Savills recorded 40 transactions closed in 2023 in the commercial real estate sector with a total investment volume of €1.2b. In 2023, the total volume of investment decreased by 32% compared to 2022. The retail sector was the main driver of real estate investment, accounting for 43% of the total investment volume. The Czech investment market is mainly dominated by domestic investors, who closed 29 transactions and accounted for 80% of the investment volume this year. 31% of the investment transactions in 2023 were made in Prague.
The retail sector had a total of 13 transactions in 2023, with a volume of €512m. The office sector had 11 transactions with a total volume of €344m, while the industrial sector had 5 transactions with a total volume of €132m. The remaining 11 transactions were made in the residential, hotel, and mixed-use sectors.
TOP 5 retail transactions by investment volume in 2023:
- TREI Portfolio
- Palac Pardubice
- The sale of the remaining 25% share of OC Arkady Pankrac by ECE to G City Europe
- Retail Park Trutnov
- Albert Ceska Lipa
Why retail dominates investment volume?
"The dominance of the retail sector in this year’s transaction volume is an interesting change to what we’ve seen in recent years. Reflecting on what could be behind this change, we observe a few elements. Perhaps the most relevant is the fact that retail assets had already experienced a downward price shift pre-pandemic. This means that going into the current market environment retail prices appeared to be more marked-to-market compared to other sectors and this allowed for investors to capture returns in line with the prevailing sentiment,” said Fraser Watson, Head of Investment at Savills CZ & SK and added: “Other aspect contributing to retail’s appeal is the fact that post-pandemic spending in brick and mortar stores has rebounded strongly, demonstrating that physical retail assets have a bright and sustainable future, and do have the ability to fend off competition from e-commerce. A final factor is considered to be that in most cities across the country, there will be no further significant development of shopping centres. This allows investors to predict and evaluate the longer-term future in terms of competition, giving more stability and certainty. We expect that retail as an asset class will continue to be appealing to investors going into 2024."
Retail parks investment
"In 2023, the retail park investment volume roughly doubled compared to the previous year, but retail parks accounted for about 8% of the total volume. The strongest year for retail parks was 2021, when their resilience to negative market influences made them highly attractive to investors during the pandemic period, accounting for 45% of total volume," said Vojtech Wolf, Senior Investment Analyst at Savills.
TOP 3 countries of origin of investors in terms of investment volume in 2023
- Czech Republic
In Q4 2023, prime yields remained stable across all real estate sectors, with the retail sector standing at 6.50%, industrial assets at 5.25% and offices at 5.25%.
Prediction for 2024
In 2024, we expect inflation to fall towards the targeted 2% level which will in turn lead to further cuts in the CNB’s base rate, which can be expected also from ECB. We can cautiously anticipate a slight economic recovery in the first half of 2024 with a positive influence on real estate investment activity.
Report provided by Savills, Czech Republic.