Industrial Demand Continues to Rise
The Central European industrial and logistics market is continuing to record high demand, reflecting the indicators in the wider European industrial markets.
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Demand for industrial and logistics space has seen an expansive first half year with average vacancy rates of 5.7% across the European markets surveyed according to Colliers International.
“Limited development pipelines and availability will continue to push the drive to landlord-favorable markets over the remainder of 2018, and most likely into 2019,” says Colliers.
“Development activity continues unabated in Hungary, with demand outstripping supply in the fast-growing market. The commercial real estate developer and manager CTP has started the construction of new premises. The retail sector was an important demand engine, as Auchan Retail Hungary is moving into an 87,000 sqm industrial park built and managed by the operator and developer, Goodman,” Colliers adds.
Poland and Czech Republic continue to be the dominant Central European markets with an estimated industrial stock of around 14 million sqm and seven million sqm respectively. This compares to 2.8 million sqm in the Budapest area.
Leading CE Market
With regard to new supply, Poland was the leading Central European industrial market with 734,000 sqm in the first half year, followed by Czech Republic with 383,000 sqm and Hungary with 30,000 sqm according to Cushman & Wakefield. The average vacancy for the region stood at 4.4% with the lowest vacancy in Hungary at 3.5%, compared to 4% in Poland and 3.7% in the Czech market.
Although the Budapest industrial market has high demand, take-up is lower in comparison with its Central European neighbors. In contrast to Poland, Czech Republic and Slovakia, a functioning commercial industrial market has not developed outside the capital in Hungary and companies establishing light industrial facilities have tended to develop their own facilities.
Gross take-up in the Hungarian industrial market was 163,000 sqm in the first half of 2018 according to Cushman & Wakefield; this compares to a gross take-up of 733,000 sqm in Czech Republic and a massive two million sqm for Poland.
“Demand is continuing to be strong with Czech and Poland leading the pack. But Hungary, Slovakia and Romania are also doing great,” comments Ferdinand Hlobil, head of CE industrial at Cushman & Wakefield.
Analysts see the necessity for more development to meet growing demand in the industrial sector in Hungary. Indeed, regional developers such CTP, Prologis, P3 Logistic Parks and Wing all have substantial plans in Hungary.
Speculative vs BTS
With high demand limiting supply the differential between speculative and BTS development has become more difficult to define, as most speculative space is let before completion.
“The difference between BTS and speculative is a bit misleading nowadays, as most of the delivery is taken by tenants at the planning stage or during the construction phase. So there is not as much typical speculative construction as there was in the past,” explains Hlobil.
Prologis was the leading CE developer with 25% of market share in H1, followed by Panattoni with 22% and Hillwood with 9% according to Cushman & Wakefield. Panattoni and Hillwood do not currently operate in Hungary. Panattoni was the leading CE developer with regard to new construction, with a 25% market share, followed by CTP with 18% and P3 Logistic Parks with 11%. P3 have plans to enter the Hungarian market.
“Right now the vacancy across Central Europe is very low, but developers are ready to deliver on a BTS basis in numerous locations. We only expect more [truly] speculative development if demand slows down, as developers are now under pressure to match demand size,” concludes Hlobil.
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