Skip Ribbon Commands
Skip to main content

News Release

Prague

2014 could be a record year for the Czech property investment market


​Prague, 23 July 2014 – The first half of 2014 continued to show increasing levels of investor activity, following on from the second half of 2013. Even though the total level of year-on-year investment volume transacted in 2014 presents only a marginal increase (20%), the activity of investors and the weight of capital attempting to force itself in to the Czech real estate market is promising substantially increased volumes over the coming quarters. Some predict, a possible record year in terms of transactional volume.

The increased liquidity is caused mainly by the unprecedented amount of capital available for the Czech market. The large number of transactions under offer and/or in various stages of marketing, allows the market to predict 2014 to have the possibility to record similar volumes of transactional activity as 2011 (€2.06bn) or even 2007 (€2.89bn). Pricing at the institutional-end of the market continues to show yield compression with the delta on secondary and value-add assets also beginning to show signs of accelerated compression. The total investment volume recorded in H1 2014 amounted to approximately €713 million (up y-o-y 20 %), compared to the €592.5m achieved in H1 2013.

The majority of deals unsurprisingly took place within the city of Prague. The largest transaction of H1 2014 year was the sale of City Tower in Prague 4 by Proxy Finance to PPF for a price in excess of €100 million. This was followed by the sale of Cecopra’s Palác Křižík in Prague 5 to Generali / Česká Pojišťovna for ca. €75 million and TK Development’s Fashion Arena Outlet Centre to Mayer Bergman for approximately €72 million, the latter also being the largest retail transaction of 2014 to date.

As usual for Prague, market volumes were dominated by office transactions. Amongst others, notable transactions included Praha City Centre, a multi-leased office building located in the Prague 1 district, trading from GLL to Tristan Capital in the region of €50 million. This was complemented by two significant office acquisitions by Czech Open Ended Investment Funds - namely the acquisition of Florenc Office Centre (aka KPMG building) by ZFP Invest from DEKA for ca. €34 million and the  acquisition of Qubix Building in Prague 4 by REICO České Spořitelny from Austrian Developer S+B, for ca. €34.5 million.

Other large transactions included CBD high street property disposals, including Euro Astra Palace acquired by MINT from Avestus (approximately €42 million), ARA Building (ca. €18 million) and City Palais (ca. €46.5 million), both acquired by private Austrian investors. Core CBD properties remain the focus of established core buyers and private investors active on the Czech market and we expect further transactions in this segment to be announced over the coming quarters.

The industrial sector recorded a number of smaller transactions such as the Sale and Leaseback of Bang & Olufsen’s production facility in Kopřivnice to Palmer Capital for ca. €11.5 million and the acquisition of D1 Zone Nupaky by CTP from Mosaic for approximately €9.5 million. Even though there have not been any significant transactions in the industrial sector in 2014, we expect record volumes this year. We are aware of significant transactions in late marketing or, to be closed early in Q3 2014. These will set new yield benchmarks as well as volume records.

Our views on prime office yields are at 6.00% (heading sub 6.00%), prime logistics are at 7.50% (heading towards 7.00%), whilst prime retail yields are expected to re-benchmark in 2014 at significantly below 6.00%. We expect at least 50bps yield compression over the next 6-9 month period.