Increase in SBU and LML Space Requests in ECO-15 Countries

According to a report by Colliers, an analysis of ECO-15 countries recorded an increase in space demands for small business units (SBUs) and last mile logistics (LMLs), linked to the significant development of the e-commerce.

In the coming quarters, experts expect further development of this market segment and increased demand for I&L (industry and logistics) in the region, says the report “ExCEEding Borders Small Business Units & Last Mile Logistics Sector in CEE-15”.

The total stock of SBU/LML space in ECO-15 countries is over 3 million m², with the largest amount, around 2 million m², located in Poland.

“Demand from I&L occupiers in the CEE-15 region over the past few years has been strong and driven primarily by the 3PL, retail and distribution sectors, followed by the light manufacturing, automotive and consumer packaged goods,” said Colliers Regional Director of Capital Markets Kevin Turpin.

“During the pandemic, we have seen increased interest from tenants in the e-commerce sector and logistics operators offering their services to retailers and e-commerce companies. The increase in requests for SBU / LML space is also a consequence of this trend,” Turpin added.

The SBU/LML market in ECO-15 countries is at a different stage of development, with Bulgaria holding the largest share in these spaces of its I&L stock, with 59% of its total supply. The largest area is located in Poland, with 2 million m², while there are no typical SBU/LML schemes in Albania and Bosnia and Herzegovina.

Some 500,000 m² of SBU/LML space is being built in the region, the majority being in Poland (310,000 m²). As a general rule, rents and rental charges are significantly higher than in standard buildings, because their location and their ability to adapt to needs lead to higher construction costs. In most countries, indicative rental rates for this type of space vary between 4 and 10 euros per m²/month, but in the Czech Republic and Estonia, they can reach 12 euros.

I&L has become one of the most sought-after property classes in ECO-6 (Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia), resulting from changes in consumer behavior, production of goods and global supply chains caused by the pandemic and the war in Ukraine.

I&L investment transactions accounted for approx. 25% of all volumes on average in CEE-6 countries over the past five years. Investments in the sector also secured the top spot in 2021 with 37%. European capital, including CEE, dominates investment activity with 33%, ahead of Asia-Pacific capital with 31%, since 2017.

Although the war has had different impacts on countries, all are experiencing rising fuel prices, rising construction material prices, reduced availability and partial disruption of supply chains, all affecting the state of the I&L market in this region.

“Currently, the I&L sector is doing well, which is why we do not expect any significant changes in this trend in the near future. It is possible that we will experience some slowdown in the growth of the I&L market until the construction markets and supply chains are stabilizing and supply chains are returning to some level of normality. This downturn, however, is likely to be short-term rather than long-term,” concludes Turpin.

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