CEE industrial focus shifts to regional cities: CBRE

This year should see an increase in industrial project deliveries in Central and Eastern Europe (CEE), according to a new research report by CB Richard Ellis (CBRE).

The activity will be mainly focused on Russia and Poland.

Increased manufacturing productivity and its link with regional CEE markets is causing development activity to move from capital cities towards regional cities. This is particularly the case in the Czech Republic and Poland but also to some extent in Hungary and Slovakia.

In most markets developers can only develop based on a build-to-suit agreement or when a significant pre-lease is signed. In line with differences in economic performance across the region, most smaller markets are experiencing only limited new developments taking place.

'Medium to longer term economic prospects, economic growth in most CEE markets has turned positive in recent quarters,' said Jos Tromp, head of CEE Research and Consultancy, CBRE. 'The two largest economies in the region, Russia and Poland, are expected to expand by over 4% year-on-year in 2011.'

Due to a considerable slowdown in the development pipeline over the past two years, the amount of completions in the major CEE cities reached around 1 million m² in 2010 compared to 2.4 million m² in 2009, a decline of 60%.

'In CEE, regional markets are traditionally more driven by industrial production than capital city markets, where retail plays an important role,' Tom Listowski, head of Industrial and Logistics CEE, CBRE, said.

'Looking at country-wide vacancy rates, the increased pipeline under construction in Poland may initially seem a bit surprising. Vacancy, however, is generally lower in regional cities than in Warsaw, and the majority of new projects are starting based on build-to-suit agreements.'