Real estate investment in the Czech Republic reached €3.27bn last year, down slightly from the record 2016, says adviser Cushman & Wakefield. Alongside domestic investors, incoming German and US capital made up 70% of volume. It expects about €2.5bn investment in 2018.
In a release, C&W said the number of property transactions in 2017 was close to that in 2016. Capital was primarily channelled into office - at 37 transactions but just 31% of the overall volume, down from almost 50% in 2016. In retail, 28 transactions took place for some 53% of the total.
More than half of all transactions were carried out in the Czech capital but the biggest deals came in various cities. They included the sale of Olympia Brno, the CBRE GI portfolio (Nisa Liberec, Zlatý Anděl and Olympia Plzeň), Metropole Zličín and the Letňany shopping centre.
"Domestic capital is now competing head on with foreign capital thanks in part to the still favourable debt market," said Jeff Alson, Cushman & Wakefield International Partner CEE Capital Markets. The average selling price lagged 2007 levels but offers for some core properties were pitched higher despite the buildings being 10 years older.
Looking ahead, C&W, in a report that preceded the re-election of Russian-leaning President Milos Zeman at the weekend, sees a contraction in Czech transaction volume in 2018. "Offices will be investors’ primary target again, while retail will be subdued compared with 2017," Alson said. "This is partly driven by the fact that many shopping centres are now held by long-term investors." But he expects more capital to be allocated by local institutions and private sources. "The limited stock of prime real estate property on offer will probably also compel investors to explore for some other alternative commercial real estate assets in the coming years."
In retail, the shrinking stock on offer will cause transaction volume to contract, with demand shifting to the dominant shopping parks, C&W said.
In office it expects investment to be directed into prime, large-area office buildings with a selling price of more than €60m, and sees sales reaching €1bn alone in the capital Prague. Industrial and logistics will benefit from investor demand and a shortage of other real estate types.
Smaller investors may begin focusing on alternative sectors such as senior homes, student living quarters, or flexible warehouse space.
Other investor targets will include industrial property, where growth is driven by e-commerce and the automotive industry, added Alexander Rafajlovič, C&W Capital Markets Partner. "In 2018, we expect overall investment volume to amount to about €2.5bn... We believe that in addition to Czech and German investors, the activity of new players from South Korea, Malaysia and South Africa, who have gained initial experience with the central European region, will continue."