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One of the biggest challenges in the industrial real estate market is the availability of land and real estate in the right place that meets the needs of both developers and end users. When selecting an area, the availability of public services, access to transportation infrastructure, the availability of skilled labor, and the availability of investment incentives are also important.
The 17 industrial and logistics market countries of the Central and Eastern European region are at different levels of development in terms of size and pace of development. In 17 countries in the region, the total stock exceeds 50 million square meters. Based on this offer, the available space currently available can be considered low, as most of the industrial and logistics markets in Central Europe have registered availability rates below 5%.
Strong demand in the industrial and logistics real estate market
“Demand from the industrial real estate and logistics sector in the Central and Eastern European region has been strong in recent years, driven mainly by the 3PL (logistics service provider), retail and distribution sectors, followed by the light industry sectors, automotive and consumer goods. During the epidemic, and as we expect in the future, there may be a change in the volume of demand and the order of the sectors due to the expansion of e-commerce, data centers and products that require special storage, which will translate in an increase in demand. Nonetheless, we believe that the Central and Eastern Europe region, which has a long industrial history, will continue to be attractive to manufacturing companies, from the automotive industry to aerospace components, including metal and plastic processing, electronics, household equipment, pharmaceuticals and health workers ”. He said Kevin Turpin, Regional Director of Market Research, Colliers International.
“While we expect e-commerce to grow at an even faster rate and stimulate demand for logistics in these challenging times, we also expect long-term growing demand from manufacturing companies bringing certain elements of the supply chain closer to Europe. to reduce risks. in order to. In the long term, this could mean they can store or produce larger stocks closer to the end user, which could result in further growth in demand in the region. “
2220 Vecsés, Üllői út 807
Stable rentals
In the CEE-17 region, rents were stable and even increased in key locations where space was limited. This trend is likely to continue as demand remains high and construction costs have increased in recent years.
Typical rents in the region range between € 2.9 and € 5.5 per square meter per month, although in early stage markets it can reach € 7.
Land damage and construction costs
For a standard warehouse, the development and construction costs and the guide prices in the development areas (assuming you are licensed) show that
Land prices in the region average between € 10 and € 80 per square meter, but due to the limited supply of land in the areas you are looking for, especially in the vicinity of large cities or busy transport hubs, prices for land can reach € 120 and € 150.
The average cost of construction of a “standard” warehouse building in the region is between 300 and 600 euros per square meter, excluding “soft” costs (design, financing, legal costs). Higher construction costs can also be observed in some markets, but rising labor and material costs can increase construction costs by as much as 25% overall.
Industry trends
Among sectors, the epidemic hit the auto industry the most. The Central and Eastern European region has more than ten of the world’s largest automakers, not to mention its component companies, freight forwarders and car dealerships, which employ a total of hundreds of thousands of people. Any major recession or inactivity in this sector will have serious economic consequences.
Companies in the pharmaceutical industry, the 3PL (logistics service provider) sector and e-commerce are also major players in the Central and Eastern Europe region, but their future looks much brighter. Once the coronavirus vaccine is developed, a large amount of production, storage and transportation capacity will presumably also be required in the Central and Eastern European region.
The e-commerce and 3PL sectors have achieved significant growth in the Central and Eastern European region over the past decade. The biggest names can be found in the logistics sector, p. Eg DHL, UPS, FedEx, etc. The popularity of products that can be ordered online, including vegetables, hobby-related products, garden products, sports equipment and electronic devices and entertainment products online, will lead to a growing demand in the industrial and logistics real estate market in the next years.
1223 Budapest, Növény utca 7.
| Rental area: 7671 subwaytwo Rent: 5.25 – 5.5 EUR |
Delivery: 2021 Q4 |
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Legal incentives for investment
Most CEE 17 countries support investment in the industrial and logistics sector with at least one type of incentive. These legal incentives vary from country to country, but are characterized by subsidy, non-reimbursable programs, be it government subsidies, tax breaks, reductions, lighter rules, extended administrative support.
“Industrial production is approaching record levels in most countries in the CEE region, so it is undeniable that the region is attracting manufacturers and logistics companies like a magnet. Countries in the Central and Eastern European region have made significant foreign investments thanks to a well-trained workforce, rapidly developing infrastructure, and cheaper labor compared to Western European levels. Furthermore, in most countries there are legal incentives for investment. Legal advisers have an important role to play in providing assistance, not only to reduce risks, but also to take advantage of developments and opportunities. ”He added Lukas Hejduk, CMS partner and director of real estate in the Central and Eastern Europe region.
The Hungarian industrial sector remains highly focused on Budapest
Until now, despite the generally high purchase price, the purchase of existing property has been preferred to new real estate developments due to high investment costs and longer construction periods, both in Budapest and in rural areas. At the same time, the number of buildings that can be purchased is quite limited, the investment costs have become more acceptable, which is why currently developments around Budapest are more and more frequent. In 12-16 months, these new developments can be a good option for companies looking to find new production and logistics buildings in Budapest, even if 34% of the planned new buildings have already been launched, ”he says. Dr. Gábor Czike is a partner at CMS Budapest, director of the Real Estate Law Group.
legal act | Ban and Hoop Bar AssociationLabor law, Liquidation, Establishment, Real estate leasing, inheritance law
Although some countries (Latvia, Montenegro, Serbia and Slovenia) do not offer specific incentives for the industrial and logistics sector, companies can still benefit from general legal incentives.
Labor market and investment: a change in trends
The Central and Eastern European region continues to be at the top of the minds of foreign investors in terms of the logistics sector, thanks to the availability of labor and savings in labor costs. Interest keeps falling, only the reasons have changed.
Paweł Kopeć, Director of the Randstad Business Solutions Center “Cost continues to play an important role in investment, but a stable development environment has also become an important aspect, well symbolized by the Central and Eastern European region, as unemployment rates have increased only slightly in these. countries since the coronavirus outbreak. Workforce qualifications are also an important consideration for investors. Despite the low unemployment rates, there are a large number of well-qualified workers in some areas. In the short term, companies are more likely to rebuild their workforce rather than increase their stock, fearing the effects of the second wave of the epidemic. As a result, we expect temporary employment of labor to become an even more popular solution in the market. The epidemic has also transformed the way employees view their future employer. In the near future, we hope that a safer job and the financial stability of the company will become increasingly important considerations in the selection of jobs in terms of salary and benefits ”.
1095 Budapest, Lechner Ödön phasor 9
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