Investment activity in the Czech commercial real estate market is now primarily driven by domestic capital, while in the long-term trend, local capital accounted for one third of the total investment volume. Over the past three years, however, the balance has shifted this year, and Czech investors represent 80% of all transactions completed to date, according to a Savills analysis.
Czech investment groups are no longer just local players, they are becoming respected investors across Europe. "By the end of the year, we expect the share of Czech investors to increase to 90%. They have strength, confidence, and the capability to execute large-scale transactions. They are no longer passive seekers of investment opportunities but have become sought-after partners, actively acquiring assets throughout Europe," says David Sajner, Investment Director at Savills.
The Czech real estate market did not experience as steep price decline during the COVID-19 pandemic as Western Europe did. As a result, many foreign investors are now more inclined to sell their Czech assets rather than expand their local portfolios. This combination of broad supply and limited foreign competition creates an opportunity for domestic players to acquire quality assets under conditions in a market they trust and know best.
Investment funds manage the capital of Czech investors who prefer to invest "at home" - in an environment their portfolio managers know well, where they can accurately assess risks and understand both tenant behaviour and market dynamics. "People want to see where their money is going; they want to walk past the buildings they co-own. Domestic funds have knowledge of the market. Foreign investors, on the other hand, have to factor in a risk premium, which often makes them less competitive on price," explains Sajner.
Several factors make the Czech Republic attractive to investors: a stable market with limited fluctuations where property values did not decline as sharply as in Western markets; rising rents driven by low construction activity; property value growth driven by rent indexation to inflation, which has increased rents by roughly 25% over the past two years; capital inflows into local real estate funds as investors move money from savings accounts due to declining returns; and local market knowledge among domestic portfolio managers.
