Commercial Property in the Czech Republic - Update

Before mid-2005 there was negative opinion in the property industry relating to commercial property in the Czech Republic.  The general opinion was that commercial property assets would produce limited profits for investors who would suffer from excessive supply in the face of restricted demand.  Overall it was felt that investors and owners would reap low margins and suffer high levels of vacant space and that construction activity would be left unchecked exacerbating the situation….the Czech Republic was lumped together with Poland and Hungary and disregarded by many.

However, the few who failed to heed the warnings and ploughed right into office and retail space, logistics operations centers and warehousing in and around Prague, Brno and other major centers in the Czech Republic are today reaping the rewards of their decisions in financial terms!  Here’s the latest update on the commercial property market in the Czech Republic.

2005 was the single most successful year for the commercial property market in the Czech Republic to date - but latest figures from Prague suggest that we could be on course for another bumper year in 2006 and that activity, demand and profits are not slowing down. 

Last year demand for new retail and industrial space took off and pushed up rental and leasing rates, this year office space in Prague in the most popular districts is intense and this is having a dramatic effect on prices and profits.  The retail market is continuing to expand as domestic demand is fuelled by low interest rates, affordable mortgages and an easier access to credit cards and credit facilities, and still the industrial and logistics sectors are setting the trend and leading the way.

Basically one should never have underestimated the importance of the Czech Republic in terms of its logistically strategic Central European location bordering as it does Germany, Austria, Poland, Slovakia and within touching distance of Hungary for example, or as the CIA World Factbook puts it, the Czech Republic is “strategically located astride some of oldest and most significant land routes in Europe.”

The Czech Republic has embraced its position and is now a strong exporter of goods to Europe and in particular Germany, and it has become one of the most economically strong EU members since it joined back in 2004…foreign direct investment is inward flowing, domestic investment is strong and the nation’s internationally focused, bi or multi-lingual, highly intelligent and well educated work force are attracting and securing increased levels of business activity in the Czech Republic helping to ensure that there is continued demand for commercial premises.

For property investors looking for a more stable, less risky entry to the property market in the Czech Republic there are various commercial property funds available that hold assets in the likes of Prague and Brno – alternatively direct investment into Prague’s District 4 office space will see an investor enjoy vacancy rates of just over 3%, or investment into the developer Skanska Property will allow an investor exposure to Skanska’s impressive plans for its brand new logistics/industrial park which will be located next to the R6 motorway, the railway, the city ring road and Prague’s Ruzyne Airport!

Special Reports: Property News for Czech Republic

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