Western Europe remains the top choice for industrial occupiers if we are looking at current take-up figures – nevertheless strong economic growth prospects in CEE and Middle East will see more companies pursuing opportunities in these markets.
Favourable macro-economic conditions, competitive labour costs (four to ten times less than in Western Europe), strong household consumption driven by the rapidly growing middle-class in CEE attracts companies that want to be located closer to their customer base. Yet another factor needs to be taken into account – the lead time (the period between the customer’s order and a delivery of a product). Growing customer base in CEE does not imply directly that companies need to re-locate to these regions or extend their logistics platforms. Companies servicing customers allowing longer lead time might find it more efficient to continue serving customers in CEE from their existing warehouses in Western Europe.
What is also driving companies to CEE is rapidly growing industrial production and exports. In fact, Czech Republic, Hungary and Poland alongside Germany took the top spots in growth rates in 2010, and this is unlikely to change significantly over the next few years. Connectivity remains a downside risk in CEE and MENA markets but the substantial progress has been made in certain markets such as Dubai, where local authorities are aiming for the rapidly expanding port of Jebel Ali to become the world’s largest container port upon its completion.
Selected Eastern European markets provide new opportunities for occupiers as they normally have softer rental profiles and higher choice than their Western European counterparts. Following historically low levels of new completions and an impoverished supply pipeline, the choice of product available to corporates has shrunk significantly across the European markets, the trend expected to continue over the next 12 months. Yet vacancy rates remain higher in CEE than in Western Europe, contributing to more favourable occupier conditions.
Favourable macro-economic and property conditions will continue to attract companies to expand in CEE and MENA markets. Despite expected slower growth than in CEE, mature Western European markets will remain in the leading position over the foreseeable future due to excellent infrastructure and household demand remaining on a high level.
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