BNP PARIBAS REAL ESTATE GUIDE TO

Size: px

Start display at page:

Download "BNP PARIBAS REAL ESTATE GUIDE TO"

Susan West
5 years ago
Views:

1 BNP PARIBAS REAL ESTATE GUIDE TO INVESTING IN CZECH REPUBLIC 2018 Real Estate for a changing world

2 DO YOU KNOW... Prague is the sixth richest district in EU As Eurostat stated, in Prague the regional GDP per capita, expressed in terms of purchasing power standards, achieves 178% of the European Union average. Prague joined the top 10 regions a decade ago, and since that time has been overcoming contesters step by step, which resulted in 6 th position among 276 EU regions in Bustling high street cluster Prague has the best high street in the CEE region. In the historical heart of the city, just one step off the Old Town Square, along a quiet Parizska street, you can find numerous premium and luxury world renowned brands such as Cartier, Louis Vuitton, Jimmy Choo, Tiffany&Co., Hermes, Prada, Salvatore Ferragamo and Fendi among others. While mass market retailers occupy more busy Na Prikope and Vaclavske Namesti street. Skoda conquers new markets Skoda is one of the longest-standing carmakers in the world. The iconic Czech brand has been a part of the world leader Volkswagen Group since In terms of cars sold, in 2017 Skoda captured 4.5% market share in the entire EU & EFTA region. It means that Skoda was more popular than i. a. Toyota, Citroen, Hyundai, KIA, SEAT, Volvo, Suzuki and Honda in Digital society Internet penetration in the Czech Republic is very high and exceeded 92% in Around 6.3 million of internet users are e-shoppers. These e-shoppers on average spend 681 per year. Online purchases generate around 2.5% of country s GDP, with surges of the e-commerce volume by approx. 20% y-o-y over the course of the last three years. Source: Eurostat; APEK/the Czech Association of Electronic Commerce. Records in Tourism A record number of guests accommodated in Czech hotels in 2017 (20 million), up by 9.1% year on year. The tourist offer of the country is not limited to well-known Prague. Czech Republic is the most castle-rich country (over 200) in Europe and it is worth to leave the capital and feel charm of other regions.

4 INVESTING IN CZECH REPUBLIC 2018 2018 INVESTING IN CZECH REPUBLIC 5 Czech Republic by number s F o r e w o r d Inflow of FDI 4 107.

5% Ústí nad Labem České Budějovice Liberec PRAGUE 10.6m inhabitants Pardubice Jihlava Hradec Králové BRNO Property market 2 4.2m m 2 office 3.45m m 2 retail 7.

3 4 INVESTING IN CZECH REPUBLIC INVESTING IN CZECH REPUBLIC 5 Czech Republic by number s F o r e w o r d Inflow of FDI bn Investment Grade Standard & Poor s: AA- Moody s: A1 Fitch: A+ 311,367 students studying at 66 universities 3 Karlovy Vary PLZEŇ GDP growth in % Ústí nad Labem České Budějovice Liberec PRAGUE 10.6m inhabitants Pardubice Jihlava Hradec Králové BRNO Property market 2 4.2m m 2 office 3.45m m 2 retail 7.1m m 2 warehouse Olomouc OSTRAVA Zlín The Czech Republic reports strong economic growth supported by robust domestic demand. It is perceived as a stable and mature market with low investment risk. Czech still provides a pricing spread to Western European markets and rental growth prospects support the recent yield compression. In the Czech Republic the total real estate investment volumes compared to the size of the country show the highest ratio in CEE. Unlike its peers in CEE, it has a deep and active pool of domestic investors which in turn support a further inflow of foreign equity fuelled by the liquidity brought by local buyers. Stewart Thomson, MRICS Country Head for Czech Republic Number of Business Process Outsourcing and Shared Services Centres in the Czech Republic 220 (10% up y-o-y) Number of employees in BPOs, SSC: 89,000 (19% up y-o-y) inhabitants 1 city with population above 400k inhabitants (Prague) cities with population k inhabitants (Brno, Ostrava) city with population k inhabitants (Plzeň) EU funds ( budget) 23.95bn 1. Czech Statistical Office / 2. / 3. Ministry of Education / Czech National Bank / 5. ABSL

6 INVESTING IN CZECH REPUBLIC 2018 2018 INVESTING IN CZECH REPUBLIC 7 Czech Republic OVERVIEW T OP 6 RE A S ONS T O I N V E S T I N C z e c h R e p u b l i c Stable and mature market still offering

1 2 3 Well established property market Rental growth prospects in all commercial real estate sectors on the back of robust occupier demand.

4 6 INVESTING IN CZECH REPUBLIC INVESTING IN CZECH REPUBLIC 7 Czech Republic OVERVIEW T OP 6 RE A S ONS T O I N V E S T I N C z e c h R e p u b l i c Stable and mature market still offering attractive pricing spread to Western Europe with a unique strategic location in the heart of Europe Well established property market Rental growth prospects in all commercial real estate sectors on the back of robust occupier demand Well skilled labour The 311,000 students studying at 66 universities, with 77,000 graduates per year and a strong technical education provide an excellent base for investors in high value add sectors such as R&D and IT. Mature investment market and a healthy financial sector Strong domestic investor base and high demand from foreign buyers seeking both low risk and capital appreciation. The Czech banking sector is healthy and provides attractive lending conditions. Strategic location and well developed infrastructure Strategic location in the heart of Europe with great access to Western and Eastern markets. Stability & High quality of life & Security The Czech Republic is highly rated for its stability and security as well as quality of life ranking 6 th in the Global Peace Index. Strong FDI inflow & Low investment risk & Positive economic prospects The lowest investment risk and the highest share of FDI per capita in the CEE supported by prospects of strong economic growth well above the EU average. COST AND TERMS O v e r v i e w o f c o n s t r u c t i o n, l e t t i n g a n d i n v e s t m e n t c o s t s a n d t e r m s C o n struction L E T T I N G I N V E STMENT Land acquisition Office 6,000-7,000 costs (per sqm) 1 Retail 6,000-7,000 Warehouse Construction costs Office 1,200-1,500 (per sqm) 2 Retail 1,000-1,500 Warehouse Bank margins % LTC ratio 60-80% Prime rents 3 Office Retail SC Retail HS Warehouse Standard Office 5 yrs lease terms Retail SC 5-10 yrs Retail HS 5-10 yrs Warehouse 5-10 yrs Agent fees Office 12-15% Retail SC 12-15% Retail HS 12-15% Warehouse 12-15% Prime yields 4 Office 4.85% Retail 4.75% SC 3.50% HS Warehouse 5.75% Prime asset values Office 3,500-5,000 (per sqm) Retail 6,000-7,000 Warehouse 800-1,000 Stamp duty Asset/Shares 4% Bank margins % LTV ratio 60-80% Standard sale fees % *including fit-out 1. Prime location in capital cities. 2. For modern schemes. 3. Prime assets in the capital. 4. Best-in-class schemes in prime location within capital city.

8 INVESTING IN CZECH REPUBLIC 2018 2018 INVESTING IN CZECH REPUBLIC 9 Czech Republic OVERVIEW Czech Republic B I G F O U R Prague Prague GDP per capita in PPS reaches 178% of EU average making it the

5 8 INVESTING IN CZECH REPUBLIC INVESTING IN CZECH REPUBLIC 9 Czech Republic OVERVIEW Czech Republic B I G F O U R Prague Prague GDP per capita in PPS reaches 178% of EU average making it the sixth richest district in EU. The Czech Republic capital has seen very strong interest both in prime office assets as well as prime high street locations supported by strong rental growth. Given its tourism attractions, the hotel market has been booming attracting investor demand as well. 1.3m 2.3% Unemployment rate 1 1,438 (36,540 CZK) Average gross salary 1 Brno Brno has the highest per capita number of university students in the country making it an attractive destination for investments in the IT, R&D and technology sectors. K e y f a c t s 378,000 Total modern stock (sqm) 5.0% Unemployment rate 1 Prime headline rents city centre ( /sqm/mth) Office 552, Retail 295, Warehouse 985,400* Source: *South Moravia regional industrial stock 1,093 (27,762 CZK) Average gross salary 1 Ostrava Ostrava has been undergoing an intensive transformation. For investors it provides a deep labour pool from the Ostrava agglomeration. Governmental incentives have attracted numerous investments to the many industrial zones of the region. 324,000 K e y f a c t s 6.9% Unemployment rate 1 Total modern stock (sqm) 1,024 (26,015 CZK) Average gross salary 1 Prime headline rents city centre ( /sqm/mth) Office 215, Retail 269, Warehouse 455,900* Source: *Moravia-Silesia regional industrial stock K e y f a c t s Office Retail Warehouse Total modern stock (sqm) 3.3m 1.02m 2.68m Prime headline rents city centre ( /sqm/mth) Prime yield (%) Plzeň Plzeň and the Plzeň region benefit from close proximity and easy connection to Germany which has brought a number of companies seeking links with the German market to the region. This Plzeň region is one of the most sought after logistics hot spots in the country and a major production base mainly in electrical engineering and automotive. 189,000 K e y f a c t s 2.2% Unemployment rate 1 Total modern stock (sqm) 1,100 (27,944 CZK) Average gross salary 1 Prime headline rents city centre ( /sqm/mth) Office 50, Retail 204, Warehouse 1,170,500* Source: *Plzeň regional industrial stock Source: 1. Czech Statistical Office 1. Czech Statistical Office

6 10 INVESTING IN CZECH REPUBLIC INVESTING IN CZECH REPUBLIC 11 office MARKET o v e r v i e w industrial MARKET o v e r v i e w Prime rent ( /m 2 /month) 4.85% Prime yield The office market in the Czech Republic is heavily dominated by the capital city. While Prague prime rents are on an upward trend, regional office rents are broadly stable. Prague has seen declining vacancy rates in recent years as a result of robust occupier demand and subdued supply. After completion of 146,000 sqm of office space in 2017 in the capital, this year more than 200,000 sqm will be added. Nevertheless, a large part of the projects under construction are largely pre-leased and the remaining available space will be absorbed quickly by the market upon completion. Developers are moving more and more outside the established office zones into areas such as Holešovice in Prague 7, Prague 6 and Prague 9 Vysočany, as supply of prepared development land with permits is limited in established office zones. There are several large scale mixed-use projects on former brownfields which are in planning and could be launched soon. Prague has still space for more office space as on a per capita basis it ranks lower than its CEE neighbours and Western capitals. Occupier demand is likely to remain strong in 2018 as companies aim to relocate to higher quality premises to get a competitive advantage in the fight for talents in a tight labour market. Offices, their location, design, services and amenities have become a major HR tool Prime rent ( /m 2 /month) 5.75% Prime yield Occupier demand in the logistics sector is driven by growth in the e-commerce sector which posted 18% rise in sales last year. Leasing activity concentrates around the Greater Prague area that traditionally takes the largest share of take-up. The Ústí region has gained in attractiveness after completion of the D8 highway towards Germany, combined with availability of labour resulting in strong growth in take-up levels to this region. Plzeň region remains in the top 3 in terms of total leasing activity. Vacancy rate, supply under construction, %, sqm 800, , , , , , , ,000 0 New Supply Source: Vacancy rate Prime office rents ( f) f Source:, f - forecast As the companies are expanding and moving to new A class premises, redevelopment and redesign of older stock has strong potential. Offices will be the most traded asset class in the capital this year. Sourcing prime products may become challenging although we are aware of several prime assets in negotiation. Opportunities are in the core plus and value-add sector. Yields may further move in on the back of sustained investor appetite. Gross and net annual take-up, sqm Gross take-up Net take-up 1,600,000 1,400,000 1,200,000 1,000, , , , , Source:

12 INVESTING IN CZECH REPUBLIC 2018 2018 INVESTING IN CZECH REPUBLIC 13 retail MARKET o v e r v i e w Annual supply, sqm 400,000 350,000 300,000 250,000 200,000 3.5% High street yield 4.

7 12 INVESTING IN CZECH REPUBLIC INVESTING IN CZECH REPUBLIC 13 retail MARKET o v e r v i e w Annual supply, sqm 400, , , , , % High street yield 4.75% Shopping centre yield 6.1% Retail sales growth in bn CZK E-commerce sales (+18% y-o-y) 150, ,000 50, Source: Economic growth, rising consumer spending and retail sales benefit the retail sector. Prime rents are on a rising trajectory. New supply is limited as a result of relative saturation of the retail market. Well-performing shopping centres are being extended, aging centres are going through remodelling, redevelopment and redesign. Underperforming assets are being repositioned and in some cases retail use is being replaced by leisure, services or other uses. Prague prime high street has a unique position in the retail hierarchy. It has seen sustained rental growth over past years and rental levels are forecast to continue rising. The high street has close to zero vacancy rate. Prague has the most diverse retail offer in the CEE in terms of number and variety of luxury brands. High street assets are in strong demand by investors resulting in rapid yield compression to the current 3.5%. Due to a limited availability of stock and rental growth prospects, high street properties are a stable form of wealth preservation for both institutional investors as well as HNWIs. Myslbek, Prague, Shopping Centre & Offices

8 14 INVESTING IN CZECH REPUBLIC 2018 Key Figures* BNP P a r i b a s R e a l E s tat e Map of road infrastructure 36 countries i n C Z e c h r e p u b l ic including 21 alliances 40.5m m 2 5,100 of assets under management in Europe employees Liberec Ustí nad Labem Karlovy Vary 187m Hradec Králové PRAGUE Nearly Pardubice Ostrava Plzen proflt before tax +20% vs ,600 transactions during the year 2 valued in Europe * As of 31/12/2017 Olomouc Jihlava 124m m Brno Zlín NATIONAL ROADS HIGHWAYS/EXPRESS ROADS: EXISTING UNDER CONSTRUCTION PLANNED AIRPORTS České Budějovice, one of the leading international real estate providers, offers its clients a comprehensive range of services that span the entire real estate lifecycle: property development, transaction, consulting, valuation, property management and investment management. With 5,100 employees, we support owners, leaseholders, investors and communities in their projects thanks to our local expertise across 36 countries. is part of the BNP Paribas Group. As regards Central & Eastern Europe, we provide services in respect of Capital Markets, Property Management, Transaction, Valuation and Consulting. APM CR s.r.o. is part of the BNP Paribas Banking Group All rights reserved. This Guide is protected in its entirety by copyright. No part of this publication may be reproduced, translated, transmitted, or stored in a retrieval system in any form or by any means, without the prior permission in writing of Poland. Picture credentials: Cover, P7-8: Fotolia P3: castle Bouzov - Fotolia P5: picture of Stewart Thomson BNP Paribas Real Estate picture library; picture of Prague - Fotolia P12-13, 16 picture library

/ C O N TA C T S czech republic Stewart Thomson, MRICS Country Head for Czech Republic +420 606 070 406 stewart.thomson@bnpparibas.

com Zuzana Youngová Head of Property Management +420 602 215 052 zuzana.youngova@bnpparibas.com Marek Pohl Head of Valuation +420 607 734 113 marek.pohl@bnpparibas.

9 / C O N TA C T S czech republic Stewart Thomson, MRICS Country Head for Czech Republic stewart.thomson@bnpparibas.com Lenka Šindelářová, MRICS Head of Research & Consultancy Business Development Director lenka.sindelarova@bnpparibas.com Zuzana Youngová Head of Property Management zuzana.youngova@bnpparibas.com Marek Pohl Head of Valuation marek.pohl@bnpparibas.com Tibor Ovečka Head of Office Agency tibor.ovecka@bnpparibas.com Dušan Drábek Head of Industrial & Logistics Agency dusan.drabek@bnpparibas.com C EE Patrick Delcol Chief Executive Officer CEE patrick.delcol@bnpparibas.com Dr. Piotr Goździewicz, MRICS Director Capital Markets CEE piotr.gozdziewicz@bnpparibas.com John Palmer FRICS SIOR Director Industrial Investment CEE john.palmer@bnpparibas.com Mateusz Skubiszewski, MRICS Director Capital Markets CEE mateusz.skubiszewski@bnpparibas.com Patrycja Dzikowska Head of Research & Consultancy CEE patrycja.dzikowska@realestate.bnpparibas APM CR s.r.o. Ovocný trh 8, Prague 1, Czech Republic Tel.: Real Estate for a changing world

MARKET OVERVIEW Czech Republic Q1 2017

MARKET OVERVIEW Czech Republic Q1 217 1 Market Overview Q1 217 CZECH REPUBLIC As a reaction to growing inflation, the Czech National Bank released the Czech Koruna / Euro peg that had been in place since