CS IT

Overview of real estate investments in Czech Republic

28. 11. 2024

In the third quarter of 2024, the real estate market entered a moment of reflection, with investment volumes reaching approximately €188 million, a figure comparable to the same period in 2023. While this represents one of the lowest results in recent years, it should not be seen as a sign of permanent decline. The primary explanation for this contained figure lies in the timing of transaction closures: many significant deals remain under negotiation and are expected to lead to a surge in market activity in the coming months.

Taking a closer look at the data, investments show a balanced distribution across various sectors. Retail attracted 31% of total capital, while industrial assets accounted for 30%, and residential properties secured 27%. Smaller office buildings represented 12% of transactions. Despite the majority of investments being focused on non-central locations, the data reveals that local investors are beginning to diversify their portfolios beyond Prague. This marks a significant shift in how both locations and returns are perceived within the market.

One prominent trend that emerged during the quarter is the absolute dominance of local investors. This trend has been consolidating over recent weeks and reflects a cautious international outlook, as foreign capital continues to be minimally present in the Czech market. In contrast, local players have demonstrated increased agility and adaptability, capitalizing on opportunities within their domestic market.

Among the most significant transactions, REICO’s entry into the Build-to-Rent (BTR) residential sector stands out as a key milestone. The company acquired a property within the Nový Opatov project, located near the Opatov metro station. This acquisition is noteworthy not only for its value but also because it marks the commencement of construction on a project that has faced multiple years of delays. In the industrial sector, major transactions involved assets in strategic logistics parks. Deals led by Fio Investment Fund and CREDITAS were finalized at prices aligning with prime sector yields, reinforcing the robustness of this segment. Meanwhile, retail is showing signs of recovery, particularly in neighborhood shopping centers. Notable examples include transactions involving the OC Řepy and Čtyři Dvory shopping centers, which underline the growing investor interest in retail assets tailored to local communities.

Year-to-date, total investments in 2024 have exceeded €1 billion across 34 transactions, reflecting resilience despite a challenging macroeconomic environment. Interestingly, 50% of these investments were focused on properties located outside Prague. This trend underscores the growing confidence of investors in opportunities beyond the capital, suggesting that non-central areas are becoming an increasingly attractive option for those seeking strong returns and new prospects.

Despite the positive developments in residential BTR and retail, the office market continues to face difficulties, echoing the structural changes brought about by the post-Covid era. In 2024, only €235 million has been invested in office properties, a figure well below the average recorded over the last three years. Nonetheless, there is cautious optimism for a recovery in the fourth quarter, with several office deals currently under negotiation.

Prime yields, however, remain relatively stable across sectors. Office yields stand at 5.50%, industrial assets at 5.25%, and retail shows slight variations depending on the segment. For example, high-street locations see yields at 4.50%, shopping centers at 6.00%, and high-quality retail parks at 6.25%.

The resilience of the Czech market can be attributed to a strong base of local investors, who have continued to drive activity despite geopolitical challenges and broader economic uncertainties. While the office sector remains a point of concern, the residential and industrial markets are signaling positive momentum. BTR projects, in particular, are proving to be a magnet for capital, while retail—though selective—is witnessing steady recovery.

Looking ahead, Colliers forecasts total investment volumes for the year to approach €1.5 billion, a figure that reflects a cautious yet optimistic outlook. The industrial sector, in particular, is benefiting from two distinct transaction types: those aligned with prime yields for long-term warehouse assets and those focusing on growth and development opportunities, primarily pursued by local investors.

Sources: https://www.colliers.com/en-cz/research/q3-2024-investment-market-overview

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