Demand for business real estate increased in 2020

According to a report by the CzechInvest, which focuses on supporting business and investment in the Czech Republic, there was an increase in investment demand for real estate last year. In 2020, CzechInvest received a total of 114 investment inquiries for real estate throughout the Czech Republic. This is a slight increase compared to 2019 when 105 real estate inquiries were recorded. Clients most often demanded production halls (46 %) and industrial land (28 %). Compared to 2019, the increase of demand for production halls in 2020 was significant. On the other hand, a more significant drop in the number of inquiries was recorded in the sector of office real estate, which accounted only for 4 % of demand in 2020. Laboratories accounted for 2 % of the total volume of real estate demand.

In accordance with the new strategy of the agency, CzechInvest divides its clients according to the technological sectors that they belong to. These sectors represent specialized high-value-added industries, the perspective of economic development and competitiveness when it comes to the Czech market. In 2020, the largest number of real estate inquiries from companies from the mobility sector was recorded (32 %). This includes investment plans in the automotive industry and related industries in which our country plays a very important role and thus is gradually strengthening its position as one of the leading European centres for design and research as well as for development activities in this sector. Current trends among investors looking for real estate in the Czech Republic in 2020 include electromobility, alternative propulsion systems technology or autonomous vehicles technology. A total of 26 % of real estate demand in 2020 came from the sector of other products and services. This includes several traditionally strongly represented industries in the Czech Republic, such as the metalworking, plastics, electrical engineering, etc. Another strongly represented sector was advanced manufacturing technologies (13 %), which includes companies in the field of nanotechnology, robotics and innovative manufacturing technologies.

In terms of recorded inquiries, the most sought-after regions were Středočeský (14 %), Ústecký (10 %), Plzeňský and Karlovarský (9 % each). The close proximity of the German border is particularly important to these regions. The Moravian-Silesian Region with an 8 % share of investment inquiries followed right after these regions.

An interesting discovery is that the COVID-19 pandemic has helped to increase the share of high-value-added investments despite the economic crisis. High-value-added investment means an investment that is technologically focused or focused on research and development in strategic areas. In 2020, the high-value-added investments accounted for two thirds of all investments agreed by CzechInvest. In 2018 and 2019, only a fifth of new projects met the criteria of high added value. Almost 80 % of the agreed investments are expansion - expansion of operations of companies already established in the Czech Republic.

Patrik Reichl, CEO of CzechInvest, comments on the records:

"In 2020, we negotiated 27 new investment projects, in which companies promised to invest 15.3 billion crowns in the coming years. Despite a certain decline associated with the coronavirus pandemic, investors are still interested in locating their projects in the Czech Republic. In addition, we expected a reduction in the number of projects due to stricter conditions resulting from the amendment to the Investment Incentives Act. We are all the more pleased that, despite these facts, two thirds of all agreed investments bring high added value.”

Inquiries for brownfield sites in 2020 accounted for 12 % of the total number of all real estate inquiries, with investors most often looking for sites in the Central Bohemian Region (18 %) again. In this respect, it is surprising that CzechInvest did not record any demand for brownfield sites in the Karlovy Vary, Ústí nad Labem or Moravian-Silesian regions that are among the regions with the largest number of unused brownfield sites.

It is important to draw attention to the fact that the mentioned statistics do not monitor the entire commercial real estate market in the Czech Republic. They are representative only of the part that the CzechInvest agency focuses on. More comprehensive data is offered by regular industrial market reports from private developers.

According to consulting company Colliers, which focuses on commercial real estate and investment management, a total of 68,000 sq m of new industrial space was launched during the first quarter of 2021, bringing the total size of the Czech market to 9.17 million sq m. The newly completed premises included 5 buildings located around the country. The largest share of them (41 %) is located in the Pilsen Region, followed by the Moravian-Silesian Region (37 %), Prague (19 %) and the Liberec Region (2 %). At the end of March 2021, the vacancy rate was only 3.6 %, for a total of 329,100 sq m. In terms of demand, the first quarter was record-breaking. The gross demand realized in the first quarter of 2021 reached a record value of 765,600 sq m, which is an increase of 44 % quarter on quarter and even 147 % year on year. The record can be partly attributed to the demand which was slowed down by the pandemic but has now been back in the process of realization.

Source: CzechInvest, Colliers