Strong occupier demand and nearshoring potential in CEE maintain low vacancy rates despite significant new supply

• The fundamentals of the industrial property market in CEE remain strong. Nearshoring offers further opportunities for the region, particularly in the automotive, machinery and equipment, apparel, and consumer goods sectors.
• The H1 2023 new supply of industrial space amounted to ca. 3.8 million sq m, with a total of over 7.6 million sq m added in the past 12 months, expanding the market by 16%. As of June 2023, CEE’s modern industrial and warehouse space exceeded 59 million sq m; Poland accounted for 52% of this, followed by the Czech Republic with a 19% share.
• About 5 million sq m are currently under construction in the region, with Poland and Czechia making up 42% and 27%, respectively. At the aggregate level, the share of pre-leased space under construction has gradually decreased from 61% in Q2 2021 to 44% in Q2 2023, except in Czechia and Romania, where only 39% of space under construction was available for occupation.
• Occupier demand diverged across CEE in Q2 2023. While regional gross take-up remained steady compared to the previous quarter, it dropped by 32% year-on-year. However, on the country level, industrial demand remained very robust in Czechia and Slovakia. Net absorption stayed positive for CEE as a whole and in each country except Hungary, but it was below the Q1 level and the 5-year quarterly average.
• Despite slight upward corrections in Hungary, Poland, and the Czech Republic, vacancy rates stayed single-digit across all markets, notably remaining below 2% in Czechia and Bulgaria.
• In Q2 2023, prime industrial rents increased in all CEE markets except Romania when compared to Q2 2022. Poland saw the most significant rental growth at +35% year-on-year, despite a 5% quarterly decline in Q2. The highest regional prime rent for ambient warehousing space remains in Czechia at €7.75 per sq m per month.