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What to look out for in the 2020 Czech Market

3 MIN READFebruary 13, 2020
At a club meeting hosted by GRI Club CEE in Prague, Czechia, the region’s most senior investors, developers, lenders and fund managers met to discuss how the region was currently performing, and what could be expected of 2020. 

It was said that investors are still enjoying the yields in the office sector. According to data provided by Colliers, the total office stock is sitting at around 3.67 million m², a growth of 5.3% from 12 months before. The vacancy rate is still very low (5.5%), but is expected to rise slightly due to the large volume of space currently under construction. In fact, Colliers believes that 2020 will see one of the biggest deliveries of office space in recent years, projecting an additional 174,600m² by December 2020. 

Attendees had a much more negative view of the Czech residential market however. It was said that asking prices are overvalued in respect to regional household income, but these prices will stabilise due to the lack of supply. Right now, it would take 17 years for someone on an average income to buy an apartment; leading tenants to start looking at the aparthotel market. The Czech National Bank (CNB) estimates an overvaluation of residential assets of around 15-20% as the price hikes far exceed the growth of the average households disposable income, but predicts the growth will begin to weaken in the quarters ahead. 

CNB also provided some data which explored the current economic outlook of Czechia. It was reported that GDP growth in the country will remain slow for the remainder of Q1, then start to accelerate again. Some of the risks listed for the market over the next 12 months included residential property prices, bank profitability, pension fund sector stability, and excessive credit growth leading macroprudential authorities to view debt in the private sector as risky. 

For the industrial sector, the most demand is in Czechia, alongside Slovakia, Hungary, Romania and Serbia. The large pipeline of projects due in 2020 (559,000m²) suggests a continuous growth of the industrial property market. E-commerce is only going to strengthen its position as it penetrates the region; indicated by the beginning of some  global/multinational factories coming to CEE over Germany.


Discuss and network with other senior heads of real estate active in Central Eastern Europe at CEE GRI, taking place on 19-20 May in Prague. 

Article by Matt Harris

 
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