CBRE: Investment in Czech market up 30 percent

Czech investors were especially active in H2 2010, boosting full-year results; office and retail yields now stand at 6.75 percent

CPI bought the IGY shopping center in České Budějovice for €48 million foto: © ČTKČeská pozice

CPI bought the IGY shopping center in České Budějovice for €48 million

Investment in Czech real estate showed year-on-year growth of 30 percent in 2010, according to the latest property market report released by property consultants CB Richard Ellis. A strong showing in the year’s latter half accounted for the increase, with domestic investors comprising 60 percent of all investment.

Total H2 2010 investment came to €417 million, an increase of 82 percent over H1 2010. Among the 17 transactions carried out in the second half of last year were CPI’s acquisition of City West B2 and B3 from Finep for €70 million as well as of the IGY shopping center from GE Commercial Finance Real Estate, for €48 million.

Among international buyers, the Westmont Hospitality group gave hotel investment a massive boost with the purchase of the InterContinental Hotel in Prague for €108 million — the first five-star hotel deal in CEE since the onset of the financial crisis. Austria-based Hypo Real Invest’s €15 million purchase of Avenir Business Park represented a far more typical deal for the Czech market.

Stuart Bloomfield, head of Capital Markets Czech Republic at CB Richard Ellis, cited a number of positive market trends moving forward. “There was increased activity in the retail, industrial and latterly hotels sectors, as well as increased activity outside of Prague. We expect these trends to continue through 2011 and expect to see a similarly increasing diversification of the investor base in terms of nationality,” he said in a press release.

‘Around 45 percent of all property investment in the region related to €100 million-plus deals’

Another promising sign for the Czech market is that office deals represent only 42 percent of all deals after having been virtually the sole source of investment during the financial crisis. While regional investment rose to 22 percent of all transactions, office acquisitions remain focused on Prague. Once the Europolis portfolio sale is closed as expected in January 2011, Czech figures will rise even further.

Moscow takes regional top spot

Compared to the CEE market as a whole, the Czech market remains a small pool. According to CBRE’s CEE investment report, total regional investment shot up 90 percent year on year to €5 billion, with Russia and Poland accounting for 74 percent of all deals.

While “recession-proof” Poland led CEE throughout the crisis, Russia passed into the top spot as a result of Lenmar Capital’s acquisition of five Moscow office buildings at the end of the year, for around €690 million.

“2010 marked the return of interest in portfolios and large single assets in the CEE real estate market,” said Jos Tromp, Head of CEE Research and Consulting at CBRE, in a press release. “Around 45 percent of all property investment in the region related to €100 million-plus deals.”

Tromp said large funds are likely to continue investing selectively in the region’s core markets, but said a large number of portfolio sell-offs is unlikely due to the high book value of much of the recently purchased properties.