CZECH THE YEAR AHEAD
Retail
Which are the major projects that will be leasing this year?
Palladium will be the main focus for Cushman Wakefield at the year’s end, however other projects to open include Bondy Centrum (Mlada Boleslav), Olympia Brno Phase III, and Devo’s Exit 66 Factory Outlet.There will be other factory outlets also opening and Africa Israel’s Pardubice project will be leasing.
What will the hot areas of the market be? Prague? Regional?
Retail is diverse across the country and we’ll see more openings outside the capital than in it. It’s clear that we’ll see more square meters delivered this year around150,000 sqm than in 2006 70,000 sqm.
Is betting on rental growth in the near-term a smart move for investors?
Generally, retail rents are fairly stable although there has been a slow increase. In the long-term, as the number of developments starts to come down, you’ll see increases. On the high streets, there’s steady growth. Palladium might slow this in Prague in the short-term, but probably not much.
Which regional city will see the most activity?
The development pipelines in Ostrava and Liberec are very large, but won’t come online this year. Liberec will see the most activity over the next three years.
Office
Tewfik Sabongui Jones Lang LaSalle
Which are the major projects that will be leasing this year?
Unlike previous years, there will be a limited number of completed projects to work on in Prague.
Which will be the hot sub-markets?
The hot spots will remain Prague 4 and Prague 5, along with Prague 1 and possibly Prague 8. Rents should remain fairly stable across the market, with some slight increases or decreases in specific areas where we see shortage or surplus of supply.
Who will be making the large requirements?
The big requirements will still come from relocations and allocations from Western Europe and the US (back offices, call centers, IT companies, etc.) as well as the banking and insurance sectors. We also expect to see some international companies relocating their HQsand/orcentralizing their offices. Local demand will continue to provide a significant share of take up for modern office space.
Is betting on rental growth in the near-term a smart move for investors?
I wouldn’t bet, but rather speculate. I don’t expect rents to grow within the next two years as there’s a number of projects in the pipeline which have a similar completion date. Knowing this, and knowing how competitive the Czech market is, I expect prices to remain stable, with few exceptions.
Which provincial city will see the most activity?
We expect Brno, Ostrava and Pilsen to become more active. This trend started two years ago, and looking back at the achievements, it only shows a healthy sign of activity. A potential threat though is sudden over-supply, which won’t match the existing, and growing, demand.
Karel Str&nska Colliers International
Which are the major projects that will be leasing this year?
The biggest volume of transactions will certainly be carried out at CTP Invest’s projects in Ostrava, Brno, Bory and Pilsen. Agencies will be working on VGPIndustrial Park in Horni PoCernice, and the 50,000 sqm of space at D1 ProLogis Park. Outside Prague, it will be CentrepointVerneIndustrial Park (North Bohemia) and the D5 Logistics Park developed by Panattoni and Charnwood.
Which will be the hot sub-markets?
We see clients looking in North Bohemia, which will start the development process and surely bring some established players to the region. However the volume on the D5 still has the potential to grow. The Ostrava region will surely accommodate several new investors.
Is betting on rental growth in the near-term a smart move for investors?
I don’t think rents are set to grow instead we’re seeing deals realized under the market rates.
Which industries will occupy the most space?
The automotive industry will take a significant portion. There will also be two or three bigger transactions from FMCGs, and a similar amount of space taken by various manufacturers. The rest will be logistics. The investments by IPS Alpha in ≈Ωatec, and Hyundai Motors in Ostrava, will bring a significant number of suppliers, and thus new occupiers.
Residential
Tom Duda Professionals
What will happen to the prices on new flats?
They should go up, as they have been dramatically over the past few months.
No sign of a slowdown then?
No slow down at all.
What are the most significant elements driving prices?
It’s a combination of easily available mortgages, undersupply, and rising land and construction costs, along with VAT worries.
Is growth in demand across the board, or are the mid-market and luxury markets developing at different rates?
Demand is high for good quality housing, regardless of the sector.
HUNGARY THE YEAR AHEAD
Retail
Charles Taylor Cushman Wakefield
What are the big schemes for 2007?
It’s a big year for Budapest. ArenaPlaza, which is 65,000 sqm, is the biggest story. There haven’t been any major centers opened in Budapest since 2002, so there’s a lot of catching up to do. AIG/Lincoln is building Market Central, there’s the Vorosmarty ter development by ING finishing up in the center, and Wallis is building out AgriaPark in Eger: it’s a 21,000 sqm shopping center that also opens in October.
What comes after that?
I think after that it’s very difficult to see any new obvious spots that are underserved with good public access. ING’s Buda Skala development will be the next one, which should come out in 2009, but after that Budapest is probably well-served and it’s just a matter of pro-active management, kicking out the old, tired retailers and bringing in the new ones.
The city’s not over-supplied then?
If you look at Budapest vs. Prague or Warsaw, it’s behind Prague and seriously behind Warsaw. You could probalby argue that Warsaw is over-supplied, but if you look at the figures and try to conclude if we’re saturated, I don’t think we are. Not with modern retail space, at least. Projects like DunaPlaza are quite first generation. In the countryside, ECE is moving into other locations now.
Is a bet on rental growth in the near-term a smart move?
In Western Europe we’re looking at 3.5 percent rental growth in prime centers over the next few years. In the short-term Hungary will probably lag behind at around 2.9 percent because of the government’s austerity measures, but we see it outperforming in the medium-term as salaries continue to rise.
You’d have to be very location specific to bet on rental growth in the short term, but over the medium term we think it will be strong.
Any new concepts, or entertainment features coming?
Arena Plaza will be putting an IMAX cinema in the first in Hungary . That’s probably the only new leisure concept we’ll see next year.
Adrienne Konthur CB Richard Ellis
What are the main projects for 2007?
ALK, Tulipan Park, East Gate, Vendel Park, City Point, ProLogis Park in Hegyeshalom, Parkridge Park in Sz&zhalombatta, Europa Park in Ujpest and Mester Park. There will be new buildings in ProLogisHarbor Park and Parkridge will also have new buildings.
Where will the hot areas of the market be?
The hot areas will continue to be the M0 and all the motorway areas. The north-east section of the M0 will be developed soon. It’s expected that new, smaller parks will be developed close to the city center in the old industrial areas of Budapest. These parks will be for storage, commercial and small, light assembly. Further development can be forecast near the borders, motorways or bigger cities.
Who will make the big requirements?
Most of the old industrial schemes within Budapest have been redeveloped in recent years, therefore local demand will strengthen. We expect stronger demand for smaller (200 600 sqm) warehouse units. The main stream of occupiers has always been and is likely to remain cross-border, international companies.
Is a bet on rental growth in the near-term a smart move?
It’s not a good bet. Considering the known pipeline, developers will not be in a position to increase prices in order to remain competitive. At the same time, a niche market could arise for targeting domestic clientele for smaller size units, which could be offered at a slightly higher price.
Office
Shaun Jenkinson DTZ
