CEE Industrial Property Market
Across CEE, the fundamentals for the industrial property market remained particularly strong throughout 2022, as further demonstrated by positive dynamics both on the supply and demand sides, along with considerable investors’ confidence in this asset class. Besides the earlier market drivers, additional demand in Q2–Q3 2022 was generated by industrial, automotive, and FMCG companies stockpiling production materials to shield themselves from expected price hikes.
Stock and Pipeline
At the end of 2022, the total stock of modern industrial and warehouse space in CEE exceeded 55.3 million sq m; 51% of that is situated in Poland. During the past 12 months, the new supply amounted to over 7.3 million sq m. Since early 2020, around 16.1 million sq m of modern warehousing and industrial space has been delivered in CEE, meaning the market has expanded by 49%.
Over 6.3 million sq m is presently under construction in the region, of which 54% is again in Poland.
Although 44% of pipeline stock in CEE is still built on a speculative basis, the developers in the sector increasingly prefer a build-to-suit (BTS) approach to new developments in the sector. The recent slowdown in price inflation for construction materials resulted in improved availability and a shortening of the construction period.
Throughout 2022, occupiers’ activity was very healthy, with the aggregate gross take-up almost equal to the figure in 2021 but 39% and 67% higher than in 2020 and 2019, respectively. Furthermore, despite significant development activity, the vacancy rate did not exceed 6% in any of the markets, while in Czechia, it stood at only 1%.
On an annual basis, prime rents increased in all the CEE markets in Q4 2022. The steepest rental growth over the past 12 months was observed in Poland (+41%y/y), Czechia (+34% y/y), and Bulgaria (+25% y/y).
The industrial segment accounted for 27% of total investment volumes in CEE in 2022. Still, the figure dropped by 34% y/y as stock available for sale remained the challenge, and investment dynamics slowed down. The significant investment transactions completed during 2022 include acquisitions of Project Danica portfolio, VidaXL, Panattoni Park Gdansk Airport, 7R portfolio, Zabka Distribution Centre and Cromwell Warsaw Portfolio in Poland, CPI Industrial Portfolio in Czechia, as well as Airport City Logistics Park in Hungary.
Over Q4, prime industrial yields have softened in all the CEE countries. Compared to Q4 2021, prime industrial yield increased in the Czech Republic (+0.75 pp), Slovakia (+0.25 pp), and Poland (+0.4 pp) but remained stable in Hungary and Bulgaria, while being lower by 0.1 pp y/y in Romania. Further dynamics of prime industrial yields are projected to differ across CEE in the coming months. Still, rental growth and healthy vacancy in the sector will remain among the key factors attracting CEE investors.