The Czech Republic’s real estate market has for some years been dominated by local capital – domestic investors were responsible for 62 per cent of investment volumes in 2018, by far the highest market share of local investors in the CEE region. However, Czech and neighbouring Slovak investors are now becoming serious global players too.

After finding their feet investing in the regional markets of Poland, Hungary and Romania, these domestic investors began spreading their wings in a commercial rather than private sphere and the ever-expanding list of deals executed in western European markets such as Germany and the UK over the past few years has been impressive.

Perhaps the most adventurous has been the Frankfurt-listed CPI Property Group, which claims a real estate portfolio worth €8.3 billion, with 103 assets located outside of the Czech market in countries such as France, Germany, Switzerland and Italy. Its 2016 takeover of Luxembourg-based real estate developer Orco Property Group made it the largest owner of offices in Berlin.

HB Reavis, founded in 1993 in Bratislava, has turned itself into a major 'international workspace provider' with nine income producing office properties with a total of 203,900 sq m in the UK. Amongst others, the company is currently developing the Bloom Clerkenwell in London and DSTRCT Berlin, its first building in Germany.

The push and pull factors for this outward investment are not hard to discern. Companies such as CPI, PPF, Penta Group, J&T, HB Reavis and CTP Invest are very well capitalised, yet their home markets are too small to absorb the kinds of investment volumes these companies are looking to deploy.

A restricted supply of available assets is regarded as the main reason behind the 20 per cent decline in investment volumes in 2018 compared with the previous year. Where product does exist, it comes at high prices: prime yields in the Czech Republic across all asset classes have reached their lowest levels as the market matures to a level close to that of more economically developed countries in Western Europe.

Coming from emerging markets themselves, Czech and Slovak investors are also used to and comfortable with the levels of risk of investing in other emerging markets and secondary markets in Europe. In December 2018, J&T closed a transaction in which it acquired three Spanish shopping centres – Gran Casa (Zaragoza), Max Center (Vizcaya) and Valle Real (Cantabria) – for €485 million through a joint venture with Sonae Sierra. With less baggage in terms of risk mentality, it believes that successfully developing speculative buildings in the Czech Republic and Slovakia means it can transpose this knowledge and experience to other similar markets – plus it has the cash to do so.

With a good track record so far, these new global investors are a welcome addition to the global investment marketplace and a pleasing ratification of the sophistication of the property markets in CEE for inbound observers and investors.

Further information

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