In 2017, private investors participated in 20 transactions in the Czech Republic. The total amount of funds reached 53.5 million euros. This year, this trend continues – regularly more and more local private investors are opening up opportunities in the commercial real estate market. And it is not only about small regional properties, but also about assets worth tens of millions of euros.
The share of active investors is increasing
One example is the sale of the Brno Business Park office complex, which has been taken over from IMMOFINANZ by the INFOND investment fund represented by the consulting company IMAP Redbaenk. The success of this major transaction was overseen by Knight Frank, a consulting firm that specializes in the commercial real estate market.
“The share of local players in the real estate market, not only in Prague but also in the regions, has been increasing over a long period of time,” states Zdenka Klapalova, executive director of Knight Frank. “The real estate market provides an opportunity to reach targeted investment decisions in terms of location, sector and tenants. At the same time, unlike other investments, the real estate market provides a constant and stable income. Domestic investors know the local market, believe in it, know how to work with risks, and often participate in the management of their assets,” adds David Sainer, director of sales at Knight Frank.
The market has ideal conditions for deals
Real estate professionals are now noting that buyers in many cases are willing to accept very low incomes just to get the property they are looking for in the location they are interested in.
Knight Frank registers a large number of private investors interested in commercial real estate throughout the Czech Republic. In the past twelve months, they have sold 6 office properties to private investors. Among the most interesting buildings are Jankovcova 23, Element (Šafránková 13), Taborska 41, Prague Office Park and, most recently, Brno Business Park.
The last two deals were arranged for an Austrian investment fund, which decided to sell the Prague Office Park office complex to a Czech private investor and the large Brno Business Park office facility to the Brno-based INFOND investment fund.
“The current economic situation and still low interest rates on mortgages and loans provide almost ideal conditions for such deals, especially in the real estate market,” says Radek Schmid, a partner at IMAP Redbaenk, a consulting company.
Investor appetite will continue to grow
The Brno Business Park office complex has almost 35,000 square meters and 739 parking spaces. In the case of the IMMOFINANZ fund, this was the third similar deal that Knight Frank has made in the past 12 months. Previous successful sales in the past year include the sale of the Prague Office Park building complex in the Stodulka district of Prague 5 and the Vinice office building in the Strášnice district of Prague 10.
In total, the IMMOFINANZ fund sold 65,000 m2 of offices, including 1,550 parking spaces. However, the fund still owns luxury properties in attractive locations in the center of Prague.
Interest in this type of investment is also due to the favorable situation in the banking market. It is therefore to be expected that the appetite of private investors for commercial real estate will continue to grow. This applies not only to the Czech market, but also abroad. Knight Frank research shows that 32% of private investors plan to invest in overseas property over the next two years in order to diversify their portfolio.
Targeted investments will be mostly those that show solid fundamentals, including employment, longer leases, financial stability of tenants, technical characteristics of the property and proven locations. Investors will target not only luxury real estate, office, business and hotel assets, but also investments in growth sectors such as suburban logistics, leisure facilities and business centers, including student dormitories and residential buildings.