Colliers says Czech real estate investment in 2018 totals €2.62bn
The Czech real estate market finished 2018 with a strong fourth quarter as the completion of the year’s two largest transactions took the investment total for the year to €2.62 billion, according to the report, Market Overview for the Czech Republic for Q4 2018, from global property advisers Colliers International.
Despite these two large fourth-quarter transactions – comprising the sale of part of the CTP industrial portfolio to Deka for €460 million and the sale of Forum Nová Karolina from Mayer Bergman and HOOPP to Reico for €209 million – the full-year investment volume figure was down 30% from 2017 and down 27% in terms of the number of deals. Both declines point to the main challenge in the Czech investment market currently: a lack of available quality product.
In spite of this lack of prime investment opportunities, the Czech property market remained attractive for a wide range of investors with capital inflows recorded from 13 different countries. Local investors, though, showed the biggest appetite to invest, with a significant market share of 62% in investment volumes and 77% of transactions.
“The Czech Republic has by far the highest market share of local investors in the whole CEE region, confirming a strong vein of confidence existing among local buyers,” says Andy Thompson, Head of Investment, Czech Republic & Slovakia.
In the Office segment, the fourth quarter saw the total office stock in Prague reach 3.48 million square metres, with some 156,000 sqm added during the whole of 2018. By year-end, some 348,800 sqm of office space was under construction or refurbishment in Prague, with 62% of that space due in 2019 and another 31% in 2020.
The Czech office vacancy level ended the year at 5.1%, the lowest rate recorded since Colliers began monitoring the market in 2005. Based on the pipeline and the net absorption levels over the last three and half years, Colliers expects vacancy rates to fluctuate between 5% and 7% until the end of 2019. Prime office rents in the City Centre of Prague in the fourth quarter stood in the range of €21-22, Inner City prime was at €15-17 and Outer City prime rent at €13.50-15. Prime rents look likely to grow above the current prime rental level not only in the City Centre, but also in other submarkets.
In the Industrial segment, 190,700 sqm of warehouse space was completed in the fourth quarter of 2018, meaning total development completions in 2018 increased by 8.4% from the previous year to 754,400 sqm. The volume of completed space has increased each year since 2012, but still stands approximately 21% below the record year seen in 2007. Total stock stood at 7.74 million sqm at the end of 2018.
The Czech Republic’s average industrial and logistics vacancy rate stood at 4.6% in the fourth quarter, an increase of 50 basis points from the year before. This equated to 354,900 sqm available for immediate occupation, though only nine properties could accommodate requirements in excess of 10,000 sqm.
Prime industrial rents in Prague and Brno stood in the range of €4.25-4.70/sqm/month, while other in-demand regions such as Ostrava, Plzeň and Ústí nad Labem saw rents in the range of €4.00-€4.35/sqm/month.
Around 433,900 sqm of warehouse space is presently under construction, with 47% of that already pre-let. Given this, Colliers expects the trend of build-to-suit properties for larger space occupiers to continue throughout 2019 and vacancy rates to thus stay very low.