The industrial market in Slovakia has not replicated the significant growth on the demand side that we have noted in Central Europe, especially in the Czech Republic or in Poland. On the other hand, we are now seeing positive signals on the market in terms of new construction that could be finished at the end of this year or at the beginning of 2015. We do expect that leasing activity will follow this new construction on the market and that we will therefore see increased leasing activity in the near future as well.
Compared to the previous quarter, activity in the second quarter of 2014 was average. The gross take up (which includes also prolongations of existing tenants’ lease contracts) was recorded at a level of 32,063 sq m which is less than the previous quarter. On the other hand, if we compare this against the same period last year, the gross take-up in Q2/2014 was more than double compared to Q2/2013. Net take-up (leasing of space that was previously vacant) was at a level of 9,545 sq m in Q2/2014 and this was significantly lower compared to even the last four quarters. This means that only a small number of companies were entering the market or expanding their premises. We expect that take up will improve together with increased construction activity on the market in the upcoming quarters. Logistics companies and retail sector companies were the most active in terms of leased space in the last quarter.
The second quarter of 2014 proved that new construction on the industrial market in Slovakia is very limited and irregular. While in Q1/2014 more than 6,000 sq m of modern industrial space was constructed on the market, in the second quarter there was no finalised industrial construction. On the other hand we see that development companies already started new construction that could be finalised by the end of this year, part of which will be built on a speculative basis.
The vacancy rate has stabilised at 4,1% - a level that is considered as a very low vacancy rate compared to other Central European countries. Low vacancy rates create difficulties for companies that want to expand or open new operations in industrial parks. In Q2, similar to previous quarters, most of the transactions recorded on the market were lease renegotiations. The 4,1% vacancy rate is significantly below a generally accepted “healthy” level of approx. 10%. As construction of new space has now commenced with expected completion in the upcoming quarters, we expect the vacancy rate to grow slightly. These trends were confirmed by statistical analyses prepared by Cushman & Wakefield.
“It is very positive that we see the start of construction activity on the market. Development companies have started construction in the Lozorno and Senec areas. Since these developments are built partially on a speculative base (without certain tenants secured) it will increase the vacancy rate and hence give more opportunities for companies to expand,” says Martin Balaz, Head of the Industrial team at Cushman & Wakefield.