The total volume of real estate investments in the Czech Republic reached EUR 328 million in the third quarter of 2021, being 24% below the previous quarter but 8% up year-on-year, according to Savills latest report.
Breaking down the individual real estate sectors, industrial led the quarter's volume with EUR 189 million, accounting for 58% of the total. Investment into retail assets, mostly retail parks, spiked during the third quarter totalling EUR 94 million and accounted for 29% of the total, the highest quarterly result for the sector so far this year. On the other side, the traditionally strong office investments dropped to EUR 44.5 million, or 14% share, the lowest since Q3 2020.
Lenka Pechová, senior research analyst, Savills CZ&SK, says: “With offices somewhat out of the game in Q3 2021, the majority of investments took place in the regional markets, with EUR 231 million, whilst Prague saw only EUR 97 million worth of commercial real estate change hands during Q3 2021.”
A total of 14 transactions were recorded during the Q3 2021, up from 11 transactions concluded in Q3 2020. Domestic investors made up half of the quarter's volume, i.e. EUR 164 million, although were responsible for 11 of the 14 (79%) transactions. Cross-border investment accounted for 50% of the Q3 2021 volume, with the largest volume of foreign capital originating from China (26%) and USA (20%).
The average transaction size dropped from the previous quarters' EUR 29 million to EUR 23 million. The quarterly average for 2018-2019 was around EUR 40.5 million.
From Q3 2020, yields have remained unchanged for all prime asset classes. The best office assets in Prague stand at 4.10%, with prime industrial buildings at 4.25%. With the long lasting absence of transactions in the prime shopping centre segment, yield estimates for the best performing and CBD-located schemes in Prague stay around 5.75%. The highly attractive rental housing schemes in Prague remain priced at 4.00%.
Fraser Watson, Director, Investment Advisory at Savills CZ&SK, comments on the outlook: “Last year's transaction volume of EUR 2.73 billion cannot be expected to be surpassed nor reached. As several investments were postponed to 2022, the total investment activity this year is expected to reach around EUR 1.7 billion. However, a robust transaction pipeline indicates a positive investor sentiment for the coming year The exceptionally well performing industrial market, which is demonstrating high take-up volumes, historically low vacancy levels and significant rental growth seen in the past 9 months is attracting an increasing number of investors. However, similarly to the office sector, the modern industrial stock in the country remains tightly controlled and as a result not many opportunities are available for sale. Prime yields for any asset class are not expected to shift significantly in the near future.”