Unlock the Future of Real Estate
Looking ahead to 2025, the Czech real estate market will see important changes. Our latest report, "Czech Republic Outlook 2025," provides key insights and trends to help you understand the market.
Investment Market
Transaction volumes are stabilising, and prices are levelling off after sharp declines and interest rate changes. Investors are focusing more on operational real estate, especially in the living sector, rather than offices. This trend is expected to grow in 2025. Prime yields should stay stable until the end of the year but yields on secondary assets might continue to rise.
Prague Office Market
Quality is crucial for achieving premium office rents. Modern units will become harder to find, and many large requirements may take longer to complete. The future of older buildings is uncertain, as they are hard to adapt and may need to be repurposed. Despite high demand for prime office space and limited construction, average rental growth in Prague is expected to slow down next year.
Industrial Market
Demand for logistics space remains strong, but leasing activity has softened slightly due to weaker economic conditions. The reorientation of supply chains continues to drive interest in the Czech market. For 2025, we expect prime rents to stay stable, maintaining the same levels seen during the pandemic. This stability is supported by strong demand and limited space availability.
Retail Market
Consumer confidence hit its lowest point in late 2022 and is slowly recovering. Discounters will continue to benefit, but the midmarket segment will recover slowly. The revival of tourism is driving growth in the luxury sector, as its consumer base is less affected by rising prices. We expect moderate growth in High Street rents in Prague next year, with Shopping Centre rents also likely to increase.
Hotel Market
Prague hotels are showing strong performance growth in Europe this year, with an 11% RevPAR increase (YTD Sep 2024). This is likely to continue in 2025, but at a slower pace. The hotel supply growth remains limited, except in the luxury class, which will see 320 additional rooms by the end of 2025. Even with this, the luxury market in Prague will remain undersupplied, representing only 2.8% of the total supply. Demand in 2025 is expected to surpass 2019 levels by over 16%, driven by the return of visitors from Asia and stronger air connections.
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SECTOR-SPECIFIC REPORTS
Economy & CRE Investment
The economy has seen stagnant growth and diminishing inflation, with Central Banks intensifying rate hikes. Inflation is on the expected path, encouraging Central Banks to continue their policies until at least H2 2024. Property values are projected to inflect in Q3 2024, coinciding with economic recovery and interest rate cuts.
Office
The European office market is adapting to hybrid work models, with a surge in flexible spaces and 'option space' in leases. Demand for Grade A office space remains strong, with a focus on quality and sustainability. Investment is shifting towards value-add opportunities in the office sector, especially in high-quality offices with strong ESG credentials.
Logistics
Logistics occupier activity has slowed down, aligning with pre-pandemic levels. Vacancy rates are rising due to increased supply, and developers are becoming more cautious. Investment activity is expected to recover as pricing stabilises, with different capital strategies emerging.
Retail
The retail sector faces challenges from inflation, interest rate hikes, and low consumer confidence. Despite stagnant trade volumes, there's a growing demand for immersive retail experiences. Retail asset pricing is shifting towards value-add strategies, focusing on sustainability and community engagement.
Living
The living sector, including senior living and student accommodation, sees sustained demand due to demographic trends and urbanisation. Despite a dip in 2023 investment volumes, the sector remains resilient and significant for investors, representing 20-25% of transactions in the EMEA region.
Hotel
The European hotel sector is showing resilience despite economic challenges, outperforming the broader real estate market. This is underpinned by the constrained supply and the strong operating performance recovery particularly in resort destinations and urban markets driven by leisure travel. This is expected to continue in 2024, albeit at slower pace.
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