Experts see a potentially large demand for logistics parks in eastern Slovakia. (source: ProLogis)
THE INFLOW of large investments before the financial and economic crisis was accompanied by swift development of logistics services in many parts of Slovakia. But the economic downturn seriously affected this business sector and construction of new logistics centres and warehouse capacities essentially came to a standstill in 2009. But experts in the field see future potential in Slovakia – fuelled by the arrival of new investors, the production launch of new car models and the country’s determination to develop a modern transportation infrastructure, both highways and rail.
“Logistics companies follow large investments,” Peter Jánoši, the head of the industrial department at CB Richard Ellis (CBRE), a global provider of corporate and institutional services in the real estate industry, told The Slovak Spectator. “Each big investment means commercial potential for a logistics company as well. Of course, logistics companies also closely watch the development of infrastructure, which is also linked with industrial development and the market.”
The economic downturn severely dampened construction of new logistics parks and warehouse spaces and developers of such facilities are now focusing on leasing their existing space.
“For a significant period of time it has been possible to witness the halt in all activities linked with construction of warehouse facilities built on a speculative basis,” Martin Stratov, the head of industrial agency and development in Slovakia at King Sturge, one of the largest international property consultancies in Europe, told The Slovak Spectator, adding that in practice this means that developers are not currently building warehouses without having in hand a future rental contract. “Developers are currently focusing on leasing their existing warehouse facilities.”
This trend is resulting in a drop of vacant warehouse space and the current vacancy rate in Slovakia is lower than in neighbouring countries, according to Jánoši.
ProLogis, a provider of distribution facilities with a portfolio of 387,000 square metres of warehouse space in Slovakia, reports 91 percent occupancy, according to Martin Polák, the director of ProLogis for Slovakia. ProLogis is one of the largest providers of distribution storage space in the country and has captured a 38-percent market share.
HB Reavis, owner of 115,000 square metres of existing storage capacity, has a vacancy rate below 5 percent, according to Roman Karabelli, spokesperson for HB Reavis Slovakia, who added that, according to CBRE analysts, the average vacancy rate in Slovakia is about 11.3 percent.
Tenants and users of warehouse space are benefiting from the current market situation as the lowered demand enables them to negotiate better prices.
“The current market situation would appear to be ideal for tenants as they are able to optimise their lease specifications and rental rate as there is currently a great deal of space available for immediate lease,” Martin Polák, the director of ProLogis for Slovakia, told The Slovak Spectator. “Once the market has stabilised, the reduced supply of warehouse space will enable rents to increase.”
Stratov agrees, believing that certain benefits which developers use to attract new tenants will be modified, while not expecting any significant changes in the ‘basic rental’ terms in Bratislava and its vicinity.
“In this part of the country there are still vacant space and this is a locality where developers will always compete,” he said. “For new projects, rentals might be a bit higher.”
The situation in Slovakia is similar to that in the Czech Republic, according to Karabelli. Polák shares this opinion, adding that the Slovak logistics market registered a decrease in demand last year and there was a similar decrease in the Czech Republic during the same period.
But these market watchers see upcoming potential in Slovakia.
“With regards to the developing road infrastructure, there is still a huge potential here in Slovakia,” Jánoši told The Slovak Spectator. “There are several factors which play well into the hands of Slovakia. Among others, it is the project for construction of the broad-gauge railway which would have a large impact from the logistical viewpoint.”
Stratov is also optimistic and expects that more interest in warehouse and industrial spaces will resume.
“Before the crisis we registered several businesses interested in warehouse and industrial premises; this demand was halted after the outbreak of the economic crisis,” said Stratov. “We expect these demands will resume after the economic situation improves.”
When considering the most prospective regions for construction of new logistics parks, industry experts see the potential for large demand for logistics parks in eastern Slovakia.
“Very few modern centres have been built in this part of Slovakia and we are registering an increasing demand,” said Stratov.
Jánoši views the main logistics hubs in areas such as Trenčín, Košice and Prešov as the most suitable sites for construction of the next round of logistics parks, adding that construction of modern industrial and warehouse premises in eastern Slovakia will be closely linked with development of the road infrastructure in that area.
With regards to the near future, Jánoši says it is very difficult to exactly estimate forthcoming prospects at this time but that he sees a certain revival already.
ProLogis is currently concentrating on leasing its remaining available warehouse space and on extending its lease agreements with existing customers, according to Polák. The company’s portfolio in Slovakia consists of three parks: ProLogis Park Bratislava, ProLogis Park Nové Mesto and ProLogis Park Galanta-Gáň.
The company’s objectives will also include targeting build-to-suit opportunities on land it already owns and finding other ways to monetise its land holdings, said Polák, adding that due to its extensive property holdings it can build high quality warehouse space in a short timeframe if a customer demands it.
This year HB Reavis plans to carry out the next phase of its Malý Šariš logistics centre in eastern Slovakia, comprising 5,300 square metres. HB Reavis, which is also active in constructing logistics premises in the Czech Republic, is negotiating with several businesses interested in warehouse and production premises in western Slovakia, as well discussing a direct sale of land to investors in the Eurovalley industrial-technological park in the Záhorie region.
According to Karabelli, construction of new logistics projects has continued to decline so far in 2010 in western Slovakia.
“A large number of projects were halted in the immediate vicinity of the capital,” said Karabelli. “But it is likely that the situation will turn around in 2011 and demand for existing vacant space will exceed the supply.”
