What is certain is that nothing is certain. This is how the statements of leaders in a number of areas could be translated. Predictions are cautious, and often contradictory, and the results depend on a number of variables. Investments in commercial real estate are a little bit different. Given the highly competitive environment, investor interest has only temporarily declined due to the impact of Covid-19. With the gradual easing of restrictions, it is gaining momentum once again.
Whilst taking into account the existing indications, a comparison with the situation after the financial crisis in 2008 is a very important factor, according to the Czech branch of the international consulting company BNP Paribas Real Estate. At that time, foreign investors held the largest share in Czech real estate. "Gradually, however, local funds and investment companies took over the reins. Thanks to this, in the space of the last 10 years, Czech investors have committed to a 64% share in all completed acquisitions,” recalls Stewart Thomson, Head of Capital Markets Czech Republic & Slovakia.
The five-year average shows a 40% share of local investors in all transactions, and ranks the Czech Republic among the most developed European countries. Just for comparison: in France, domestic buyers hold 65%, in Germany 57%, in the United Kingdom 48% and in the Netherlands 39%.
The increased activity of domestic investors is also more evident now. They are trying to utilise the space which was vacated by large, institutional funds, whose management continued to fulfil the "flight to prime" strategy, even after 2008. This means that they focus only on highly secured and liquid real estate in traditional destinations such as Munich, Paris or London.
The interpretation of 'safety' differs precisely according to the type of investor. Global investors prefer the corresponding cities and epicentres of world trade, whereas local investors figuratively return home. This is not an opportunistic approach. On the contrary, it is a very prudent and informed reaction, which is based on a thorough knowledge of the local commercial real estate environment.
Stewart Thomson, Head of Capital Markets
According to current analysis by BNP Paribas Real Estate, the share of domestic investors could now be even higher in comparison with developments after 2008. The main reason is the amount of funds accumulated in investment funds and real estate companies. After all, they have recently acquired a number of premium properties. Other companies combine different types of real estate in their funds or sub-funds in a very sophisticated way, to ensure that shareholders have a guaranteed return despite the ongoing economic turbulence.
Precisely, it is domestic investors who can 'hold' the Czech real estate market together. This is not only in the case of new construction, but also with already completed buildings, which foreign owners may exclude from their portfolios.
In the context of Central and Eastern Europe, the position of the Czech Republic is quite exclusive. The aforementioned 5-year average share of domestic investors is only 2% in the case of Poland, 19% in Romania and 17% in Slovakia. One exception, which is down to the political arrangement, is Hungary with a 40% share.
