German open-ended funds coming back to Prague

Germany remains key for the recovery of the Czech property market after the significant economic impact caused by the financial crisis caused the market to come to a standstill, says Ryan Wray, associate director of investment at DTZ in Prague.

As the country’s major trading partner, particularly in key sectors such as the automotive industry, German recovery is expected to provide the impetus for growth in its smaller neighbour. ‘We have to look very closely at what’s going on in Germany,’ said Wray, in an interview with PropertyEU at EXPO REAL.

Wray believes there are signs that deal activity might be picking up. ‘In the last eight weeks we’ve seen a considerable increase in German open-ended funds looking to carry out transactions in Prague,’ Wray said.

Besides the return of institutional investors the Prague market is also seeing a rise in offers from what Wray referred to as ‘realistic opportunistic investors, who are really scrutinizing product and trying to acquire secondary properties at good prices.’ While there has yet to be a huge flow in deal volume, the narrowing of the gap between vendor expectations and investors’ offers promises an increasing number of deals. ‘The fact that German open-ended funds are making offers means vendors now have a selection of offers to choose from,’ Wray said

One effect of the crisis is that regional investor interest has narrowed its focus to Prague and Warsaw to the exclusion of secondary markets. ‘Fairly or unfairly the secondary markets will be disregarded,’ Wray said, adding that much of the pipeline development that has fallen away ‘tends to be in peripheral areas where it would be hard to sustain even in a healthy market’.