News108 Agency: The Future of Warehousing – Automation and Regional Construction

An increasing saturation of the Prague market and new opportunities tied to the infrastructure – that’s one possible way to briefly describe the current situation on the field of storage and industrial real estate in the Czech Republic. A survey among the leading storage space developers and logistics providers, conducted by 108 AGENCY, predicts how the market will develop over the next couple of years.

In the past year, the Czech industrial real estate market was characterized mainly by the growing e-commerce sector which benefitted both from the overall favourable economic situation, and from the arrival of many new players who chose the Czech Republic as an optimal base for their expansion and who thus created a large demand for extensive warehousing solutions. The focus was primarily on regions with connection to Germany whose market the investors primarily supply. The growing importance of the e-commerce sector was also noticed by suppliers of logistics services. In the 108 AGENCY survey, most of the approached subjects declared it the strongest growing sector of all, followed by the automotive industry and the FMCG sector.

Developers react to the current demand by creating new warehousing solutions, both for specific interested parties, and speculatively. Considering the abundance of developable areas, it can be expected that construction will continue in the future. The increasing interest in regions previously unnoticed can be also observed by taking a closer look at the construction newly launched or planned by the end of the last year. This includes chiefly the region of Ústí nad Labem, Karlovy Vary, or, at the other side of the country, the Olomouc and Ostrava regions.

The demand is propelled not only by logisticians, but additionally by producers such as Magna, Personna, or Trevés who over the last year acquired new spaces in the abovementioned Ústecký Region. Among other things, the locality attracts investors due to the marked difference in labour costs when compared to Germany where the rough minimum wage was further increased to 8.84 EUR/hour, effective as of January 1, 2017. The growing attractiveness of these areas will contribute to their continuing development; this, however, may be greatly threatened by the job market development and feasibility of providing a sufficient number of qualified workers.

Increasing automation

A possible lack of qualified labour in the regions that have experienced a significant growth of interest on the part of investors over the last few years is also an important issue, especially with respect to further technological developments. In this case, both developers, and logisticians jointly expect growing automation of warehousing processes. A secondary incentive to adopt these measures is the wish to make large economies. A recent example of intensifying efforts to achieve automation is Amazon’s plan to build a new, highly robotized distribution centre nearby the Polish city of Szczecin. The project is supposed to mark a new technological shift from the company’s old distribution centre in Dobrovíz by Prague.

More flexible logistics

The fast market development is associated with strong pressure exerted by clients to enter into more short-term contracts on logistics services. Over the past few years, there’s been a shift from the previous 5-year contracts to more flexible 2 to 3-year agreements, accompanied by a marked increase in the overall volume of transportation. The rising interest in logistics services goes hand in hand with constructing new warehouses; providers are noticing an increasing demand, primarily in the regions of North and West Bohemia. Localities in Prague and Brno remain strong as well. The completion of the D8 motorway which will further develop North Bohemia by providing it with a new logistic construction, intended for serving mainly the German market, proved to be another strong incentive.

Finding a recipe for city logistics

Transport development is related to the so-called “city logistics”, an area which is lately intensively explored by logistics companies that search for optimal solutions. These solutions may arise in the form of, on one hand, smaller, specialized tailor-built warehouses (e.g. using the so-called vertical storage technology), or, on the other hand, ofdelivery vehicles with alternative drives (CNG, purely electric cars). There’s currently no unified vision being proposed by Czech cities; however, partial solutions are already being prepared as a response to the growing importance of urban supply and limited possibilities of building in the cities themselves.