The third quarter of 2010 was relatively quite in terms of investment activity on the Czech real estate market. In Q3 2010 real estate investment amounted to 41 million, which represents a 76% decrease compared to Q2 2010 and a 33% decrease y-o-y.
Since the beginning of 2010 a total of 289 million transacted, a 130% increase compared to 2009. However DTZ expects that the overall investment volume in 2010 will reach between 500-600 million, which would result in a 11 to 33% increase compared to 2009 and ca. 44-50% decrease compared to 2008.
"The fourth quarter of 2010 is expected to show increased investment activity with a pipeline of deals in various stages of negotiations exceeding 250 million mainly in the retail sector and the Prague office," states Lenka indeláøová, Analyst at DTZ.
Four transactions were closed in Q3 2010. Three transactions were closed in the Prague office sector representing 72% of the total volume. Two transactions were closed in Prague 5. Austrian Immorent sold Avenir Office Park Building E to the Austrian Fund Hypo Real for cca. 15 million and Mayfield sold Gallery Louvre to the Spanish investor Azora for 10 million. In Prague 7, Holeovice the office building 'EBC' was sold to a Czech private investor at around 4million. The Czech investor CPI was active again purchasing a portfolio of retail projects in Prague, Kolín and Zlín of a reported 11.6 million.
The most active players remain Czech and Austrian investors. It is expected the German open-ended funds that remain temporarily closed will not feature significantly on the market until mid-2011. Last week a new draft of the legislation for investor protection including regulation of German open-ended funds was published in Germany, which is softer than the previous version. The draft sets minimum holding periods of two years for shares in funds; stepped value reductions for redemptions in Years 3-4; and exemptions for small (below 5,000) investors. According to Karel Koneèný from DTZ Investment, "The new law is expected to be in force in the coming months, however it will take the Fund's a certain amount of time to implement the changes into their business strategies".
Prime yields for office and retail stand below 7%. Prime yields for industrial properties with 5 years secured income stand at 8.25%; and for industrial properties with a minimum of 10 years secured income the yields stand at ca. 8%. Until year-end yields are expected to remain relatively stable with potential for compression in 2011. Capital values are currently approx. 20-30% lower in some cases than they were in the peak of the market Q3 2008. It is expected that capital values have now stabilized. DTZ sees that the gap between vendor and buyer expectations has narrowed but negotiations take long time to close.