CBRE has summarised this year's developments in the Czech commercial real estate market and provides an up-to-date outlook for 2025. The report highlights anticipated investment activity and the evolution of key segments for the upcoming year.
From January to November 2024, €1.36 billion has been transacted, which is already equal to the total volume for 2023. This year is expected to be closed with a total investment volume of around €1.5 billion. Several large transactions are currently in the final stages of negotiations, hence Q1 2025 is set to be a very strong quarter. CBRE expects total Czech commercial real estate investment volumes to far exceed €2 billion in 2025. Local investors will remain the key players, but the anticipated return of international capital could further strengthen the market.
Clare Sheils, Managing Director at CBRE Czech Republic comments: “Supported by economic recovery, the 2025 market is expected to stabilise and grow, with investment volumes expected to rise. ESG considerations will remain a key focus for 2025 with a strong emphasis on energy efficiency, sustainable building practices, and reducing carbon footprints.”
Since mid-2022, prime yields in the Czech Republic have expanded by 60 – 135 basis points across office, retail, and industrial & logistics sectors. During H2 2024, CBRE has monitored the stabilisation of prime yields, and even the first compressions for Retail parks and High Street prime yields in Q4.
In recent years, investors have begun to place greater emphasis on portfolio diversification to minimise the risks associated with economic fluctuations. As a result, interest in investing in alternative segments such as rental residences, student campuses, or medical facilities is growing. At the same time, the sustainability of projects is gaining importance. Energy certificates and international certifications such as BREEAM or LEED are becoming key criteria when evaluating investment opportunities.
Office market adapts to a new era
There is currently more than 160,000 sqm of new office space under construction in Prague, although most of this space won’t be completed until 2027. The recovery of office construction is being led by the owner-occupied market, namely two of the largest Czech business institutions. This may be the trigger for other projects to follow suit.
Even though some large tenants continue the gradual return of underutilised, secondary space, extremely low new deliveries will keep the vacancy level below 8% next year. Cost is the main driver behind corporations reducing portfolio size, but other core aims such as quality, experience, and flexibility are also prominent.
Simon Orr, Director in A&T-Offices at CBRE explains: “The current leasing market is slow as the market is adapting to a higher cost environment. The unanswered question for now is whether tenants will be willing to pay much higher rates for newly built offices and increase their real estate costs as a result.”
Next year around 240,000 sqm will be newly leased, slightly below the 10Y average of 280,000 sqm. There are still relatively few new occupiers entering the Prague office market. These newcomers tend to start up in flexible office space and the flex market in Prague, which continues to grow, is benefiting from that trend.
The Industrial & Logistics market is getting used to the new normal
This year, industrial & logistics take-up should stay around 800,000 sqm representing a y-o-y decrease of 15%. Next year, take-up volumes might remain at the same level, or even stay slightly below 2024 levels. Jan Hřivnacký, Head of Industrial Leasing at CBRE adds: “Currently, we are unaware of any XXL transaction that would boost the 2025 volume. We believe we cannot expect 2021 and 2022 levels of take-up to repeat.”
Demand in 2024 has been driven by manufacturing companies, which accounted for 60% of overall take-up during the first three quarters of 2024. Automotive has been the most active subsector with a 69% share. As of Q3 2024, there was more than 1 million sqm under construction. Developers are waiting for preleases and this trend will continue through 2025. This year CBRE expects around 700,000 sqm to be newly delivered to the market, which would represent almost a 15% decrease compared to 2023. The vacancy rate has been continuously increasing throughout the year. As of Q3, the vacancy rate stood at 3.1%.
Czech retail is set for growth in 2025
More than 100,000 sqm are in various stages of construction and planning within retail parks. In terms of shopping centre stock, CBRE expects ca 43,000 sqm to be delivered to the market in 2025, all of which are either refurbishments or extensions of existing schemes. The vacancy rate in existing shopping centre stock remained low at around 4%.
The real retail spending growth in the Czech Republic presents a compelling narrative of recovery and resilience. Starting with a year-on-year growth of 3.9% in the first quarter, the momentum has been sustained and even surpassed expectations, reaching an impressive 5.3% by the third quarter. For the entirety of 2024, the growth rate is projected to be around 4.3% y-o-y. In 2025, growth is expected to continue at a steady pace, with a forecasted rate of 4.1% y-o-y.
