“The volume of EUR 2.5 billion has not been traded in Prague in any of the past four years, during which annual investment activity hovered around EUR 1.5 billion. We haven’t seen such a strong level of supply on the market for at least a decade,” says David Sajner, Investment Director at Savills, adding: “Several factors have converged on the market, including funds approaching the end of their investment cycles and accumulated investor demand. The first major transactions have set realistic pricing benchmarks and triggered a wave of further sales. Owners who had been considering selling for some time have now decided that the moment is right.” 

In addition to the factors mentioned above, the market’s dynamic recovery is being driven by falling interest rates and more accessible financing. Interest rates on savings accounts have dropped to around 3–4% p.a., encouraging investors to seek higher returns through real estate funds investing in both commercial and residential properties. Debt financing in euros has now stabilised at approximately 3.5%, and up to 60–70% of an investment property’s value can be financed through loans. “Effective use of debt financing can, in some cases, boost the performance of real estate funds to levels comparable with equity indices such as the S&P 500. However, most property funds still underperform the equity markets over the long term. It’s important to note, though, that this should not be their goal. Real estate investments typically serve as the more conservative part of an investment portfolio, and pursuing stock market–level returns should not be the main ambition of traditional commercial property funds., and maximising returns to the level of the stock market should not be the main objective of standard funds focused on commercial property,” explains David Štrouf, Investment Associate Director at Savills.

Several factors currently support the attractiveness of investing in office properties. One of them is the shortage of new office space construction. New office buildings are typically constructed only after securing a pre-lease of 40–50% of the total space. The limited newly built stock increases the value of existing buildings, particularly in the “A and B” segments, thereby boosting demand for secondary assets.

Rising rents represent another important factor. “Prime office rents in central Prague now exceed EUR 30 per square metre, while in inner-city locations they average around EUR 20 per square metre. For projects currently under construction or in advanced stages of preparation, rents are already being agreed at EUR 23–26 per square metre – approximately 15% higher than in today’s completed buildings. This is driven by rising construction and financing costs, stricter ESG requirements, and the limited supply of new office space,” says Pavel Novák, Head of Office Agency at Savills. He adds: “The gradual alignment of market rents with the levels developers require to launch new projects will ultimately, provided the administrative environment improves, lead to a revival of development activity. The market could therefore be approaching a turning point, with new developments expected to resume after several years of limited new supply.”

Another important factor is rent indexation, which continues to contribute to the growth of the income component of returns. After record increases – with rents rising by as much as 15.1% in 2022 according to the Czech Statistical Office (ČSÚ) – the indexation rate for 2024 stands at 2.4%, in line with the targets set by the Czech National Bank (ČNB) and the European Central Bank (ECB). “Rent indexation remains an important factor for investors, ensuring a stable increase in rental income,” adds David Sajner.

Another key factor is the movement of investment yields. “The prime office yield currently stands at around 5.25%, which corresponds to the level seen in 2015. The lowest point was recorded in the fourth quarter of 2019, when yields dropped to 3.9%. The market is now stabilising, and investors are once again finding attractive opportunities with realistic yield expectations,” notes David Štrouf.

Another driving force is the return of employees to offices. Companies are gradually moving away from widespread home-office policies, and employees are welcoming the return. Prague ranks among the European cities with the fastest increase in physical office occupancy, which has once again risen above 60%.

European context: CEE strengthens as Europe returns to investment growth
For example, investment volumes in German offices during the first to third quarters of 2025 remain 73% below the ten-year average and 1% down year-on-year. However, we are once again observing yield compression for prime assets, signalling growing demand. Despite weaker growth in the core Western European markets, investor activity is increasing across the so-called non-core markets – that is, those in Central, Eastern, Southern, and Northern Europe. For the first time in history, their combined share has exceeded 50% of the total European investment volume, driven by heightened interest in the CEE region, the Nordics, and Southern Europe.