole country. The Prague region is home to about 40 percent of the country’s warehouse premises, with the remaining ones in other regions.
Bahník of Karimpol, which is active in Slovakia as well as the Czech Republic, Poland, the Netherlands, Luxembourg and Austria, and which on the Slovak market focuses on speculative construction, expects continuity and does not anticipate any significant changes, especially with regard to the supply of warehouse premises, which he expects will grow in accordance with the requirements of renters of industrial space.
In Slovakia Bečár also expects construction to continue outside the Bratislava region, especially around Žilina and Košice.
“Even though these regions are not as important as Bratislava, which lies on one of the main European logistics arteries, from the viewpoint of location, they will increase their potential,”
Cushman and Wakefield consider locations in western Slovakia near highways D1 (which crosses Slovakia from Bratislava to Košice) and D2 (from Bratislava to the Czech Republic) to be attractive.
“During the last two years the industrial zone in Košice near the airport also started to develop more significantly,” said Baláž of Cushman and Wakefield, adding that the development company Erste Group Immorent already built a second hall there this year on a speculative basis.
Most read articles
Euro Calculator (Sk30.1260 = 1 EUR)
What influences your travel plans?
Quote of the Week
“The candidacy is meant for someone who arrives well known and does not need a year and a half to show his face.” PM Robert Fico comments on the possibility of his running in the 2014 presidential elections.