Q3 2024: Czech investors dominate real estate market as total volume reaches €188 million

The Czech real estate market in the third quarter of 2024 was marked by a striking feature: 100% of all investment capital originated from domestic investors. Approximately €188 million was transacted across the country’s key real estate sectors during the quarter, one of the lowest volumes in recent years, according to the latest report by Colliers.

Despite the muted quarter, total investment volume for the first three quarters of the year exceeded €1 billion, spread across 34 transactions. Notably, nearly half of all deals involved properties outside Prague, signaling a growing confidence among domestic investors in regional markets.

Sector Breakdown and Key Transactions

The investment activity in Q3 2024 was evenly distributed across asset classes: retail (31%), industrial (30%), residential (27%), and smaller office transactions (12%). One of the standout deals of the quarter was REICO’s forward purchase of the G1 building in the Nový Opatov project, marking its entry into the build-to-rent (BTR) residential sector.

“The third quarter confirmed a clear trend: domestic investors are driving the market while international capital remains on the sidelines,” commented Josef Stanko, Director of Market Research at Colliers. “This dynamic has persisted throughout 2024, with Czech buyers showing a willingness to explore opportunities beyond the capital city.”

Retail Gains Momentum, Offices Await Recovery

The retail sector has shown signs of resurgence, benefiting from renewed investor interest, while the residential BTR segment continues to attract steady capital flows. However, the office market remains sluggish, reflecting the lingering challenges since the pandemic. With €235 million invested in offices year-to-date, the segment is performing at just 50% of its three-year average for the same period.

“The office market is still waiting for new opportunities,” added Stanko, noting that negotiations are underway for several major office properties, which could improve the sector’s outlook by year-end.

Prime Yields and Market Trends

Prime yields have remained stable throughout 2024, with office properties at 5.50%, industrial assets at 5.25%, and retail yields varying by submarket: 4.50% for high-street retail, 6.00% for shopping centers, and 6.25% for prime retail parks.

While pricing corrections appear to have bottomed out in many European markets, the Czech Republic is still catching up. The narrowing gap between supply and sale prices, combined with the European Central Bank’s recent interest rate cut to 3.25%, could boost transaction activity in Q4 2024.

“The potential for improved borrowing conditions may encourage investors to wait for better terms, but it also indicates an opportunity for more deals in the coming months,” noted Stanko.

Outlook for 2024

Economic and geopolitical uncertainties, including the impact of the recent U.S. presidential election, continue to influence investor sentiment. However, the Czech market has demonstrated resilience, buoyed by a strong base of domestic investors.

“The market remains active, particularly for smaller transactions,” said Stanko. “We anticipate the total annual investment volume to reach around €1.5 billion, which, given the challenges of the year, is a solid outcome.”

With sustained domestic investor interest and improving macroeconomic conditions, the Czech real estate market looks poised for a stronger finish to 2024.

Source: Colliers