This year, Colliers Czech Republic, leading global commercial real estate services and investment management firm, has announced multiple new appointments across various business lines, as part of the company’s strategic growth plan needed to better cope with the market dynamics and clients’ needs.
One of these hires is Mark Richardson, who recently joined the Colliers Capital Markets team in Prague, moving from Colliers Investment team in Warsaw, Poland, where he spent the past 18 months before joining forces with the Czech team comprising Andrew Thompson, Tomas Szilagyi and Konstantin Cordery. “I am delighted to be joining the expanding Colliers team in Prague and the prospects of building on the team’s track record and successes,” said Mark, who is very familiar with both the Czech Republic and CEE Real Estate Investment markets and has over 21 years of experience working in the real estate industry.
2021 real estate market trends
“Inflation continues to rise across the Globe and in turn the cost of construction which is having an impact on the real estate market and the cost of undertaking developments this year,” says Mark when asked about the current situation on the Czech market. “The Cost of raw material and the salaries of Construction work continues to rise driving inflation which means in theory that interest rates should also increase. Theoretically, if the cost of borrowing money to acquire Real Estate increases, the price of Real Estate should reflect this increase and prices should correspondingly slow due to the higher cost of borrowing,” thinks Mark. “However, this doesn’t necessarily have to be the case, as there remains a significant amount of capital active in the market seeking opportunities to acquire Real Estate which means that Investors will simply adjust their return requirements accordingly to offset the impact of higher interest rates and as a result, yields are projected to remain stable and unchanged in the short term,” predicts Mark.
Responding to the question of where would the capital flow in the foressable future then, Mark is of the opinion that there remains a large amount of ‘frustrated’ domestic capital in the Czech Republic looking for potential apportunities to invest, which continues to keep his investment team busy, with signs that Czech Investors are increasingly looking to invest cross-border due to the lack of opportunities in the Czech Republic.
Different dynamics of the Czech Republic and Polish investment markets
Mark is looking after both International investors and Czech Funds. “I am helping many Czech investors looking for isuitable investment opportunities in both the Czech Republic and Poland,” he says and continues: “I often find myself talking to Czech investors about Investment options in their own country, and end up spending half the time discussing other Investment opportunities and the merits and attractiveness of the Polish Real Estate market and other CEE opportunities. There appears to be plenty of Czech capital now seeking to invest in Poland. Whilst historically German and Austrian Investors and financing banks have been active in the Czech Republic, we are now seeing strong signs that Czech investors are also seeking to invest in Austria and Germany driven in part by the lack of investment opportunities and institutional ivestment product available to buy in the Czech Republic,” says Mark and adds: “One of the strong points we share at Colliers CEE is our well connected platform where we easily can put various opportunities together in front of our clients.”
One interesting observation noted by Mark is the different dynamics between that of the Czech Republic and Polish Investment markets. The Czech Republic is similar to that of most Western European Markets whereby 50% of all transations is typically completed by domestic capital, whereas in Poland, approxiantely 95% of all capital invested in the Market is Foreign capital – typically investment managers from the US, UK, Germany and South Korea London investing in Poland. We are aware of the possibility in the near future of the first Polish Real Estate Investment Trust (REIT) being created which would help transform the Investment landscape in the country.
“There has been a strong shift towards the industrial sector being the preferred Investment sector class away from that of offices and retail. The global Covid pandemic has accelerated the growth of online retail sales and changing consumer habits and how retailers respond to these changes,”says Mark and notes for example that the US fashion retailer, GAP, recently took the decision to close all of its fashion stores in the UK, France and Italy but will continue to trade online and believe there will be more businesses globally to follow suit, not only fashion brands.
Mark notes that retail parks continue to be resilient to these changes. The retail park customers ability to park in a safe outdoor environment close to their desired retail stores during the global pandemic and government restructions resulted in relatively strong trading performance of the retail parks compared to that of shopping centres and in turn ensured the continued attractiveness of the sector as an asset class to investors.