Logistics investors target Czech Republic, Poland, and Slovakia

Poland, Slovakia and the Czech Republic all offer opportunities in the industrial and logistics sector but they are likely to appeal to different investors, delegates heard at Garbe’s Investment briefing on the Outlook in CE3, which took place online recently.

Martin Polak, MD Central & Eastern Europe, Garbe Industrial Real Estate

“All three countries have a good track record as a reliable place to invest,” said Martin Polak, managing director Central & Eastern Europe, Garbe Industrial Real Estate. “Each has something to offer, but Poland is particularly attractive for big institutions and international capital, while Slovakia is more affordable and the Czech Republic is more suited to local investors.”

Poland has the big advantage of size and supply, as it is the largest stockholder in the CEE region with 28.3 million sq m of stock. Demand is high because investors know that finding space there is easier than in other countries, and that doing business is also easy as over the last few years the country has positioned itself as a reliable place in which to deploy capital.

“Demand is high, but strong supply and take-up have led rental growth to be less pronounced than in other countries with supply constraints,” said Polak. “But lately rental growth has come through and now it can offset yield movements.”

Rents have gone up by 43.6% since 2015 and in Q2 this year they have increased to €5.6 per sq m, which is still competitive.

The Czech Republic has made the most of its geographical position and ease of access and it has established itself as a great nearshoring location, especially for German companies that no longer want to invest in China or other more distant places but want a cheaper workforce.

It has 10.7 million sq m of warehouse space, a close-knit network of reliable suppliers and a strong tradition of industry and IT know-how. It has seen rapid rental growth due to high demand. Prague has seen the largest rent increase, +71.7% between H1 2019 and H1 2023, but other cities like Pilsen, Brno and Ostrava have also benefitted from high demand.

“The problem is that 85% of stock belongs to long-term holders and there’s not enough development, as there are constraints on land and the permitting process is difficult,” said Polak. “This has pushed rents higher, but unlike in Poland there is a lot of local capital available for logistics. Given the lack of product, you really need to know the market and be on the ground to move quickly when opportunities arise.”

Slovakia is also an attractive location for nearshoring, as wage levels are affordable although there is a shortage of skilled workers. It is a small market, with 3.7 million sq m of warehouse and logistics space, and it is driven by international capital. Automotive is the strongest sector.

“Investment volumes are small by comparison, but it is a stable market,” said Polak. “Rents are growing fast, especially in Bratislava, where they have increased by 63% between H1 2019 and H1 2023.”