Industrial real estate recovering

THE INDUSTRIAL real estate market in Slovakia is slowly recovering from recent years of economic troubles while market watchers expect that the ‘built-to-suit’ market will lead the way in the coming years and dominate. The automotive industry remains one of the driving forces of the industrial space market, while growing e-commerce is also adding momentum. Another trend sees increased technological demands for industrial premises and a push for energy efficiency.

THE INDUSTRIAL real estate market in Slovakia is slowly recovering from recent years of economic troubles while market watchers expect that the ‘built-to-suit’ market will lead the way in the coming years and dominate. The automotive industry remains one of the driving forces of the industrial space market, while growing e-commerce is also adding momentum. Another trend sees increased technological demands for industrial premises and a push for energy efficiency.

“The market of industrial real estate is starting to move and follow a trend of post-crisis revitalisation,” Martin Hudák from the industrial team at Cushman & Wakefield in Slovakia told The Slovak Spectator. Built-to-suit (BTS) projects continue to dominate, he said, noting there is room for some speculative projects, without any pre-leasing or commitment from tenants, too, but only up to a certain size.

Tomáš Ostatník from the department of industrial real estate at CBRE Slovensko sees the building of new premises at least partly for a concrete client to dominate Slovakia.

“The trend of speculative projects was definitively strangled during the crisis and the fact that investments have not been flowing into Slovakia in such an abundant amount as in the past is also visible,” Ostatník told The Slovak Spectator.

Prologis sees the Slovak industrial real estate market as slowly recovering, especially in and around Bratislava, where it receives strong customer demand. Bratislava is ideally suited for domestic and international logistics operations, and combined with its skilled workforce, the capital is an obvious logistics hub in the region, Martin Polák, senior vice president and country manager of Prologis for the Czech Republic and Slovakia told The Slovak Spectator.

Peter Jánoši, country head of PointPark Properties (P3) in Slovakia also sees a revival of the industrial space market.

“For example 50,000 square metres of logistics space were rented in Slovakia last year,” Jánoši told The Slovak Spectator.

According to him, Slovakia was perceived several years ago as an economic tiger with a potential for development of transportation infrastructure.

“This has reflected also in the arrival of carmakers Kia and Peugeot and many retail companies,” said Jánoši. “Alas, transportation infrastructure is still not at a good level, especially when the fast connection with the east of Slovakia is missing.”

Along with infrastructure and investments, he sees insufficient promotion as factors affecting demand on the Slovak market.

According to recent findings of Prologis, many companies intending to grow their business also need to expand their distribution space. Ostatník agrees, seeing as the current trend is especially the relocation of existing companies from older to new premises. According to Hudák, trends in Slovakia mimic the development of the global economy, especially in terms of the automotive industry and e-commerce.

“From the long-term view especially the automotive industry is the driving force of the economy,” said Hudák, adding that related industrial supplementary services, either logistics or manufacturing ones, supplement this momentum.

In this respect Jánoši pointed to expanding activities of Volkswagen in Bratislava.

“As new trends we can perceive extending services of parcel service companies or the offer of these services by logistics companies as a clear indication of the increase of trade via e-commerce,” said Jánoši.

Players on the market

International companies Prologis, Goodman, PointPark Properties and Karimpol remain the biggest players on the market in Slovakia.

“The most dominant player especially on the highway D1 [connecting the west with the east of the country] is Prologis and on the D2 highway [leading from Bratislava to the Czech Republic] is PointPark Properties,” said Ostatník.

According to Hudák, the four biggest players share the Bratislava market. “But in respect to the revitalisation and some acquisitions of these companies it is possible to expect some news related to their growth,” he said.

Prologis operates three parks in Slovakia: Prologis Park Bratislava, Prologis Park Nové Mesto, and Prologis Park Galanta-Gáň with a total area of 455,000 square metres. Prologis’ portfolio in Slovakia is currently 99 percent leased.

P3 currently operates two logistics parks – one in Lozorno close to Bratislava and one in Žilina with the total area of over 140,000 square metres. Their vacancy rate is about 10 percent while they have built some premises in both parks on the speculative basis.


Market watchers expect that construction of industrial space will mimic the growth of the automotive industry. “The room for growth is indisputable. It will also very much depend on impulses and state aid so that Slovakia keeps its competitiveness towards countries like the Czech Republic and Poland,” Hudák said.

P3 expects continuation of construction outside the Bratislava region, primarily in the BTS form.

“Important are especially areas of Žilina and Košice, where quality logistics premises are still lacking,” said Jánoši. “We assume further development in the automotive industry, their suppliers and the increase of the segment of parcel services.”

According to P3, the trend of centralisation of distribution centres of companies would continue, while warehouse spaces consolidate into so-called XXL hubs.

“With the increase of online trade smaller regional centres, that are closer to clients, are also developing,” said Jánoši.

With regards to current trends Polák said that Bratislava is becoming increasingly more important within the CEE region as a logistics hub, as it offers great access to larger key markets in the Czech Republic, Poland, Hungary and Austria.

“The growth of the market is not as fast as that of the Czech Republic and Poland, but we can see industries, such as the automotive one, which have recorded improvements as well as e-commerce companies and third party logistics (3PL) providers,” said Polák.

Ostatník sees as the main trend the decreasing energy demands of modern warehouses compared to older premises.

Polák pointed out that Slovakia is one of the CEE markets with the lowest vacancy rate over a long term basis.

“As there is still a lack of Class-A distribution facilities in Slovakia and a growing demand, due to the companies’ expansion within the Bratislava region, a further market stimulation and possible emergence of new developments is highly probable,” said Polák. “The vacancy rate is not expected to increase significantly although new developments will be undertaken.”

In terms of rents, according to Polák the growth can be expected due to modest supply, the low vacancy rate and the rise in replacement costs.

“This applies not only to Slovakia, but also other markets in the region and globally,” said Polák.

Jánoši expects that the construction of industrial spaces would continue at the pace of last years, while construction of BTS premises for end customers looking for a long-term solution for optimising and making their activities in CEE more effective, is expected.

While Jánoši expects that rentals would keep current approximate levels, the pressure on prices via additional stimuli can reduce the effective monthly rent to about €3 per square metre, he said.

“We perceive a strong pressure on the price also in the context of competition of neighbouring countries, especially Poland and the Czech Republic,” Jánoši said.

With regards to their plans, P3 continues to see its future in BTS projects to be complemented also by speculative construction.

Polák said it is a very busy period for Prologis. It has recently completed the construction of 12,600-square-metre build-to-suit facility in Prologis Park Bratislava for TOMRA. It will be delivered by the end of the final quarter of 2014, while 40 percent of the building is already pre let. The company has also expanded its portfolio on other markets in the region by buying facilities in Poland and the Czech Republic.

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