Colliers published a survey of the Czech commercial real estate investment market for Q4 2021. It shows that the volume of investments fell for the second year in a row in 2021, although sales were 8 percent higher year-on-year in the last quarter. The largest investment in Q4 was the sale of the Generali headquarters in Prague with an area of 36,000 sqm.
Last year, the total volume of realized investments amounted to €1.79 billion. From this volume, offices had the largest share of 35 %, closely followed by industrial with 32 %. Retail and residential followed with 13 % and 10 %. “The annual result represents a decrease year-on-year of 33 %, but this is still slightly skewed by large, Heimstaden Residomo transaction in early 2020. In comparison with 2019, last year’s volume represents a decrease of 45 %. However, more importantly, the momentum gained in the market during H2 2021 is likely to carry through into 2022,” says Josef Stanko, an analyst at the consulting company Colliers.
The largest real estate transaction
The largest and most significant transactions in Q4 were represented by all different types of assets. These included office portfolios, rare industrial assets, various retail assets and key land plots for future development. “The total investment volume in Q4 2021 reached approximately €579 million, this represents a ca. 30 % increase quarter-on-quarter and a ca. 8% increase year-on-year. Aside from offices and industrial, the other classes were less active in the last quarter,” explains Josef Stanko. According to him, it is worth mentioning the retail sector with a volume of €76 million, representing a share of 13 % on the final quarter’s volume. Office assets represented a share of 36 %, while the industrial sector’s share was approximately 47%. Colliers registered 29 closed transactions during the last quarter.
The largest transaction at the end of 2021 was CPI Property Group, which sold a large office asset of almost 36,000 sqm in Pankrác in Prague 4 to Generali. This property is occupied long-term by Generali’s insurance branch and the new owner already announced upcoming refurbishment to the current standards. Another interesting transaction was Revetas’s disposal of an office portfolio (3 properties) in Karlín, Prague 8. Considering how popular this submarket is among tenants, the new owner, Českomoravská Nemovitostní, acquired an important addition to their portfolio. This company is currently one of the largest office space providers in Prague. In the area of industrial real estate, the American fund Exeter bought two properties in Multimodal Park Ostrava Mošnov from Concerns, following their earlier acquisition of an industrial asset in Nošovice. Together, this acquisition is one of the largest of 2021.
Retail has the highest yields
The demand for industrial properties continues to outweigh opportunities and Colliers estimates that prime industrial yields have fallen at 4.00 %, which is the same as prime office yields to 4.00 %.
Retail properties remained relatively stable, except for retail parks where we record continued demand, which drives up prices. Therefore, our view is that prime retail park yields have moved to 5.50 %, for those assets with the best locations and tenant mixes.
“The big question lies with the prime residential yield. In Prague, where the prices per sqm are the highest, investors can achieve something between 2.00 % and 4.50 %. With the increasing prices of construction, it is also difficult to predict the yields for future PRS projects,” points out Josef Stanko.
Outlook to 2022
With the possibility of the pandemic slowly coming to an end in Europe, the market has the opportunity to return to pre-covid levels of performance. We are becoming more experienced in hybrid working, adaptability and resilience. Other challenges such as increasing inflation, increasing energy costs, rising interest rates, and the decreasing availability of the workforce remain, but the last two years have taught us to look ahead optimistically.
“If the investment market maintains its current momentum, we could expect the transaction volume in 2022 to reach somewhere between €2.0 and €2.4 billion. Investors should keep their eye on office and industrial assets. This, as last year showed, will always be a good lower-risk choice, with stable yields and some rental growth upside,” concludes Josef Stanko.
