Commercial property prices in the Czech Republic are stagnating in the second half of this year. This is despite the fact that their prices abroad have started to fall. The reason for this is a significantly smaller number of domestic commercial investment projects than elsewhere in the world, and therefore a less competitive environment, and currently suspended new construction of premises. This follows from an analysis by the consultancy RSM.
“The stability of the Czech market was clearly demonstrated in the times of the recession, when yields for office properties in the West fell and with it their valuations. Meanwhile, in the Czech Republic, the opposite trend occurred. Some companies found it worthwhile to hold on to their space even when they were not using it much, knowing that they would have difficulty finding an alternative. So while in the US or Europe they fought for customers with discounts, in the Czech Republic they managed to increase rents,” said Jiří Skotnica, head of the valuation department at RSM.
This is one of the main factors why commercial property prices in the Czech Republic have not yet fallen, he said. However, he added that the market resembles a bending wand and it is quite difficult to predict whether the pressure will ease in the future or whether a break will come.
According to the analysis, landlords want to hedge against negative developments and are investing a significant part of their efforts, for example, in the right mix of tenant types in retail parks and shopping centres. Recently, the number of chain stores targeting the lower price level has started to increase significantly. In a difficult economic situation, retail parks are starting to rely on the presence of discount chains, for example. But leisure concepts or corporate showrooms, for example, have also started to appear more in place of former retail units, RSM said.
Owners have also started to invest in reducing the energy efficiency of buildings and improving working comfort and hygiene conditions in the case of manufacturing sites, among other things, she said. This would allow buildings to start meeting ESG (environmental, social, governance) certification requirements, for which they can get more favourable mortgages from banks and thus become more attractive to future investors, the company noted.
The situation in the retail sector will also continue to deteriorate, according to an analysis by the Association for Real Estate Market Development (ARTN). The market will be affected in the future by the unfavourable macroeconomic situation in the Czech Republic, lower competitiveness of part of the population and the development of prices on the energy market. According to ARTN, this will lead to an increase in the trend of online trade and the so-called “showroomisation” of premises. This is despite the fact that the number of e-shops in the Czech Republic fell by two percent year-on-year in 2022. Furthermore, according to the association, various hybrid formats linking shops and services will also develop.
RSM is a consultancy network focusing primarily on medium-sized companies. It is currently the sixth largest consultancy in the world and the eighth in the Czech Republic. Overall, the network operates with 860 offices in 123 countries. In the Czech Republic and Slovakia it operates offices in Prague, Brno, Pardubice, Trebic and Bratislava.
Source: RSM and CTK
