The Czech property market is increasingly attractive for foreign investors due to the fact that the availability of space for production facilities has been boosted by a major government programme designed to support the construction and development of industrial zones, brownfield regeneration and development of speculative buildings, premises for R&D and shared-services centres. Major international and Czech developers are still seeking opportunities for development of industrial, logistics and business parks.
In 2009 the market was influenced by a drop in demand, with the majority of developers suspending speculative development. The industrial market could react very quickly to changed market conditions, with new supply dropping already in 2009 and then further in 2010 to 186,000 m2. So far in 2011 approx. 51,000 m2 were completed. Total stock of modern A-class developer-led logistics and industrial space amounted to 3.647 million m2 at the end of Q2 2011. There is currently approx. 242,000 m2 of modern class-A warehouse space under construction, of which about 13 % is not pre-leased. Roughly 173,000 m2 of warehouse space could still be completed this year.
The vacancy rate remained almost stable at 8.6 % compared to 8.92 % in the previous quarter, however on annual basis it decreased considerably from 15.9 % recorded in Q2 2010. A total of 314,000 m2 of modern warehouse space was vacant at the end of the first half of the year. Vacancy decreased mainly in West Bohemia and in Moravia-Silesia although only marginally, in most other submarkets it remained stable. Until the end of the year a continued modest decrease in vacancy rates is expected.
After a drop in demand recorded already in 2009, 2010 saw signs of recovery with gross take-up reaching 867,000 m2 and net take-up excluding renegotiations amounting to 707,000 m2 (an increase of 171 % compared to 2009 net take-up). In the first half of 2011 so far gross take-up of 392,600 m2 was almost the same as recorded in the first half of 2010, while net take-up of 198,300 m2 was 37 % lower than in the same period last year. The results confirm that landlords succeed in retaining tenants, there have been practically no relocations within the stock. The activity of new occupiers who are expanding and moving from older premises to modern warehouse space or those who are entering the Czech market is slowing down considerably.
Occupational activity concentrates mainly in the Greater Prague area, South Moravia and West Bohemia. 3PL companies dominated take-up in 2011 due to several large renegotiations, followed by end-users and manufacturing companies. The median deal size in Czech Republic amounts to cca 5,000 m2. DTZ predicts total take-up in 2011 could reach between 600,000-700,000 m2. Due to the lower availability of space in most of the submarkets, this is also putting upward pressure on rental levels. Headline rents for modern logistics space have remained stable at €3.6-4.3 per m2/ month. It is forecasted that prime headline rents will increase towards year-end to around €4.40 per m2 per month.
|New supply (m2)||912,400||711,500||443,000||186,000||51,000|
|Gross take-up (m2)||967,100||773,700||361,000||867,200||392,600|
Source: DTZ Consulting & Research, 2011
In 2010, generally, net effective rents across the Czech Republic remained stable. However in some regions with
low vacancy, rents grew slightly.
|Region||Rent (EUR)/m2/month||Region||Rent (EUR)/m2/month|
|Central Bohemia||3.75 - 4.50||Pilsen||4.00 - 4.75|
|Hradec Králové||3.25 - 4.75||Prague||3.75 - 4.50|
|Karlovy Vary||3.75 - 4.25||South Bohemia||3.75 - 4.25|
|Liberec||4.00 - 4.40||South Moravia||4.00 - 5.00|
|Moravia-Silesia||3.25 - 4.00||Usti||4.00 - 4.50|
|Olomouc||3.75 - 4.25||Vysocina||3.75 - 4.25|
|Pardubice||4.00 - 4.50||Zlín||3.75 - 4.25|
Source: CzechInvest, 2011
The most attractive option for investors wanting to occupy suitable premises is to build facilities in one of the many industrial zones that have been completed or are currently under development. These zones offer land with infrastructure and are often prepared with the support of various state programmes and in cooperation with local authorities.
In 2009, CzechInvest filed 91 industrial zones supported from the new Business Properties and Infrastructure Support Programme (BPISP), which is a 6% decrease compared to the record year of 2007. This was caused by the fact that the reporting obligation of some industrial zones expired (pursuant to programme conditions). The greatest number of industrial zones is in the Central Bohemia, Moravia-Silesia and South Moravia regions.
A total of CZK 9.2 billion has been distributed to individual zones from these programmes. Thanks to this support, 2,361 hectares of industrial zones have been developed, in which 536 companies hitherto have invested CZK 180 billion and created 97,813 jobs.
Map of supported industrial zones
1 Český Krumlov, 2 Prachatice, 3 Písek, 4 Blatná, 5 Domažlice, 6 Stod, 7 Plzeň (2)*, 8 Ostrov, 9 Podbořany (2)*, 10 Žatec (2)*, 11 Klášterec nad Ohří, 12 Chomutov, 13 Most, 14 Lovosice (2)*, 15 Přestanov, 16 Ústí nad Labem, 17 Rumburk, 18 Liberec, 19 Slaný, 20 Tuchlovice, 21 Kladno, 22 Unhošť, 23 Zdice, 24 Žebrák, 25 Zlatníky-Hodkovice, 26 Poříčany, 27 Zruč nad Sázavou, 28 Kutná Hora (3)*, 29 Kolín, 30 Velim, 31 Nymburk, 32 Mladá Boleslav, 33 Jičín (2)*, 34 Hořice, 35 Vrchlabí, 36 Trutnov, 37 Kvasiny, 38 Chrudim, 39 Svitavy, 40 Moravská Třebová, 41 Ždírec nad Doubravou, 42 Havlíčkův Brod, 43 Pelhřimov, 44 Kamenice nad Lipou, 45 Třebíč, 46 Velké Meziříčí, 47 Žďár nad Sázavou, 48 Bystřice nad Pernštejnem, 49 Blansko, 50 Brno (2)*, 51 Pohořelice, 52 Mikulov, 53 Velké Pavlovice, 54 Vyškov (2)*, 55 Brankovice, 56 Hodonín (2)*, 57 Staré Město, 58 Zlín, 59 Vsetín, 60 Holešov, 61 Valašské Meziříčí, 62 Hranice, 63 Velká Bystřice (2)*, 64 Olomouc (3)*, 65 Uničov, 66 Šumperk, 67 Mošnov, 68 Paskov, 69 Ostrava (2)*, 70 Frýdek - Místek (2)*, 71 Nošovice, 72 Třanovice, 73 Třinec, 74 Český Těšín, 75 Karviná, 76 Krnov
* The number in brackets next to the names of municipalities represent the total number of supported zones in the given location.
For the programming period 2007-2013, CzechInvest, in cooperation with the Ministry of Industry and Trade, has introduced the Real Estate Programme financed from EU structural funds, which is built on the experience gained through the previous such programme conducted from 2004 to 2006.
The aim of the Real Estate Programme is to encourage the creation and development of business properties including infrastructure and to contribute to the improvement of the investment climate and environment of the Czech Republic. In order to achieve this aim, this programme will involve several types
of projects, which can be financially supported using European funds and the state budget. Supported projects will include preparation of industrial zones and their further development, relocation of companies and construction of rental buildings. However, the primary focus will be on brownfield regeneration,
including renovation of buildings and regeneration of disused sites.
The programme is open to almost all types of enterprises, with the exception of multinational companies. The main restrictions concern users of supported real estate, which should be mainly SMEs operating in the manufacturing industry.
After the record–breaking year of 2008, when the supply of new office space exceeded 321,000 m2, 2009 brought only 162,000 m2 to the market. Affected by the slowdown in demand and tougher financing conditions development activity almost halted resulting in new supply of 42,000 m2 in 2010. This was the lowest new supply since end of 2001.
Total office stock in Prague reached 2.715 million m2, in the second half of 2011, made up of 32 % B class properties and 68 % A class, first hand and second hand. In the first half of 2011 new supply totalled 19,600 m2. For the remainder of the year DTZ forecasts the completion of approx. 86,400 m2, which will add up to an annual supply of 106,000 m2. This is two and half times more than in 2010 but still significantly below the averages of the years 2002-2009. DTZ has revised the forecasts for supply pipeline in 2012 downwards and expects approx. 103,400 m2 to be completed. In total, there are about 322,000 m2 of office space vacant. The vacancy rate decreased on an annual basis by 1.6 p.p. from 13.2 % in Q2 2010 to 11.9 % in Q2 2011.
In the first half of the year 2011 gross take-up amounted to 173,000 sq m, 78 % more than in the first half of 2010, net take-up reached 120,929 m2, one and half times more than in the same period of 2010. Companies from the finance and banking sector followed by professional services companies were most actively leasing or renegotiating space in the first half of 2011, closely followed by IT companies, who have lead the take-up charts last year. Leasing activity concentrates mainly into districts of Prague 4, primarily area of Pankrác as well as Michle, followed by Prague 5.
|2004||2005||2006||2007||2008||2009||2010||1. half 2011|
|New supply (m2)||175,000||148,000||162,000||163,000||321,000||162,000||42,000||19,600|
|Gross take-up (m2)||131,400||178,500||285,300||195,200||260,300||246,300||214,700||173,000|
|Vacancy rate (%)||15.06||12.50||7.70||5.76||8.96||11.94||13.15||11.86|
Source: DTZ Consulting & Research, 2011
|Location||Average rent (EUR)/m2/month|
|Prague city centre||20.00 - 21.00|
|Inner city||15.00 - 17.50|
|Outer city||13.00 - 14.50|
Source: DTZ Consulting & Research, 2011
Brownfields have gained importance mainly since 2002. There are two key reasons for this: the possibility of receiving grants from EU funds and public pressure to use these sites for new investments. There is now a continually updated database of available brownfield locations.
The extensive mapping of brownfields in all regions of the Czech Republic was completed in 2007. This study identified 2,355 brownfields covering a total area of more than 10,000 ha. However, the actual number of all brownfields, including those not mapped, is probably a few times higher. The majority of brownfields are in private ownership. The database offers approximately 400 brownfields whose owners have given consent.
There is a considerable amount of requests for contacts to specific brownfield owners each quarter. Demand markedly increased due to investment incentive for production of photovoltaic energy. Former military sites are currently the most often regenerated brownfields. Such properties have been acquired by local authorities with the aim of finding new uses for them. However, an increasing number of other types of sites are being successfully regenerated not only for industrial uses, but also for other business activities.
|Past usage of site||No. of sites||Percentage (%)||Total area (ha)||Average area of site (ha)|
|Total||2 355||100||10 326.3||4.4|
|Type of ownership||Number of sites||%|
|Population||Number of sites||%|
|0 - 2 000||1 144||48.6|
|2 001-10 000||590||25.1|
|10 001-50 000||344||14.6|
|over 50 000||277||11.8|
The document is prepared on the basis of CzechInvest Fact Sheet.