Czech office market remains driven by domestic investors amid low foreign interest

The Czech office real estate market continues to be dominated by domestic investors, with international capital largely absent from major transactions in recent years. Since early 2021, there has been no significant acquisition of a Prague office building by a foreign investor, reflecting a broader shift in investment preferences and structural market factors.

Several conditions contribute to this trend. High office occupancy levels in Prague have kept vacancy rates low and helped the market avoid the sharp price corrections seen in many Western European countries following the pandemic. At the same time, foreign investors have shown limited interest in the Czech market, citing factors such as the absence of the euro, geopolitical concerns stemming from the war in Ukraine, and complicated permitting procedures that slow down the development of new projects.

“The main reason domestic capital continues to dominate the Czech office market is the comparable investment returns available in other regions,” said Radek Procházka, Managing Partner at Prochazka & Partners. “Foreign funds can often achieve similar returns in their home markets and have increasingly shifted their focus to sectors such as industrial and logistics properties.”

The last notable international acquisition occurred in 2021 when Germany’s Deka Immobilien purchased the Parkview office building from Skanska. Since then, domestic buyers have driven market activity.

In terms of development, Brno currently shows more momentum than Prague. Only around 24,000 square metres of new office space is expected to be completed in the capital this year—well below historical averages. This slowdown reflects ongoing challenges such as high construction costs, tougher financing conditions, and shifting investor priorities toward industrial and residential segments.

The office vacancy rate remains stable at around 8%, supporting landlord leverage and contributing to rent increases, particularly in prime locations. Tenant mobility is limited, with contract renegotiations accounting for more than half of all leasing activity in 2024. This reflects a constrained supply and a preference among occupiers to extend existing leases.

New large-scale office deliveries in Prague are not expected until 2027–2028, suggesting that the market will continue to see modest development activity in the near term.

Source: Prochazka & Partners