According to analysis of the real estate consultants Colliers International for Q3 2009, the Czech commercial real estate market may see a revival even next year.
Investment market recovers first
Colliers say investment is the first market segment to recover. The recession caused a remarkable restructuring of the main market players. The most of the transactions have been always realized by German equity funds and foreign investment funds. Today, the dominant market activity is produced mostly by private equity funds.
"No matter the new market situation, we have noted a significant downturn of the investment activity this year. In comparison to record years 2006 and 2007, the market activity fell by 80-90%," says Ladislav Szabo, Director of Investment Department of Colliers International. The total volume of this year's investment transactions reached €100,000,000 by the end of Q3 and in fact, this volume has been generated by only three transactions. Szabo expects another one or two similar transactions with a total turnover of approximately €100,000,000 may be completed by the end of this year. This would give the investment market very positive impulse. "Next year, we expect progressive increase in the total number of investment transactions. Nevertheless, the total volume is expected to remain low, reaching approximately 30-40% volume of the years 2006 and 2007," adds Ladislav Szabo.
Office market reports record vacancy
According to Colliers International, outstanding growth of renegotiations and subleases has been recorded during the third quarter of 2009. Renegotiations created almost 50% of the total office take-up, mostly in the city center Prague 1, 2 and 5. The total amount of renegotiations has doubled in comparison to previous quarter. "In fact, these renegotiations generate no additional demand for office space. High ratio of renegotiations is expected to remain also during next year," says Filip Rerko, Colliers International Tenant Representation Associate Director.
New office supply this year reaches 120,000 m². Filip Rerko expects completion of additional 75,000 m² in 2010 and 75,000 m² in 2011. "We have to count with another important fact the unused office space offered for sublease by current tenants totals almost 40,000 m²," continues Rerko. According to his predictions, the demand should remain unchanged during the next two years.
The Prague office market vacancy reached record figures and caused additional fall in rents mostly in areas that have not been hit yet (e.g. Prague 4). The vacancy totals 280,000 m² (10.6 %). According to Sona Volfova, Colliers Office Research Analyst, this situation is unlikely to improve by the end of 2009. Substantial revival is expected for 2011 at the earliest. "Due to postponed construction and limited new supply, we expect vacancy to start to decrease to its natural rate (6-8 %). This will happen, when the lack of class-A offices will be evident on the market. Consequently, the rent levels may rise again," explains Volfova.
Logistic providers bounce back on the industrial market
First signs of revival have been recorded also on the industrial market. "In Q3 2009, we have seen more than doubled take-up in comparison to previous quarter. The demand totaled almost 100,000 m². However, this figure may be partly distorted by renegotiations and subleases," says Karel Stransky, Managing Partner of Colliers International and Director of Industrial Department. From the geographical point of view, the Pilsen, Ostrava and Brno regions dominated the take-up.
The increased take-up relates to the market comeback of important players the logistics service providers. During the first two quarters of 2009, almost all the take-up came explicitly from retailers and wholesalers, while logistics providers rather concentrated on space optimization. Conversely, the automotive industry and its subcontractors have been hit by the crisis most seriously and still stay inactive.
Considering the vacancy, the industrial market