New industrial units in Central Europe are being developed at twice the rate of last year, according to Cushman & Wakefield’s CE industrial team.

New industrial units in Central Europe are being developed at twice the rate of last year, according to Cushman & Wakefield’s CE industrial team.

More than 500,000 m2 of units were built in H1 2014 compared to 260,000 m2 last year, while almost two million m2 of industrial property was leased. As a result, the vacancy rate has dropped below 10%on average.

'The take-up of new space is so high that almost all stock is leased before the actual development starts. As a result, speculative development is almost non-existent today,' said Ferdinand Hlobil, head of Cushman & Wakefield’s CE industrial team. 'This trend is seen mostly in Poland and the Czech Republic. Take-up is driven primarily by the automotive industry, but the role of online retailers is gaining in importance.'

POLAND
Poland’s industrial market is outperforming that of its neighbours in the CEE region both with regard to new developments and take-up levels. Given the amount of warehouse space currently under construction, this year’s supply is expected to be the highest in the last five years. Take-up rose by 20% in H1 2014 compared with the year-earlier period and leasing volume is expected to remain high throughout the rest of the year. 'It is important to note that small-medium sized cities in Poland close to large conurbations are also generating interest from developers who plan to expand their development footprints,' said Tom Listowski, head of industrial in Poland & CEE corporate relations at Cushman & Wakefield.

For the rest of the year, Cushman & Wakefield expects the industrial property market across Central Europe to grow at the same rate as it has to date. The Hungarian and Romanian markets are slowly beginning to experience a revival that goes hand-in-hand with the positive development across the Central European region and Europe as a whole. Hungary in particular has squeezed vacancy rates below 20% and a further improvement would be a clear signal for new mid-term development investments.

Slovakia is driven primarily by the Bratislava region and several major investments such as by VW. A greater degree of investment and project diversity in Eastern Slovakia would benefit the entire country.

'The political developments in Ukraine represent a threat for the Central European market. If the conflict escalates still further, we can expect increased prudence on the part of investors. This may gradually cause them to "tighten the taps", with developers being cut off from a part of their financial resources. Also, companies are likely to cut down on their manufacturing expansion into Ukraine,' Hlobil added.

The full report is attached below