Offices in Prague and retail in the regions dominate real estate investment (CZ)

It is not just A class offices in Prague that attracts interest from investors on the Czech real estate market. As real estate prices stabilize and investor confidence returns, what's becoming more attractive are out of Prague do-it-yourself stores and other smaller retail projects with long-term leases for 10 or more years, according to the latest study of international property consultants DTZ.

This is visible on the results of the 1st quarter this year with sold properties such as OBI/Interspar in Litomìøice and the portfolio of Penny Market stores in smaller cities. Other properties sold during the first quarter included Nestlé headquarters in Prague-Modøany and Victoria Vyšehrad, also in Prague 4.

In the first quarter of 2010 real estate investment amounted to €96 million, which is a 65% increase compared to the same period in 2009. "Czech investors dominated in terms of number of transactions and volume with a share of 69% on the total investment volume," comments DTZ Consultant Lenka Hartmanová.

DTZ expects that the overall investment volume in 2010 will exceed the levels reached last year. There are a number of potential transactions at various stages of negotiation, particularly in the office sector in Prague and retail sector in regional cities. Investment Agent at DTZ, Karel Koneèný adds: "The interest of Czech investors will continue to rise. They are very well aware of their position and are not willing to pay for example for vacant space as part of investment transactions. They are interested only in cash flow , which they capitalize. It's very difficult to find buyers for class A or B properties with the leases shorter than three years."

Retail properties accounted for 49% of the investment volume from January to the end of March, followed by office projects (40%) and mixed use properties (11%). In addition to deals defined as investment transactions, DTZ recorded several non-income producing property transactions purchased for leasing or redevelopment. These transactions totalled €59 million.

The Czech investment market is characterised by two types of investors and also two types of targeted product – institutional international investors targeting prime assets in sustainable established locations with long term secured income and local more opportunitic investors that are also looking at properties with opportunities to add value in the future.

Prime yields for office and retail are stable at around 7%. Prime yields for industrial properties with 5 years secured income stand at 8.75%; and for industrial properties with a minimum of 10 years secured income the yields stand at 8.25%

Source: DTZ

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