Slovakia’s industrial market in the second quarter remained relatively active, aided by the robust growth in the country’s industrial output as well as the increasing export volumes. The upswing in production of vehicles and transport equipment in particular contributed to this, which in turn has translated into healthy levels of occupier activity recorded in the three months to June. Prime rents were unchanged to their earlier levels and remained at €3.50 in Bratislava.
Similarly to Q1, demand for industrial space in Q2 remained driven primarily by 3PL logistics operators as well as automotive suppliers and there was a total of 48,000 sq.m space let to occupiers over the quarter, most of it in Bratislava. Furthermore, with the recent announcement of the planned expansion of the country’s automotive industry this should increase its overall output capacity by the end of 2012. As a result, this should see the current demand trends preserved and the noted sectors are anticipated to continue to represent the bulk of requirements to the market.
The overall vacancy rate in Slovakia remains low, despite the recent deliveries of speculative space. There was 25,000 sq.m of space completed in Q1 and furthermore a number of speculative schemes are under way which also indicates improving market confidence on the developers side. Indeed, with the expected improvement in demand levels over the remainder of the year, the newly added space could get absorbed relatively quickly and any growth in market vacancy is likely to be temporary.
Nevertheless, larger take-up volumes over the short term will remain deterred by the still insufficient amount of new supply arriving on the market.
Investment activity was held back by the prevailing shortage of investment grade stock and the low availability of debt. Similarly to Q1, no deals were concluded over the second quarter with prime yields holding firm at 8.75% for prime logistics assets.
Although the export driven Slovakian economy will remain exposed to the wider economic difficulties in Europe, it is nonetheless expected to perform ahead of the European average. This should positively feed into the national industrial market and further improve market sentiment. However, until the financing conditions loosen and credit becomes available for a wider real estate financing, the recovery of the market will remain slow.