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Czech Republic Real Estate Report Q1 2013

Czech Republic Real Estate Report Q1 2013

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Price $1,175.00
Meta Description Czech Republic Real Estate Report Q1 2013
Publisher Business Monitor International
Date of Report Sep 1, 2013
Quick Overview
The Czech Republic Real Estate report examines the commercial office, retail, industrial and construction
segments throughout the country in the context of a cautiously optimistic outlook for a market vulnerable
to eurozone sensibilities.
With a focus on the three principal cities of Prague, Plzen and Brno, the report covers market
performance in terms of rental rates and yields over the past 18 months, and examines how best to
maximise returns in the commercial real estate market, while minimising investment risk and exploring
the impact of government austerity on a market where cash flow is already restricted. The key growth
areas driven by increasing activity on the part of international investors, and the potential of the domestic
consumer market, are also explored with corporate growth strategies looking to the country for
expansionary opportunities.
However, despite the encouraging signs and the relative strength of the market by regional standards,
BMI remains cautious. Rents and capital values remained stable over the first six months of 2012, but we
saw a wide disparity in the 2011 results which reflect market volatility and will see correction further
down the line as the market is considered increasingly overpriced. However, there is currently no
indication that there will be anything more than gentle rises in rents and capital values going forward, and
yields are likely to remain at present levels going into 2013.
Key Points
?? We believe the Czech Republic's construction industry value will tentatively
enter positive territory in 2013 as the European environment picks. However, we believe that
caution should be exercised. Due to strained cash flow, a cap on public
spending, a renewed freeze on EU funds and the repercussions of a tough financial climate, the
risks are weighted to the downside. Although we expect the market to see positive
growth from 2013 onwards (we forecast annual average real growth of2.9% between 2013 and
2021), hopes of a robust recovery remain a distant possibility.
?? A bleak outlook is expected for the country's residential and non-residential segment, which we
now expect contracted by 4.3% y-o-y during 2012. However, we anticipate a slow rebound in the
sector, with annual average real growth of 1.6% forecast between 2013 and 2016.
?? Nevertheless, the Czech Republic still represents an attractive and strategic investment avenue
for the global construction majors, based on its geographical location as well as the increasing
need for a new infrastructure fleet. However, there are downside risks based on continuous GDP
data revisions, the weak outlook for short-term opportunities and the transport ministry's
renegotiating of contracts, which raise questions over both industry and country risks.
?? We have revised down real GDP growth in the Czech Republic to -0.7% in 2012 and 0.8% in
2013 from 0.1% and 1.3% respectively in our last quarterly report. The persistent sovereign debt
crisis in the eurozone, the Czech Republic's main trading partner, continues to weigh on exports
and investments in the country. Meanwhile, aggressive fiscal austerity further dampens the
outlook for the Czech economy as it crimps domestic demand.
Table of Contents
Executive Summary ......................................................................................................................................... 5
SWOT Analysis ................................................................................................................................................. 7
Czech Republic Real Estate/Construction SWOT................................................................................................................................................... 7
Czech Republic Political SWOT............................................................................................................................................................................. 8
Czech Republic Economic SWOT .......................................................................................................................................................................... 8
Czech Republic Business Environment SWOT ....................................................................................................................................................... 9
Real Estate Market Overview ........................................................................................................................ 10
Market Analysis - Office ................................................................................................................................ 14
Rents And Yields ....................................................................................................................................................................................................... 14
Table: Historic Rents - 2011-H112 (CZK per m2/month) .................................................................................................................................... 14
Table: Net Yield, 2011-2012 (%) ......................................................................................................................................................................... 14
Table: Terms Of Rental Contract/Lease - Mid-2011 ........................................................................................................................................... 14
Industry Forecast Scenario ....................................................................................................................................................................................... 15
Table: Forecast Rents - (CZK per m2/month) ...................................................................................................................................................... 15
Table: Forecast Net Yield, 2010-2017 (%) .......................................................................................................................................................... 15
Market Analysis - Retail ................................................................................................................................ 16
Supply And Demand .................................................................................................................................................................................................. 16
Rents And Yields ....................................................................................................................................................................................................... 18
Table: Historic Rents - 2011-H112 (CZK per m2/month) .................................................................................................................................... 18
Table: Net Yield, 2011-2012 (%) ......................................................................................................................................................................... 18
Table: Terms Of Rental Contract/Lease - Mid-2012 ........................................................................................................................................... 18
Industry Forecast Scenario ....................................................................................................................................................................................... 19
Table: Forecast Rents - (CZK per m2/month) ...................................................................................................................................................... 19
Table: Forecast Net Yield, 2010-2017 (%) .......................................................................................................................................................... 19
Table: Czech Republic Retail Sales Indicators, 2009-2016 ................................................................................................................................. 19
Market Analysis - Industrial .......................................................................................................................... 20
Supply And Demand .................................................................................................................................................................................................. 20
Rents And Yields ....................................................................................................................................................................................................... 21
Table: Historic Rents - 2011-H112 (CZK per m2/month) .................................................................................................................................... 21
Table: Net Yield, 2011-2012 (%) ......................................................................................................................................................................... 21
Table: Terms Of Rental Contract/Lease - Mid-2012 ........................................................................................................................................... 21
Industry Forecast Scenario ....................................................................................................................................................................................... 22
Table: Forecast Rents - (CZK per m2/month) ...................................................................................................................................................... 22
Table: Forecast Net Yield, 2010-2017 (%) .......................................................................................................................................................... 22
Forecast Scenarios ........................................................................................................................................ 23
Infrastructure Report ................................................................................................................................................................................................ 23
Table: Czech Republic Construction And Infrastructure Industry Data, 2009-2016 ........................................................................................... 23
Table: Czech Republic Construction And Infrastructure Long-Term Forecasts, 2014-2021 ............................................................................... 24
Construction and Infrastructure Forecast Scenario ............................................................................................................................................. 26
Macroeconomic Outlook ........................................................................................................................................................................................... 27
Table: Czech Republic - Economic Activity ........................................................................................................................................................ 29
Real Estate Risk/Reward Ratings ................................................................................................................. 30
Real Estate/Construction Risk/Reward Ratings ........................................................................................................................................................ 30
Table: Real Estate Risk/Reward Ratings .............................................................................................................................................................. 30
Czech Republic's Business Environment ................................................................................................................................................................... 30
Table: BMI Business And Operation Risk Ratings ............................................................................................................................................... 31
Institutions ........................................................................................................................................................................................................... 32
Table: BMI Legal Framework Rating .................................................................................................................................................................. 32
Infrastructure ....................................................................................................................................................................................................... 35
Table: Labour Force Quality ............................................................................................................................................................................... 36
Market Orientation .............................................................................................................................................................................................. 37
Table: Emerging Europe - Annual FDI Inflows ................................................................................................................................................... 38
Table: Trade And Investment Ratings .................................................................................................................................................................. 39
Operational Risk .................................................................................................................................................................................................. 40
Competitive Landscape ................................................................................................................................. 41
Company Profiles ........................................................................................................................................... 45
FINEP .................................................................................................................................................................................................................. 45
Orco Property Group ........................................................................................................................................................................................... 46
Passerinvest ......................................................................................................................................................................................................... 47
Sekyra Group ....................................................................................................................................................................................................... 48
Skanska CZ .......................................................................................................................................................................................................... 49
Demographic Data .......................................................................................................................................... 51
Table: The Czech Republic's Population By Age Group, 1990-2020 ('000) ......................................................................................................... 52
Table: The Czech Republic's Population By Age Group, 1990-2020 (% of total) ................................................................................................ 53
Table: The Czech Republic's Key Population Ratios, 1990-2020 ........................................................................................................................ 54
Table: The Czech Republic's Rural And Urban Population, 1990-2020 .............................................................................................................. 54
BMI Methodology ........................................................................................................................................... 55
How We Generate Our Industry Forecasts .......................................................................................................................................................... 55
Construction Industry .......................................................................................................................................................................................... 56
Bank Lending ....................................................................................................................................................................................................... 57
Real Estate/Construction Business Environment Rating ...................................................................................................................................... 57
Table: Weighting Of Indicators ........................................................................................................................................................................... 58
Sources ................................................................................................................................................................................................................ 60




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