Commercial real estate in the Czech Republic is gradually recovering
Savills has analyzed the situation in the Czech market. In the second half of last year, the volume of investments in commercial properties amounted to 797 euros, with 60% of this amount came from the Prague segment. Active demand was enjoyed by commercial real estate in the Czech Republic, the volume of investment in offices amounted to 41%. They are followed by retail properties, which account for 23% of total investments. Warehousing and industrial real estate hold 20%.
The pandemic and quarantine restrictions caused serious damage to the market. Stores had to close, resulting in a serious drop in retail sales. In the first months of the pandemic there was an 11% drop in revenues. The situation improved slightly in the summer months, but in the fall the new wave reduced investor activity and the market stalled again. Retail sales declined 5.3% in November, with auto sales suffering the most, down 45% from the start of the pandemic and 11.3% by fall. At the same time, last year there was a jump in the online shopping sector – people were actively buying goods online, and the popularity of this type of shopping continues to grow.
At the end of last year the volume of foreign investments in the Czech real estate market amounted to more than 60%, which is 3% higher than it was before. In the second half of the year 25 large deals were made here, which is 4 contracts more than in the first 6 months.
As for the level of profitability of premium class objects, it almost did not change. And this trend was observed almost in all sectors except for industrial objects. In this case, the indicators for buildings located in prestigious areas have slightly decreased.
Last year, the volume of investment in commercial real estate amounted to 2.7 billion euros. This figure is 13% higher than the average recorded in the last 5 years. In 2019, the amount was 11% more. One of the reasons for the decline in investment was the stricter rules of financing by banks. The latter have reduced lending, fearing that not all borrowers will be able to repay.
If in 2019 the greatest interest in the Czech real estate market was shown by citizens of Korea and the United States, now their number has decreased. Despite this, foreign investments rose to 2.02 billion euros. The largest transaction was the purchase of real estate by Heimstaden.
There is an increase in activity in the industrial real estate segment, which gives an optimistic outlook for the future. However, the limited supply of such properties in prestigious areas hampers market development.