Investors seek shelter from inflation: residential and medical projects are popular
Real estate in the Czech Republic is still an attractive option for international and domestic investors to invest and maintain the value of their money. So much so that the volume of investment in commercial real estate increased year-on-year in the first quarter by a massive 213%! This was the highest in Europe, although Italy (+ 151%), Belgium (+ 146%), Spain (+ 99%) and Germany (+ 93%) also show increased investment activity. This is evidenced in the international investment analysis by BNP Paribas Real Estate, the real estate consulting company, and its alliance partner for the Czech Republic, 108 AGENCY. In total, property changed hands in Europe for a total of €63.2 billion, which is 28% more than in the same period last year. This is the best quarterly result in the past two years.
“However, despite a strong start, a slowdown is expected in the upcoming months. Investors are taking a more cautious stance and choosing more carefully, given the deteriorating economic outlook and the ongoing conflict in Ukraine. The most successful will be properties with a long-term strong cash flow in established locations,” comments Lenka Šindelářová from the 108 AGENCY investment department.
The analysis shows that, more than in the past, investors are choosing quality properties with a higher degree of resistance to market fluctuations. This is evident in the continued caution towards retail real estate: although the acquisition volume increased by 26% year-on-year, shopping centres, department stores and retail parks make up only 14% of the total investment market. In 2017, this figure was 24%.
Conversely, investors are still very active in the office sector which show considerable resilience. Investment increased by €27.2 billion from Q1 2021 to Q1 2022, with the highest coming in Q1, 20% higher than the five-year average. The yield rate for top offices could fall slightly this year and, therefore, their price will rise slightly. This could force companies to decide between top offices in top locations and older ones with less attractive locations.
Although industrial real estate also reached a record investment volume in the first quarter, with a total result of €13.7 billion, growth has slowed to 10% year-on-year. “Despite the continuing strong demand for the logistics real estate segment from investors, the offer of acquisition opportunities is limited. This is not only evident in the Czech Republic, but also around Europe. This puts pressure on revenue compression, but it should gradually slow down,” explains Lenka Šindelářová.
Residential real estate has become a highly sought-after investment destination in recent years. This attractiveness is also evidenced in this year's first quarter. The €16.6 billion invested by investors in flats, apartments, student housing and residential resorts for the elderly already accounts for 25% of all investment in Europe!
According to the forecast of 108 AGENCY and BNP Paribas Real Estate, interest in older and newly implemented rental residential projects will continue. Demand here clearly exceeds supply, which applies both to the Czech Republic and Europe. Similarly, investors will hedge against inflation by purchasing atypical facilities, such as medical centres, clinics and other facilities related to medicine or care for the elderly or sick. “The Covid-19 pandemic has increased investor interest in the medical real estate segment, and we expect that demand for these and other alternative types of investment real estate will continue to be high in the future,” concludes Lenka Šindelářová.Back