Saturday, 15 March 2025
Despite a below-average volume of commercial real estate deliveries in 2024, the Czech market remained active, largely driven by domestic capital. According to experts at Colliers, this trend is set to continue in 2025, with investor focus shifting towards the residential and retail sectors. Sustainability and ESG considerations are expected to play a crucial role in shaping the market, while challenges related to the ineffective digitalization of construction management could pose significant hurdles.
Czech Investors Seize Opportunities Amid Foreign Capital Retreat
Economic turbulence and property price adjustments across European markets have led to a retreat of international investors from the Czech market, redirecting their focus elsewhere. This shift has created a unique window for Czech investors, who dominated the investment market in 2024 and expanded their presence across Central and Eastern Europe. Experts predict that in 2025, domestic investors will continue to capitalize on the weak presence of foreign capital, acquiring prime assets entering the market. Among the most sought-after properties will be shopping centers and retail assets, as well as build-to-rent residential projects, predominantly secured through forward purchases.
Residential Prices Expected to Rise Further
Rising demand for housing across the Czech Republic and the broader CEE region has fueled activity in the residential property market. Colliers anticipates that this trend will lead to further price increases, particularly in high-quality new developments. “With no significant improvements in zoning, permitting, or financing to stimulate higher construction volumes, the ongoing price growth comes as no surprise,” said Josef Stanko, Director of Market Research at Colliers. He added that private rental sector (PRS) projects and serviced rental housing will gain further traction, as evidenced by increasing investor interest in this segment.
Retail Sector Poised for Expansion
Following a downturn in 2023, retail sales in the Czech Republic rebounded strongly in 2024, revitalizing the retail real estate sector. Rising tourism and consumer confidence have spurred the development of new projects and the refurbishment of existing shopping centers and retail parks. Investor interest has also grown, leading to several significant transactions in the past year.
Leasing activity remains robust, with retailers eager to fill vacancies left from the previous economic slowdown. “In 2025, we expect expansion to be primarily driven by discount retailers and mass-market chains, targeting previously untapped locations,” said Stanko. Additionally, major brands are likely to test the market with temporary pop-up stores. However, the market for large shopping centers is expected to remain stagnant, given the already high saturation levels in Prague and other major cities.
Office Market to See More Renegotiations Amid Space Shortages
The Czech office market will continue to experience high levels of lease renegotiations in 2025, as developers face persistent challenges. Delays due to financing issues and a shift in focus toward residential projects have hindered new office developments. Despite this, some projects have progressed through speculative builds or forward acquisitions, with over 160,000 square meters of office space currently under construction in Prague.
However, demand for new office space remains high, and options are limited in key locations, with vacancy rates as low as 3%. “Companies seeking office space in prime locations may postpone their projects until suitable options become available,” Stanko noted. This trend is expected to result in a higher volume of renegotiations compared to new leases.
Industrial Real Estate Faces Continued Challenges
The Czech industrial real estate sector continues to struggle against competition from neighboring countries, which offer more attractive conditions such as lower rents, better incentives, and a more favorable regulatory environment. These factors have led some companies to reconsider their expansion plans or move their operations abroad.
“Industrial real estate demand is expected to face a challenging first half of 2025, with improvement likely in the second half,” said Stanko. However, he cautioned that total transaction volumes will likely be lower than in 2024, marking the fourth consecutive year of market slowdown. Rental rates are expected to see only slight declines, but landlords may offer more attractive incentives such as rent-free periods, flexible lease terms, and additional benefits to attract tenants.
Despite these efforts, the Czech industrial sector remains at a disadvantage compared to neighboring countries, and competition is expected to remain fierce in the coming year.
Source: Colliers Czech Republic
