Prague City Report, Q3 2012

Report Summary:

ECONOMY/INVESTMENT

The Czech Republic should begin to see more robust and broader-based growth starting in 2013, but the ongoing Eurozone crisis means that a stronger recovery is unlikely before 2014. According to Eurostat figures published in June 2012, Czech GDP per- capita reached 80% of the EU average in 2011 by purchasing-power standards. Despite that relatively poor result, the country fares well in comparison with the 9 other states that joined the EU in 2004 (ranking behind only Cyprus, Slovenia, and Malta). Moreover, the Czech Republic ranks ahead of one of the older member countries (Portugal). The Czech Republic is further behind in terms of labour productivity, reaching just 74% of the EU average in 2011.

OFFICE MARKET

Supply:In the third quarter of 2012, only one new office building was completed. Diamant, with an area of 3,510 m2, is located in the historical centre of Prague 1, on Wenceslas Square. At the end of the third quarter of 2012 a total of ca. 190,000 m2 was under construction. Out of this number, approximately 20,000 m2 is scheduled for completion during the remainder of this year. Altogether, almost 100,000 m2 of modern office space should be completed in Prague in 2012. We expect a further ca. 100,000 m2 to be delivered to the market in 2013. The majority of new office space in Q4 2012 and 2013 will be delivered to Prague 1 (49% of the estimated supply; strongly influenced by the Florentinum project), Prague 8 (30% of total supply in 4 projects) and Prague 4 (9% of total supply in 2 projects).

RETAIL MARKET

Supply: The total shopping centre stock in Prague remains unchanged at 778,900 m2. A new department store, Diamant, located on Wenceslav Square was the only project completed in Q3. For Q4 2012 the majority of new supply will be in the regions with the exception of a small retail park in Prague 9 – Dolní Počernice which was due for completion at the end of October. In Q3 2012, the construction of several new schemes commenced in the Czech Republic including; Centrum Krakov in Prague 8, which will bring almost 14,000 m2 to the market next year, and Copa Centrum at Národní Prague 1. Currently, there is almost 220,000 m2 of modern retail schemes under construction with planned completion within next two years. Approximately half of this space is being built in Prague. One of the largest schemes to be delivered is the extension of Centrum Černý Most, due to open in Q2 2013.

INDUSTRIAL MARKET

Supply: In Q3 2012, a total of 38,737 m2 was delivered in five industrial parks in the Czech Republic. Approximately 84% of all new space was completed on a pre-let basis. For the first three quarters of 2012, ca. 154,000 m2 were completed, which is some 5% below the completions level for the same period last year. For the entire 2012, we expect new completions to reach 200,000 m2.

About the Author:

Today's changing real estate market dynamics and the volatile world in which our industry operates require knowledge and intelligence to create competitive advantage like never before. Jones Lang LaSalle's industry-leading research group delivers market analysis and insights that drive value in real estate decisions and support successful strategies for clients.