Retail Investment Dominates H1 2016
Colliers International today released its Q2 2016 Market Overview for the Czech Republic. The report, which covers the investment, office, and industrial markets in Prague and throughout the Czech Republic, provides both summaries and analyses of developments in the last quarter, and also looks ahead to the future.
Investment Market Highlights
H1 2016 saw the total volume of real estate investment exceed €877 million, a (year-on-year) y-o-y decrease of 25%. However, the total transactional volume in reality was actually higher due to the fact the sales price of some transactions (especially hotels) remained confidential.
In Q2, the investment volume was relatively subdued at €391 million, which represents a quarterly decrease by 20%; however y-o-y investment volume was 8% higher.
Retail properties were dominant in H1 2016 with a 50% share. Office properties attracted 19% while industrial properties were target of 10% of investment volumes.
In terms of transaction numbers, in H1 2016 office properties recorded 10 transactions, followed by retail with 9 transactions and 7 in hotels. Industrial only accounted for two transactions. Overall the number of transactions is significantly higher than in the previous year: 32 transactions in 2016 compared to 21 transactions in 2015.
The largest transaction of the second quarter was the purchase of Forum Usti shopping centre in Usti nad Labem for €82.6 million by NEPI, followed by the acquisition of Forum Liberec by the same buyer for €80 million. The third largest transaction was a set of three buildings on the prime high street on Na Prikope Street in Prague by LaSalle Investment Management (LIM).
Yields experienced a mild compression compared to 2015 year-end. For specific CBD office properties benefiting from long term lease contracts, investors were ready to pay sub 5% yields.
Q2 2016 Prague Office Market Highlights
By the end of Q2 2016, total office stock in Prague grew marginally to 3.23 million square metres. Two new properties were delivered during Q2: Classic 7 Phase III (5,600 square metres) in Prague 7 and Kotelna Park (6,500 square metres) in Prague 5.
The two newly completed office buildings were fully let by the time of completion. In combination with a healthy level of demand, the vacancy decreased by 160 basis points quarter on quarter (q-o-q) to 12.3% by the end of Q2.
The total volume of available space by the end of Q2 reached 397,700 square metres, which was a q-o-q decrease of some 49,600 square metres.
Total gross take-up in Q2 2016 reached 122,590 square metres, which on a q-o-q comparison was a 22% increase while on a y-o-y comparison showed a 9% decrease. Cumulatively in the first half of 2016 gross take-up reached 205,141 square metres. In y-o-y comparison the H1 take-up is 4% higher than in the previous year.
Net take-up (excluding renegotiations, subleases and relocations) in Q2 reached 67,112 square metres, an increase of 48% q-o-q and 10% y-o-y. Renegotiations remained relatively subdued with 27,400 square metres, which was 24% of the total gross take-up. Cumulatively in H1 renegotiations were 27% of the gross take-up.
Prime office headline rents remained stable in Q2 and ranged between €18.50 and €19.50 per square metre per month. The range of inner city rents remained at €14.50-€16.50 per square metre per month, while the outer city range remained between €13.00-€14.50 per square metre per month.
The city wide average rent remained unchanged at €13.20 per square metre per month.
Q2 2016 Industrial Property Market
By the end of Q2 2016, total industrial warehouse stock in the Czech Republic reached 5.96 million square million.
During Q2, 182,400 square metres of new space was completed in some 12 buildings across the Czech Republic. Upon completion, some 36.3% of the newly delivered warehouse space was vacant. Eight of the new warehouses were fully occupied.
The Greater Prague Area (Prague) remains the largest warehousing region in the country with 2.4 million square metres of warehouse space, which represents 39% of all manufacturing and logistics space in the Czech Republic.
By the end of Q2, the vacancy level increased to 4.7%, up 57 basis points q-o-q. The total industrial vacancy was 282,900 square metres, which is was q-o-q increase of 42,000 square metres.
Prague warehousing market offered 74,000 square metres of space, which was 26% of all space in the Czech Republic with a 3.2% vacancy rate for this region.
Gross take-up in Q2 2016 was 349,300 square metres, up 11% q-o-q but down 3% y-o-y. Net take-up accounted for 263,700 square metres, up 21% q-o-q and up 4% y-o-y.
Prague dominated take-up figures with 154,200 square metres, which was 44% of the quarterly take-up. The second most active region was Usti nad Labem with 38,800 square metres or an 11% share.
Cumulatively, the gross take-up in H1 2016 reached 662,800 square metres, up 10% y-o-y. Cumulative net take-up reached 481,000 square metres, up 7% y-o-y.
The largest deal of the quarter was the pre-lease of Sportisimo (34,800 square metres) at ProLogis Park Prague – Rudna.
Headline rents in the regions, for a five-year lease term, ranged between €3.70-€3.90 per square metre per month in Prague; €3.70-€4.00 per square metre per month in Pilsen; €3.75-€3.95 per square metre per month in Ostrava and €3.95-€4.25 per square metre per month in Brno.
Office space (within the industrial buildings) leased at €8.00-€9.00 per square metre per month.
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