CBRE: The value of commercial real estate in the Czech Republic is on the rise again after a long decline
10.09.2015Company: Amcham
The Czech Republic is duplicating the development of markets in Western Europe. Driven by global low interest rate environment. Lack of prime product in the Czech market creating competition. Commercial real estate prices have not yet reached pre-crisis levels. Investors have begun to be less risk-averse and are looking for opportunities on the secondary market.
CBRE, the global leader in the commercial real estate services sector, issued a study (European Valuation Monitor, Q2 2015) which examines the movement of values of commercial real estate in Europe. The results of the study indicate that the values in Central and Eastern Europe in the second quarter 2015 reversed direction after several years of decline. Local trends are mimicking the market situation in Western Europe, where growth had already begun a few quarters earlier.
The situation in the Czech Republic is similar to the rest of Central and Eastern Europe. As Clare Sheils, Head of Valuation CEE at CBRE noted: “The Czech Republic serves as a great example within the Central and Eastern Europe, following the increase in values seen in the Western Europe. We've experienced the most prominent movement of values in the industrial sector, where over the last 12 months prime yields have compressed from 7.5% to 6.75%.”
The following chart shows that the value of commercial real estate has not yet achieved pre-crisis levels. There are exceptions, however, such as the Palladium, whose sales price increased by 7% when compared to 2007.
Note: the graph shows price levels of commercial properties in individual regions of Europe in relation to 2007.
“From the perspective of today‘s investor, the prime end of the market is still the main focus, however as investors become less risk-averse, the secondary and tertiary markets are experiencing a rise in interest,” added Clare Sheils, Head of Valuation CEE at CBRE.
