Central & Eastern Europe exceeds 3 million square meters take-up in 2011
Cushman & Wakefield releases the data regarding the record high in the evolution of real-estate industrial sector in Central & Eastern Europe and explains the trends in Romania, in this context. As the latest records show, despite the state of the global economy that did not exceed the critical moment, take-up of modern industrial premises has been increasing, 2011 being the year with the largest growth of this decade according to Cushman & Wakefield reports.

“2011 was an important year for the real estate industrial sector”, states Gabriel Sfetcu, Head of Industrial Department at Cushman & Wakefield Romania. “The volume of premises taken-up has reached a record high of more than 3.2 million square meters, thus having exceeded the previous record dating back to the period of the market peak (almost 2.8 million square meters in 2008)”, explains Sfetcu.

“Demand on the part of firms for high-quality logistics and manufacturing premises in Central Europe has been based on their trust in that market. Two to three years ago, the global market was overwhelmed with concerns and companies opted for postponing their plans for expanding or moving their manufacturing premises.

The period of uncertainty has caused them to look for the most efficient solutions”, says Ferdinand Hlobil, Head of the CE Industrial Team, Cushman & Wakefield. “The Central European region has demonstrated a certain market stability; its other advantages undoubtedly comprise a relatively cheap labor force, geographic closeness to the stable Western European markets, and the consumer markets within this region, which may still grow”, Ferdinand Hlobil adds.

According to Cushman & Wakefield’ specialists, the largest share in take-up were recorded in Poland, which made up almost 60 per cent of the entire take-up last year. Growing interest was noted in all countries of the region with the exception of Czech Republic. The highest year-to-year increase in activities was seen in Slovakia where the take-up volume almost doubled as against 2010.

“Romania also benefited from a record trading”, says Gabriel Sfetcu. “The Romanian industrial real estate market grew by approximately 100% in 2011, as total surface leased. At the end of 2011 we could have spoken of a transacted area of approximately 150,000 square meters compared to 75,000 square meters at the end on previous year”.

Central Eastern Europe - New developments in 2011

Last year’s development projects reflected a moderate revival; still the figure remains low as compared to the record-high years. While almost 2.5 million square meters were developed in the record-high year 2008, the figure was slightly over 800,000 square meters last year. Slovakia noted a higher activity rate as ten times more stock was developed last year - 60,000 square meters as against 2010 - 5,000 square meters.

“All parties involved would welcome a revival of new development projects. There are only minimal available premises ready for immediate occupation in Slovakia, so those interested in their take-up faced limited options. The majority of new developments were reserved for pre-leases; however, for the first time since 2009, speculative development projects were also launched, and it even occurred in several locations at a time, including Eastern Slovakia”, says Martin Balá, Head of the Industrial Letting Team in Slovakia.

Rents and its development

Rent volatility has been low during 2011; the base rent ranged last year between EUR 3.5 and 3.7 per square meter per month. In the most attractive locations, however, rent may grow faster as available premises are taken up. This applies especially to Slovakia and also to other countries in Central Europe including Romania where the ratio of available stock dropped under 5 per cent.
Where the vacancy rate is high, occupiers may enjoy various incentives from developers.

Vacancy rate

The vacancy rate had been declining in the Central Europe region for the second year running and it reached an average value slightly in excess of ten per cent at the end of 2011. This figure represents a sound vacancy rate as supply and demand are balanced. “However, we are talking about average values for the entire region. The individual countries differ substantially with regards to this criterion”, says Ferdinand Hlobil, and he continues: “A drop under ten per cent should serve to stimulate new development projects. Developers have been waiting for that signal; however, the question remains whether those new development projects would find financial backing from the banks.”

While Hungary has more than one-fifth of premises available for rent vacant, the same figure has been fluctuating around the “unsound” five percent in Slovakia for the second year in succession. In Romania, the vacancy rate declined significantly by ten per cent, year-to-year, down to the current less than five per cent. The Czech, too, has been heading towards such rates.

“A vacancy rate below 5 % can lead to significant industrial space rents growth, which eventually can slow down the transactions in this sector”, explains the Head of Industrial Department, Cushman & Wakefield Romania.

„On the other hand”, continued Sfetcu „a low vacancy rate in the neighboring countries, confirms our temperate optimism that suppliers of the large companies will consider relocating their production facilities close to major customers in order to reduce delivery times and transport costs.”

”Also, if a vacancy rate of under 5% in Slovakia is less in square meters of available industrial space, in Romania for a total of 1,400,000 square meters industrial space , a vacancy rate of 5% means approximately 70,000 square meters which could attract manufacturers to our country. ”

Romania – results for 2011 and forecasts for 2012

“In 2011 we had a growing trend of occupancy rate; more demands from the manufacturing industry and also from logistic operators, new on the market, resulting from mergers and separations of other operators already present on Romanian market”, states Gabriel Sfetcu, Head of Industrial Department, Cushman & Wakefield Romania.

”Regarding 2012, this year may end at the same level of performance as 2011 or with a growth of 15 – 20 % if the accelerate rate of last year persists.”, also says Sfetcu.

„Although the beginning of 2012 was extremely slow, fact that would contradict our forecasts for growth, this month demands began to appear, demands that should be completed in approximately 4 to 6 months”, concludes Gabriel Sfetcu.

”More than that”, says Sfetcu, “new speculative developments begun to emerge. Meaning that developers which until know built on request, have obtained funds and began building based on forecasted growth of demand. An example is Graells & Llonch Industrial Park Turda, near Cluj, with a total area of approximately 12,000 – 15, 000 square meters, dedicated to average boxes of 1,500 square meters.”
Graells & Llonch Industrial Park Turda is developed by a Spanish company that has realized a similar place in Prejmer, Brasov.

“This year, we expect a continued moderate revival in new development projects, which has been stimulated especially by the low vacancy rate in the most attractive locations. On the demand side, the retail chains will probably further increase efficiency of their warehousing capacities, in order to ensure supplies for their shops. Also demand for manufacturing premises might continue, especially in regards to automobile manufactures connected to the German economy. The market performance may remain approximately equal to the values recorded last year”, concludes Ferdinand Hlobil.

Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917 it has 235 offices in 60 countries and more than 14,000 employees. It offers a complete range of services for all property types, fully-integrated on a global basis, including leasing, sales and acquisitions, debt and equity financing, investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $5.5 billion in assets under management through its wholly-owned subsidiary Cushman & Wakefield Investors. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge. In Romania, Cushman & Wakefield maintains two market-leading offices in Bucharest and Timisoara.