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Lidovky.cz

Q3 commercial property investment down one-third

  9:59

The current investment dip on the Czech market is expected to be followed by a rise toward year-end and some major deals in early 2011.

Domestic investors continue to dominate the Czech market, accounting for 90 percent of all acquisitions, but some of the larger deals closing in Q1 2011 will almost certainly be the result of growing interest by international investors.

“As a trend across the region, the main signs of an easing in activity came from domestic rather the foreign players. Cross border investors have actually increased their share of total buying to 57 percent so far this year, versus 43 percent for the first nine months of 2009,” said Charles Taylor, capital markets partner for Central Europe at Cushman & Wakefield.

Commercial property investment in Central and Eastern Europe (CEE) in Q3 2010 reached a total of €1.35 billion, substantially lower than the six-quarter high of €2.04 billion achieved in the previous quarter, according to a press release by property consultants Cushman & Wakefield (C&W). The decline took place in most countries in the region and throughout all property sectors.

Investment levels

“Both foreign and domestic demand is increasing and while a shortage of affordable finance is limiting deal activity to some extent, the main barrier to more deals being done has been firstly a shortage of the quality of stock being sought by incoming investors and, secondly, a lack of realism on the part of some vendors over the pricing they need to accept to make deals work,” Taylor said.

While cross-border investors may be redressing the balance to some extent investment activity remains heavily weighted toward domestic buyers, particularly in the Czech Republic where, according to James Chapman, head of the capital markets group (CMG) in Cushman & Wakefield Czech Republic, will have accounted for 90 percent of all transactions that will have concluded by year end.

Chapman does say that even here international investors are becoming a growing presence. “However, there are a number of potential transactions under exclusivity currently that we expect to close in early 2011, so there are encouraging increasing levels of international demand attracted by more stock being marketed and a more realistic attitude on vendor pricing,” he said, adding that another factor increasing international demand is “a result of the degree of urgency being injected by banks looking to restructure some of their loan book.”

Chapman expects 2010 Czech investment levels to be only slightly higher than 2009 levels, but the final figures will depend on whether a final large deal in the works is closed by the end of the year.

Year end rush

According to Jan Kovařínský, investment consultant at King Sturge in Prague, Czech Q4 totals could reach €250 million depending on whether CPI’s acquisition of a building in Finep’s City West in Prague 5 to be occupied by Siemens will be closed in time. “It depends on the banks if it will be closed by the end of the year. In this case 2010 totals would be 10 percent better than last year,” Kovařínský said. The property’s reported value is estimated at €70 million.

Hopes for a more significant upturn are pinned on a number of large deals that could occur as soon as Q1 2011.  Phillip Wood, from the capital markets team at Cushman & Wakefield in Prague, estimates that Q1 2011 investment figures could range from €500 million to €1 billion, although this amount will be misleading in so far as an estimated €270 million will come upon the January closure of CA Immo’s acquisition of Europolis and its Czech portfolio signed in June 2010.

“To someone looking from a distance it might look like the Czech market is coming out of the blocks running,” Wood said, adding that there are another eight deals that could close during the quarter to bring the figure up.

Trading malls

The C&W report indicates retail is the most in demand sector throughout the region. In 2010 only a single shopping center changed hands but Wood is certain that number will rise though there are still some obstacles to be overcome.

“It’s a trait of the market that everything is for sale but nothing is on the market. Many of the owners of shopping centers in Prague have rebuked offers, often because of pricing expectations but also because of restrictive financing that makes these centers expensive to unravel,” Wood said.

King Sturge’s Kovařínský on the other hand points to logistics as the sector most likely to build up early 2011 investment figures. There are two large portfolios whose sale is expected to close in Q1 2011: VGP’s primarily Czech portfolio and Pannatoni’s primarily Polish portfolio.

Not only will the sales add to the market’s investment but, according to Richard Curran, managing director at CB Richard Ellis in Prague, will provide a valuable litmus test for the market. “It will be very interesting to see what buyers are attracted to these portfolios. Will a single buyer invest that much money in a single country? In the Czech Republic that would be a huge ask. It will also give us an idea of the strength and depth of demand for investment-grade stock in this part of the world. Initial soundings have been relatively positive.”

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Šárka Hamrusová: Díky laktační poradkyni jsem si přestala myslet, že je chyba ve mně
Šárka Hamrusová: Díky laktační poradkyni jsem si přestala myslet, že je chyba ve mně

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