Prague’s Real Estate “Slingshot” Is Being Pulled Taut: Offices Are in Short Supply, Developers Prefer Housing
Prices on the Czech real estate market—especially for commercial properties—have been the subject of intense debate in recent years. While they have fallen significantly in Western Europe, in the Czech Republic, led by Prague, they have remained resilient. Demand here is still strong, and far fewer office buildings have been constructed in recent years. The future of commercial real estate was discussed at the Market Mood conference by Josef Eim of Českomoravská Nemovitostní and Václav Kinský of INVESTIKA.
This is putting upward pressure on office rents. While monthly rents currently hover around €30 per square meter, five years ago they were closer to €20.
According to Eim, developers also tend to favor residential projects, where margins are substantially higher. “They sell apartments for around CZK 200,000 per square meter, whereas offices are priced between CZK 100,000 and 150,000 per square meter,” he adds.
Regional Diversification
Diversification is important even in real estate. According to Václav Kinský of Investika, there is significant potential in Poland, where the fund allocates more than 60% of its capital. “Unlike us, Poland has a large stock exchange, but people there are essentially not used to investing in local real estate at all,” he says.
Poland is also one of the faster-growing economies, with a relatively favorable business environment. “A legislative change expected in Poland over the next 12 months could open the door to much more extensive real estate investment, potentially leading to successful exits for Czech investors,” Kinský estimates.
Outlook for This Year
What should investors focus on in the real estate market this year? Limited supply in Prague is likely to continue playing a role, and not all projects will be suitable for more attractive returns.
