Czech market sees 12-fold increase in Q1

Commercial real estate investment in the Czech Republic reached €237 mln in the first three months of 2013, a 12-fold increase on the same period a year before, when only one transaction was finalised.

‘We have a good pipeline of sales which should close in the next quarters and we believe the investment sector will remain strong for the rest of the year,’ Petr Sulc, head of DTZ’s office in Prague, told PropertyEU.

Office transactions dominated the investment market in Q1. They included the sale of Andìl Park B in Prague 5, which was sold by SEB to a fund managed by GLL Real Estate Partners, and the disposal by Union Investment Real Estate of Trianon Office Centre in Prague 4 to Reico, the real estate fund of Èeská spoøitelna.

‘Compared to Poland, the Czech market is quite small and nevertheless we see similar levels of activity,’ Sulc added.

The largest asset currently on the market is the Park office complex in Prague 4, which is held by the German frozen open-ended funds Degi Europa, Degi International and Degi Global Business. Aberdeen Asset Management is believed to be making progress with the sale which, if completed, would become the largest transaction this year. The scheme is currently valued at around €330 mln. It was originally developed by AIG/Lincoln and consists of a total of 12 buildings.

According to PropertyEU's database, Degi spent over €400 mln to buy 11 of the buildings back in 2008.

Commenting on the occupier market, Sulc noted that tenants continue to have the upper hand. ‘Tenants have renegotiated lease contracts for many times now, even in prime markets like Prague 1,’ he commented. ‘We expect these renegotiations to continue going forward as corporates continue to rationalise their business.’

Even though there was no new supply in Q1 2013, the vacancy rate in the market increased to 13.1% from 12% in Q4. According to data from DTZ, there is currently 377,000 m2 of office space vacant in Prague, the highest volume in the market’s history.

As such, a limited number of projects is due to be delivered in the coming months. The largest scheme is the Florentinum office complex, which will provide 46,000 m2 of new accommodation in Prague 1. The development, which is 55% pre-leased at the moment, is being developed by local group Penta Investments.