CEE Industrial Market Continues to Thrive
CTPark Warsaw South is in the CEE region’s most significant industrial and logistics market: Poland.
When it comes to development and demand, the Central European logistics and industrial markets have been thriving. That said, total stock in the region is still low by European standards, according to analysts, with resulting development potential in many markets, some with very low vacancy rates.
According to Cushman & Wakefield figures, modern industrial stock for Central Europe (which it defines as Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia) stands at over 60 million sqm.
“Across CEE, the fundamentals for the industrial property market remains strong, as further demonstrated by positive dynamics both on the supply and demand sides, along with considerable investors’ confidence in this asset class,” says Cushman & Wakefield.
The so-called CEE-5 (the Czech Republic, Hungary, Poland, Romania and Slovakia) has almost 58 million sqm of modern industrial and logistics space, according to CBRE. A further 5 million sqm is under construction, and the vacancy rate ranges from 1.5% to 8.6%.
Colliers puts total CEE industrial and logistics stock at more than 65 million sqm in its “Exceeding Borders: Manufacturing & Warehousing Sector in CEE-12” report. Poland is by far the dominant Central European market, exceeding 30 million sqm or 38% of total stock in the CEE-12; a further 3.4 million sqm is under construction.
This compares to more than 11.3 million sqm of stock in the Czech Republic, with 1.3 million sqm under construction. According to some analysts, the Czech Republic is seen as a model for Hungary, a country of a similar size with which it could catch up.
Established Markets
Both Poland and the Czech Republic have established industrial markets across several provincial hubs. The two countries benefit from their central geographic positions in significant European logistics and industrial networks, with close proximity to Germany, in addition to their own economic success.
Poland contains as many as five core logistics market networks. The Czech Republic, as the second-largest industrial market in Central Europe, also has multiple industrial hubs. HelloParks has secured a development site in Poland and intends to add a further two in its move to become a Central European industrial developer.
Average industrial vacancy for the region stands at 4%, which is supportive of strong rental growth, according to Colliers. The vacancy rates are less than 1% for the Czech Republic and 4% for Poland.
“All of the CEE-12 countries experienced a significant rise in rental rates over the course of the last year. Colliers analysts forecast that the main sector in CEE-12 countries will continue to grow significantly in the coming year,” the agency says.
“This is due in part to cheaper labor and lower rental rates than in Western European countries. While Western Europe is beginning to slowly run out of land for locating large-scale manufacturing facilities, the CEE-12 countries are characterized by a relatively high level of such plots,” Colliers adds.
One of the recent highlights of the Central European industrial market was the 233,000 sqm pre-lease at the Panattoni Park Cbeb in the Czech Republic. The Cheb South park has achieved Breeam “Outstanding” New Construction third-party accreditation with a 94.2% score, according to the regional logistics park developer and operator.
“A modern industrial facility at Panattoni Park Cseb South has become the most environmentally friendly industrial building in the world,” says Panattoni. The 40,000 sqm facility is a distribution center for the German online auto parts distributor Autodoc.
High Standards
“It underscores that modern industrial construction in the Czech Republic truly has the highest global standards and places a strong emphasis on responsibility towards the environment and local communities,” adds Pavel Sovicka, Panattoni’s managing director for the Czech Republic and Slovakia.
The factory offers greenery, low water maintenance, an outdoor gym, dining and relaxation area. The complex was built on a brownfield site, and energy consumption has fallen by 59% compared to the reference state, resulting in a 68% decline in the level of CO2 emissions generated by the building, according to Panattoni.
Elsewhere in CEE, development in Bucharest and provincial logistics hubs in the increasingly dynamic Romanian market further confirms developers’ confidence in that country, says Cushman & Wakefield Echinox. Total industrial stock has reached 6 million sqm, making it the third-largest market in the region. New supply could add a further 500,000 sqm.
With regard to Southern and Eastern Europe, industrial developers and developer-led park operators have previously been reluctant to enter the region; therefore, there is limited provision of modern, developer-led logistics and industrial space. However, CTP has ambitious plans in this region and has now extended its network to Serbia.
Bosch has established a 20,000 sqm BTS facility at CTPark Belgrade West. CTP now has close to 11 million sqm of logistics and industrial space across 10 countries in its portfolio, according to the company. It sees strong potential for continued growth in development across the region.
“Industrial and logistics developments and leasing demand show no signs of a material slowdown and, in some cases, are set to remain on par with previous years, which have been record-setting for some countries,” says Colliers.
“On a per capita basis, the modern industrial and logistics stock in the CEE-6 countries (Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia) remains well below that of a normal Western Country, so there is still a lot of room to grow over the medium term,” the consultancy concludes.
This article was first published in the Budapest Business Journal print issue of April 8, 2024.
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