Investments in real estate (or so-called real-assets) are considered unique compared to other types of assets, because they generate two types of income. On the one hand, they bring revenue from rentals, but at the same time they also appreciate in time. Currently, however, rising inflation, which is at its highest level since the last financial crisis, is entering these variables more and more significantly. What effect does it have on commercial real estate prices and returns? And how is the current situation different from 2008/2009? CBRE, a leader in commercial real estate services, comes with an explanation in the form of extensive market analysis.
Investments in the Czech Republic reached EUR 1.15 billion in the first half of this year. CBRE expects that the second half of the year will be roughly as strong, so that investments will reach the 2 billion threshold by the end of the year, i.e. similar to last year or the year before. At the same time, the market has the potential for even greater performance, but demand is held back by the lack of new and high-quality products on the market. “Investors continue to perceive the domestic market as high-quality and the most stable within the Central and Eastern European region. They positively evaluate the local legal and financial environment, quality and available workforce, as well as the revenues achieved. These are, depending on the type of segment, 50 to 150 basis points higher than in the countries of Western Europe,” comments Jakub Stanislav, Director in the investment department of the real estate consulting company CBRE.
Real estate prices have reached their maximum, but they will not be significantly cheaper:
The positive news is that the current situation is fundamentally different from the financial crisis of 2008. The Czech market has matured since then and is in good shape, as evidenced by the low proportion of vacant premises. At the same time, property owners are well prepared for various eventualities, have financial reserves and are not forced to sell. Therefore, real estate prices will not fall significantly like during the last crisis. “Currently, we perceive that the imaginary scissors between buyers and sellers are open, that is, both sides have a different idea of the price. A record number of transactions were completed last year, but more are being negotiated this year. In any case, property owners do not want to sell at a lower price, and nothing forces them to do so. They have enough liquidity, so they can wait for a better offer. We assume that these expectations will converge by the end of this year and will be fully manifested at the beginning of next year. Buyers will fully realize that the price will not be more attractive – and the market will thus lean back to the sellers’ side,” comments Jakub Stanislav.
Author: CBRE
