Q1/2024: CZECH ECONOMY WILL SLIGHTLY GROW IN 2024
Following a notable decline in the third quarter of 2023, the Czech economy experienced a recovery in the last quarter of 2023. Moody’s Analytics anticipates that the economy will sustain this trend, with stronger growth momentum in the latter half of 2024.
Office
The beginning of the year was marked by a slow pace on the Prague office rental market. However, despite the low demand, the vacancy rate did not increase significantly.
- Total modern office stock in Prague reached 3.91 million sq m in Q1 2024.
- One office building was completed in Q1 2024, Roztyly Plaza (21,700 sq m) in Prague 4.
- Over 71,300 sq m of office space is currently under construction in Prague, marking the lowest volume in modern market history.
- Gross take-up reached 108,700 sq m, down 19% y-o-y, with renegotiations accounting for 57%.
- The vacancy rate increased by 30 basis points quarter-on-quarter to 7.5% and, considering the 'grey area' available for subleasing, reached 8.9% overall.
Industrial
In Q1 2024, occupiers’ demand for industrial properties experienced a significant slowdown, with only 160,400 sq m being leased, representing a decrease of 53% y-o-y, driven mostly by production companies.
- Total volume of modern logistics and industrial space increased to 11.9 million sq m in the Czech Republic.
- Almost 148,100 sq m of modern warehouse space were added to the market in Q1 2024.
- Demand for industrial space experienced a slowdown during this period, with gross take-up reaching only 160,400 sq m, down by 53% y-o-y.
- Vacancy rate increases slightly but remains low, at 2%.
- Prime rent in Prague remained at EUR 7.75 / sq m / month.
Retail
The challenges to consumer spending and subsequent stronger performance in the discount retail segment have proven beneficial to retail parks, which account for the majority of projects under construction in the Czech Republic.
- Around 105,800 sq m of retail space were under construction, predominantly in retail parks.
- The OD Máj shopping centre (17,000 sq m) in Prague is undergoing reconstruction, while OC Varyáda in Karlovy Vary is being expanded by 8,500 sq m.
- During Q1 2024, two new retail parks were completed, adding approximately 10,000 sq m of retail space.
- Prime rents in the retail sector remained steady, with no change observed since Q2 2022.
Hospitality
The attractivity of the Prague hotel sector continues to rise, underpinned by improving performance metrics and constrained supply.
- With a 29.6% increase in RevPAR (revenue per available room), the hotel sector in the Czech capital ranked second among major urban markets across Europe. The robust revenue growth in Q1 2024 was driven by a 17% increase in occupancy. This was accompanied by rising hotel prices (up by 11%). Overall, the RevPAR surpassed the pre-pandemic levels by 27% (Q1 2024 vs Q1 2019).
- The gross operating profit (GOP) in the sample of full-service branded hotels in central Prague increased by 46% in Q1 2024 compared to Q1 2023. The hotels in the sample achieved 31% profitability margin, which is a healthy result, given that the first three months of the year are considered low season in Prague.
- There were no major openings in Prague during Q1 2024, but several new hotels are planned to be completed during the remainder of the year. Major examples include Cloud One (opened in April), W Prague, Sir Prague, and Fairmont Golden Prague.
- Hotels' growing performance attracts investors, who acquired hotels in the Czech Republic for almost EUR 100 million in 2023.
Investment
The total volume of real estate investments exceeded EUR 340 million in the first quarter of 2024, down 24% y-o-y. The whole investment transaction volume was solely attributed to domestic investors.
- The total volume of real estate investments exceeded EUR 340 million in the first quarter of 2024, marking a decrease of 24% compared to the previous year, but a substantial increase of 92% compared to the preceding quarter.
- A significant part of this volume was accounted for by a single transaction, the sale of the Arkády Pankrác shopping centre in Prague.
- The whole investment transaction volume was solely attributed to domestic investors.
- Prime yield experienced a compression for industrial and retail high street assets.
Get the full Czech Republic property market picture with all the market data by downloading the reports.
Explore our 5-minute Real Estate Market Snapshot, a video overview of the commercial real estate market developments presenting the key trends in real estate investment, logistics, office and retail sectors in Q4 2023.
