Investment in rental residential projects in Czechia tripled year-on-year

• 167 million euros were invested in institutional housing
in the Czech Republic last year
• This represents 13% of the total volume of investment
in commercial real estate locally
• Rental housing market is growing in the Czech Republic, CEE and Europe

In 2023, a total of EUR 1,290 million was invested into commercial real estate in the Czech Republic, of which investment into rental housing amounted to EUR 167 million, three times more than in the previous year. The share of this segment within the total volume of commercial real estate investment amounted to 13%, what is a significant raise compared to the 3.3% previous high (with the exception of extraordinary year 2020¹). Investors are interested in Prague locations, but also in regional cities such as Brno or Pilsen. Investment into the Czech residential segment was the highest in Central and Eastern Europe last year, both in absolute volume and relative share. In the EMEA region, investments into the "living" sector accounted for 22%² of the total invested volume last year.

Table 1: Investment in commercial real estate in the Czech Republic

Source: Cushman & Wakefield

The popularity of the residential segment in the Czech Republic is increasing among investors due to its stability. While other parts of the property market may experience significant swings, especially on the demand side, housing will always be needed. The increase in interest is driven by socio-demographic factors: ageing population, reduced average household size, continued urbanisation and population growth in the capital caused by migration. At the same time, the availability of owner-occupied housing is decreasing, and younger generations have different lifestyle requirements, therefore the share of rental housing will increase in the future.

Erik Müller, Head of Residential Advisory Services, Cushman & Wakefield: "The construction of apartments in the Czech Republic and especially in Prague has been insufficient for a long time and will remain limited in the future. After recovery in demand from households as a result of a drop in mortgage interest rates to the 3 to 3.5% range, the market is expected to absorb most of the available apartments in the short term, resulting in renewed upward pressure in prices. Therefore, in the long term, we expect the availability of rental projects for purchase by investors to be lower, the price per square metre to rise and yields on grade-A rental housing to fall below 3.5%. Most investors are aware of this and we already see preparations for acquisitions in 2027 and 2028."

80 percent of investors increase investments in housing

The residential market is also strengthening in other EMEA countries, where the term "living sector" also includes student and senior housing. It accounted for 21% of total assets held by investors in Europe last year, up from 14% in 2014³.

In Cushman & Wakefield‘s European Living Investor Survey 2024, 53% of respondents said they had already allocated more than 20% of their portfolio to this segment. Almost 80% of respondents expect their investment to increase over the next five years, with 35% expecting it to increase significantly.

Erik Müller, Head of Residential Advisory Services, Cushman & Wakefield: "The survey shows a clear optimism in EMEA about the growth of the living segment, which is also supported by demographic factors, major societal changes and a lack of construction. This segment has already become an essential component of a balanced real estate portfolio and we expect its role to grow in the future."

The future: student housing and sustainability

Trends in the Czech Republic follow those in the main European markets (UK, Germany, Spain) – although to a lesser extent. Abroad, it’s more common for investors to target segments that are labelled as alternative in the Czech Republic: with growing numbers of both local and international students, half of the respondents are investing in student housing. In an effort to diversify within the living sector, they also target affordable housing, senior housing or co-living – segments that are expected to grow in the medium term.

Another trend that cannot be overlooked for the future is sustainability, as stated by investors into housing in the Czech Republic and across Europe. Nearly 80% of the survey respondents said it is a key aspect in their portfolio, and 70% are willing to pay extra for projects with superior sustainability features such as ground-source heat pumps, recirculation of (not only) rainwater, green facades or modern multi-storey timber buildings.

Erik Müller, Head of Residential Advisory Services, Cushman & Wakefield: "Although the Czech Republic is not yet a key market for institutional rental housing in Europe, the growing share of this segment shows its increasing importance. This is evidenced by several major transactions in the past two years, which include Rezidence Hagibor, bought by the American investment company Invesco Real Estate, or Rezidence Vysočanský Mlýn and the Veltex complex, acquired by the domestic investment fund Mint Investments. There are more active players in this market, including Arcibiskupství pražské, Česká spořitelna and others.“

^1/ In 2020, the Czech Republic saw an extraordinary transaction of 42,500 apartments, which were bought by Heimstaden Bostad from Residomo.

^2/ While with data for the Czech Republic and CEE the term "residential sector" is used, which includes only properties intended for standard living, the EMEA survey refers to the "living sector", which also includes, for example, student and senior housing.

^3/ Source: RCA