BNP PARIBAS REAL ESTATE GUIDE TO INVESTING IN CZECH ... · 4 INVESTING IN CZECH REPUBLIC – 2018 BNP Paribas Real Estate BNP Paribas Real Estate 2018 – INVESTING IN CZECH REPUBLIC

Real Estatefor a changing

world

BNP PARIBAS REAL ESTATE GUIDE TO

INVESTING IN CZECH REPUBLIC2018

DO YOU KNOW.. .

PRaGUE IS THE SIxTH RICHEST dISTRICT IN EU

As Eurostat stated, in Prague the regional GDP per capita, expressed in terms of

purchasing power standards, achieves 178% of the European Union average. Prague joined the top 10 regions a decade ago,

and since that time has been overcoming contesters step by step, which resulted in 6th

position among 276 EU regions in 2016.

Skoda CoNqUERS NEw maRkETSSkoda is one of the longest-standing

carmakers in the world. The iconic Czech brand has been a part of the world leader Volkswagen Group since 1991. In terms

of cars sold, in 2017 Skoda captured 4.5% market share in the entire EU & EFTA region. It means that Skoda was more popular than

i. a. Toyota, Citroen, Hyundai, KIA, SEAT, Volvo, Suzuki and Honda in 2017.

BUSTLING HIGH STREET CLUSTER Prague has the best high street in the CEE region. In the historical heart of

the city, just one step off the Old Town Square, along a quiet Parizska street, you can find numerous premium and luxury world renowned brands such as Cartier, Louis Vuitton, Jimmy Choo, Tiffany&Co.,

Hermes, Prada, Salvatore Ferragamo and Fendi among others. While mass market retailers occupy more busy Na Prikope

and Vaclavske Namesti street.

dIGITaL SoCIETyInternet penetration in the Czech Republic is very high and exceeded 92% in 2016. Around 6.3 million of internet users are e-shoppers. These e-shoppers on average spend €681

per year. Online purchases generate around 2.5% of country’s GDP, with surges of the

e-commerce volume by approx. 20% y-o-y over the course of the last three years.

Sour

ce: E

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tat;

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/the

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ch A

ssoc

iatio

n of

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ctro

nic

Com

mer

ce.

RECoRdS IN ToURISmA record number of guests

accommodated in Czech hotels in 2017 (20 million), up by 9.1% year on year. The tourist offer of the country is not limited to well-known Prague. Czech Republic is the most castle-rich country (over 200) in Europe and it is worth to leave the

capital and feel charm of other regions.

BNP Paribas Real EstateINVESTING IN CZECH REPUBLIC – 20184 2018 – INVESTING IN CZECH REPUBLICBNP Paribas Real Estate 5

Jihlava

Ústí nad Labem

Hradec Králové

Pardubice

Olomouc

Zlín

Karlovy Vary

České Budějovice

Liberec

PRAGUE

BRNO

OSTRAVA PLZEŇ

F o r e w o r d

1. Czech Statistical Office / 2. BNP Paribas Real Estate / 3. Ministry of Education / 4. 2015 - Czech National Bank / 5. ABSL

PRoPERTy maRkET2

311,367students studying at 66 universities3

4.2m m2 offiCE

3.45m m2 rEtAil

7.1m m2 wArEhoUsE

inhAbitAnts1 EU fUNdS (2014-2020 bUdgEt)

€23.95bn

PoPULaTIoN1

10.6minhabitants

STEWART ThOmSON, mRICSCountry head for Czech republicbnP Paribas real Estate

The Czech republic reports strong economic growth supported by robust domestic demand. It is perceived as a stable and mature market with low investment risk. Czech still provides a pricing spread

to Western European markets and rental growth prospects support the recent yield compression.

In the Czech Republic the total real estate investment volumes compared to the size of the country show the highest ratio in CEE. Unlike its peers in CEE, it has a deep and active pool of domestic investors which in turn support a further inflow of foreign equity fuelled by the liquidity brought by local buyers.

CzECh REPUBLICby numbers

GDP Growth in 20171

4.5%

220 (10% up y-o-y)Number of employees in BPOs, SSC: 89,000 (19% up y-o-y)5

number of business Process outsourcinG anD shareD services centres in the czech rePublic

INVESTmENT GRadEStandard & Poor’s: AA-Moody’s: A1Fitch: A+

INfLow of fdI4

€107.1bn

1 city with population above 400k inhabitants(Prague)

1 city with population 100-200k inhabitants (Plzeň)

2 cities with population 200-400k inhabitants (Brno, Ostrava)

BNP Paribas Real EstateINVESTING IN CZECH REPUBLIC – 20186 BNP Paribas Real Estate 72018 – INVESTING IN CZECH REPUBLIC

CZECH REPUBLIC OVERVIEW

4 5 6

1 2 3

T OP 6 RE A S ONSTO InVesT In CzeCh republIC

Stable and mature market still offering attractive pricing spread to Western Europe with a unique strategic location in the heart of Europe.

wELL ESTaBLISHEd PRoPERTy maRkET

Rental growth prospects in all commercial real estate sectors

on the back of robust occupier demand.

wELL SkILLEd LaBoURThe 311,000 students studying at 66 universities, with 77,000

graduates per year and a strong technical education

provide an excellent base for investors in high value add sectors such as R&D and IT.

maTURE INVESTmENT maRkET aNd a HEaLTHy

fINaNCIaL SECToRStrong domestic investor base and high demand from foreign buyers seeking both low risk

and capital appreciation. The Czech banking sector is

healthy and provides attractive lending conditions.

STRaTEGIC LoCaTIoN aNd wELL dEVELoPEd

INfRaSTRUCTUREStrategic location in the heart of Europe with great access

to Western and Eastern markets.

STaBILITy & HIGH qUaLITy of LIfE &

SECURITyThe Czech Republic is highly

rated for its stability and security as well as quality of life ranking 6th in the Global

Peace Index.

STRoNG fdI INfLow & Low INVESTmENT RISk & PoSITIVE ECoNomIC

PRoSPECTSThe lowest investment risk and

the highest share of FDI per capita in the CEE supported by prospects of strong economic

growth well above the EU average.

COST AND TERmSO V e r V I e w O f C O n s T r u C T I O n , l e T T I n g a n d I n V e s T m e n T C O s T s a n d T e r m s

Cons

truC

tion

inVE

stM

Ent

lAnd ACqUisition Costs (PEr sqm)1

Office €6,000-7,000

Retail €6,000-7,000

Warehouse €60-100

ConstrUCtion Costs (PEr sqm)2

Office €1,200-1,500

Retail €1,000-1,500

Warehouse €350-500

bAnk mArgins 2.00-2.20%

ltC rAtio 60-80%

PrimE yiElds4 Office 4.85%

Retail 4.75% SC 3.50% HS

Warehouse 5.75%

PrimE AssEt vAlUEs (PEr sqm)

Office €3,500-5,000

Retail €6,000-7,000

Warehouse €800-1,000

stAmP dUty Asset/Shares 4%

bAnk mArgins 1.70-2.20%

ltv rAtio 60-80%

stAndArd sAlE fEEs 0.5-2.0%

LEtt

inG PrimE rEnts3 Office €19.00-€21.00

Retail SC €120-€140

Retail HS €180-€210

Warehouse €3.80-€4.40

stAndArd lEAsE tErms

Office 5 yrs

Retail SC 5-10 yrs

Retail HS 5-10 yrs

Warehouse 5-10 yrs

AgEnt fEEs Office 12-15%

Retail SC 12-15%

Retail HS 12-15%

Warehouse 12-15%

*including fit-out1. Prime location in capital cities. 2. For modern schemes. 3. Prime assets in the capital. 4. Best-in-class schemes in prime

location within capital city.

BNP Paribas Real EstateINVESTING IN CZECH REPUBLIC – 20188 BNP Paribas Real Estate 92018 – INVESTING IN CZECH REPUBLIC

CZECH REPUBLIC OVERVIEW

PraGue GDP Per caPita in PPs reaches 178% of eu averaGe making it the sixth rich-est district in EU. The Czech Republic capital has seen very strong interest both in prime office assets as well as prime high street locations supported by strong rental growth. Given its tourism attractions, the hotel market has been booming attracting investor demand as well.

CzECh REPUBLICb I g f O u r

PRAGUE

brno has the hiGhest Per caPita number of university stuDents in the country mak-ing it an attractive destination for investments in the IT, R&D and technology sectors.

ostrava has been unDerGoinG an in-tensive transformation. For investors it provides a deep labour pool from the Ostrava agglomeration. Governmental incentives have attracted numerous investments to the many industrial zones of the region.

Plzeň anD the Plzeň reGion benefit from close Proximity anD easy connec-tion to Germany which has brought a number of companies seeking links with the German market to the region. This Plzeň region is one of the most sought after logistics hot spots in the country and a major production base mainly in electrical engineering and automotive.

378,000Population1

324,000Population1

189,000Population1

5.0%Unemployment

rate1

6.9%Unemployment

rate1

2.2%Unemployment

rate1

€1,093(27,762 CZK)Average gross

salary1


salary1


salary1

1. Czech Statistical Office 1. Czech Statistical Office

1.3mPopulation1

2.3%Unemployment rate1

€1,438(36,540 CZK)

Average gross salary1

office retail warehouse

Total modern stock (sqm) 3.3m 1.02m 2.68m

Prime headline rents city centre (€/sqm/mth) 20-21 190-210 4.4

Prime yield (%) 4.85 3.50 5.75

Total modern stock (sqm)

Prime headline rents city centre (€/sqm/mth)

office 552,000 14.90

retail 295,000 4.5

warehouse 985,400* 50-60



office 50,000 9-10

retail 204,600 30-40

warehouse 1,170,500* 3.80-4.25



office 215,000 11.50

retail 269,900 35-45

warehouse 455,900* 3.60-4.00

K E Y f A C T S

K E Y f A C T S

K E Y f A C T S

K E Y f A C T S

Source: BNP Paribas Real Estate

Source: BNP Paribas Real Estate*South Moravia regional industrial stock

Source: BNP Paribas Real Estate*Plzeň regional industrial stock

Source: BNP Paribas Real Estate*Moravia-Silesia regional industrial stock

OSTRAvA

PLzEň

BRNO


T he office market in the Czech Republic is heavily dominated by the capital city. While Prague prime rents are on an upward trend,

regional office rents are broadly stable. Prague has seen declining vacancy rates in recent years as a result of robust occupier demand and sub-dued supply. After completion of 146,000 sqm of office space in 2017 in the capital, this year more than 200,000 sqm will be added. Nev-ertheless, a large part of the projects under construction are largely pre-leased and the re-maining available space will be absorbed quick-

ly by the market upon completion. Developers are moving more and more outside the estab-lished office zones into areas such as Holešovice in Prague 7, Prague 6 and Prague 9 Vysočany, as supply of prepared development land with per-mits is limited in established office zones. There are several large scale mixed-use projects on former brownfields which are in planning and could be launched soon. Prague has still space for more office space as on a per capita basis it ranks lower than its CEE neighbours and West-ern capitals.

Occupier demand is likely to remain strong in 2018 as companies aim to relocate to higher quality premises to get a competitive advantage in the fight for talents in a tight labour mar-ket. Offices, their location, design, services and amenities have become a major HR tool.

As the companies are expanding and moving to new A class premises, redevelopment and rede-sign of older stock has strong potential.

Offices will be the most traded asset class in the capital this year. Sourcing prime products may become challenging although we are aware of several prime assets in negotiation. Opportuni-ties are in the core plus and value-add sector. Yields may further move in on the back of sus-tained investor appetite.

o ccupier demand in the logistics sector is driven by growth in the e-commerce sec-tor which posted 18% rise in sales last

year. Leasing activity concentrates around the Greater Prague area that traditionally takes the largest share of take-up.

The Ústí region has gained in attractiveness after completion of the D8 highway towards Germany, combined with availability of labour resulting in strong growth in take-up levels to this region. Plzeň region remains in the top 3 in terms of total leasing activity.

vACAnCy rAtE, sUPPly UndEr ConstrUCtion, %, sqm

gross And nEt AnnUAl tAkE-UP, sqm

OffICE mARKETOV er V Ie w

INDUSTRIAL mARKETOV er V Ie w

4.85%Prime yield

5.75%Prime yield

20-21Prime rent

(€/m2/month)

4.40Prime rent

(€/m2/month)

PrimE offiCE rEnts (2015-2018f)

Source: BNP Paribas Real Estate, f - forecast Source: BNP Paribas Real Estate


0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2009 2010 2011 2012 2013 2014 2015 2016 2017

Gross take-up Net take-up

2015 2016 2017 2018f17

18

19

20

21

22

23

02468

101214161820

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2013 2014 2015 2016 2017

New Supply Vacancy rate


4.75%Shopping centre yield

3.5%High street yield

E conomic growth, rising consumer spend-ing and retail sales benefit the retail sector. Prime rents are on a rising trajectory. New

supply is limited as a result of relative satura-tion of the retail market. Well-performing shop-ping centres are being extended, aging centres are going through remodelling, redevelopment and redesign. Underperforming assets are being repositioned and in some cases retail use is be-ing replaced by leisure, services or other uses.

Prague prime high street has a unique position in the retail hierarchy. It has seen sustained rental growth over past years and rental levels are forecast to continue rising. The high street has close to zero vacancy rate. Prague has the most diverse retail offer in the CEE in terms of number and variety of luxury brands.

High street assets are in strong demand by investors resulting in rapid yield compression to the current 3.5%. Due to a limited availabil-ity of stock and rental growth prospects, high street properties are a stable form of wealth preservation for both institutional investors as well as HNWIs.

AnnUAl sUPPly, sqm


Myslbek, Prague, Shopping Centre & Offices

RETAIL mARKETOV er V Ie w

6.1%Retail sales growth

in 2017

115bn CZKE-commerce sales

(+18% y-o-y) 0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

BNP Paribas Real EstateINVESTING IN CZECH REPUBLIC – 201814

mAP Of ROAD INfRASTRUCTUREIn CzeCh republIC 40.5m m2

of assets under management in Europe

3,600transactions during

the year

Nearly

€187mproflt before tax +20% vs 2016

124m m2

valued in Europe

5,100employees

36 countriesincluding21 alliances

* As of 31/12/2017

KE Y fIGURES*bnp parIba s re al esTaTe

BNP Paribas Real Estate APM CR s.r.o.BNP Paribas Real Estate is part of the BNP Paribas Banking Group

All rights reserved. This Guide is protected in its entirety by copyright. No part of this publication may be reproduced, translated, transmitted, or stored in a retrieval system in any form or by any means, without the prior permission in writing of BNP Paribas Real Estate Poland.

Picture credentials:Cover, P7-8: FotoliaP3: castle Bouzov - FotoliaP5: picture of Stewart Thomson BNP Paribas Real Estate picture library; picture of Prague - FotoliaP12-13, 16 BNP Paribas Real Estate picture library

BNP Paribas Real Estate, one of the leading international real estate providers, offers its clients a comprehensive range of services that span the entire real estate lifecycle: property development, transaction, consulting, valuation, property management and investment management. With 5,100 employees, we support owners, leaseholders, investors and communities in their projects thanks to our local expertise across 36 countries. BNP Paribas Real Estate is part of the BNP Paribas Group.

As regards Central & Eastern Europe, we provide services in respect of Capital Markets, Property Management, Transaction, Valuation and Consulting.

PRAGUE

Jihlava

Ustí nad Labem

Hradec Králové

Pardubice

Brno

Ostrava

Olomouc

Zlín

Karlovy Vary

České Budějovice

Liberec

Plzen

NATIONAL ROADS

EXISTINGUNDER CONSTRUCTIONPLANNED

HIGHWAYS/EXPRESS ROADS:

AIRPORTS

Real Estatefor a changing

world

/ C o N Ta C T S

lenka Šindelářová, mricshead of research & Consultancy business development director+420 602 773 592 [email protected]

marek Pohlhead of valuation+420 607 734 [email protected]

Dušan Drábekhead of industrial & logistics Agency+420 725 879 [email protected]

zuzana youngováhead of Property management+420 602 215 [email protected]

tibor ovečkahead of office Agency+420 603 422 [email protected]

stewart thomson, mricsCountry head for Czech republic+420 606 070 [email protected]

C eeC Z eC h republ iC

www.realestate.bnpparibas.cz

bnP Paribas real estate aPm cr s.r.o.ovocný trh 8, 110 00 Prague 1, Czech republictel.: +420 224 835 000

Dr. Piotr Goździewicz, mricsdirector Capital markets CEE+48 609 795 [email protected]

John Palmer frics siordirector industrial investment CEE+48 501 203 821 [email protected]

mateusz skubiszewski, mricsdirector Capital markets CEE+48 609 795 [email protected]

Patrick DelcolChief Executive officer CEE+48 22 653 44 00 [email protected]

Patrycja Dzikowskahead of research & Consultancy CEE +48 602 452 [email protected]

BNP PARIBAS REAL ESTATE GUIDE TO INVESTING IN CZECH ... · 4 INVESTING IN CZECH REPUBLIC – 2018 BNP Paribas Real Estate BNP Paribas Real Estate 2018 – INVESTING IN CZECH REPUBLIC

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