C&W | CEE Industrial Marketbeat Q1 2022

CEE Industrial Marketbeat Q1 2022

The industrial property market continues actively developing across CEE. This is fuelled by robust occupier demand for warehouse space, mainly stemming from retail transformation and rapidly growing e-commerce, and the investors’ confidence in this asset class. At the end of Q1 2022, total stock of modern industrial and warehouse space in CEE reached almost 50 million sqm; about half of that (51%) located in Poland.Development activity in the sector is high. New supply exceeded 1.9 million sq m in Q1 2022, while since the start of 2020, over 6.9 million sq m of modern warehousing and industrial space was delivered in CEE.

More than 7.8 million sqm is presently under construction in the region, the dominant share of which (61%) is again ongoing in Poland. Notably, about 40% of such pipeline stock in CEE is built on a speculative basis, further emphasizing the positive outlook for the market.
The occupier’s activity remained robust in Q1 2022. Although the aggregate gross take-up was 23% lower compared to the historic record-high figure of Q4 2021, it increased by 4% y/y, while the 12-month rolling average shows a clear upward trend, which has accelerated since Q3 2020.

Despite significant development activity in the industrialproperty sector and slight increase in vacancy on some CEE markets, the overall vacancy rates in each of the markets stood below 6%.
On a quarterly basis,prime rents increased in all the CEE markets, except for Slovakia. Over the past 12 months the steepest rental growth was observed in the Czech Republic (+33% y/y) and Poland (+13% y/y), while in Budapest –the major property market in Hungary, - prime rent remained slightly below the Q1 2021 level (-3%).

The industrial segment accounted for only 13% of total investment volumes recorded in CEE in Q1 2022, as the availability of stock for sale remained the real challenge. The key investment transactions completed during the period include acquisitions of CPI Industrial Portfolio by Hines and Cromwell Warsaw Portfolio by Partners Group & Peaksidein Poland, as well as the purchases of Airport City Logistics Park byWING and CTPark Budapest North by CTP Group in Hungary.

During Q1 2022, prime industrial yields further compressed in Hungary by 4 pp and Poland by 2 pp, remaining stable in other countries of the region. Over the past 12 months, prime yield compression was registered on all the CEE markets, -from a minimal decrease by 9% y/y in Bulgaria and Romania to a maximal shrinkage by 19% y/y in Hungary, confirming the perceived high investment attractiveness of the sector.

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