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It’s summertime, so there’s a lot less news to read about. But don’t be lulled to sleep. Tariffs haven’t gone away. Europe is still caught between a rock (China) and a hard place (the USA). July 9 was the date by which the American president said all trade deals should be completed. This summer could be even hotter than expected.
Trump believes it’s Europe’s fault that Americans import more than they export to the trading bloc. He also thinks Europe’s system of VAT collection is unfair, a conclusion whose logic is difficult to discern. But the sticking point could well end up being American cars, which he insists should be bought in greater numbers.
If Trump prefers to use the stick for negotiations, the Chinese are handing out carrots as they court the Europeans — and try to divide them. Check out Serbia, which just secured Chinese support for accelerated exports of electric vehicle materials to benefit Stellantis after the carmaker faced sourcing difficulties at "normal prices."
Serbian president Vučić said Xi Jinping personally pledged faster permitting procedures for critical materials shipments. Stellantis produces Fiat Grande Panda and Citroën C3 models at its Kragujevac plant. The Serbian government leveraged strong Beijing ties when the automaker requested assistance amid mounting supply chain pressures. Xi assured that Chinese export restrictions don't target "friendly nations such as Serbia." China has been restricting exports on rare earths and other materials used in a wide range of manufacturing.
Will Trump chicken out again on his threat to impose heavy tariffs on Europe? As usual, there’s simply no way to know. His preference seems to be to make limited agreements that change little, while marketing it as an incredible win for America. The New York Times says a framework deal with the EU might be enough.
We’ll know more by this time next week. But no matter how the “deal” turns out, Europe will still have to figure out how to balance its relationship with China, while arming itself against the Russian threat.
RE News
No wonder rental residential is becoming such a hit with developers: only the wealthiest 20% of Czech households can now afford mortgages, according to the Czech National Bank. Average mortgage borrowers earn over CZK 90,000 monthly while typical payments reach CZK 22,000. Property prices climbed 10% last year as average new mortgages hit CZK 4 million in February. A 70 sqm Prague apartment now costs CZK 11.8 million. For median-income households, properties are overvalued by 60% relative to affordability. Housing shortages persist with only 30,274 new units completed in 2024, the lowest since 2017.
Zeitgeist Asset Management will manage another rental housing project for REICO investment fund, taking over two residential buildings in Prague's Britská čtvrť development. The Stodůlky project includes 219 apartments across four and six-story buildings, with completion expected in Q3 2027. Zeitgeist will handle project management, leasing and property management for the FINEP-developed buildings.
Czech logistics firm HOPI has opened a 31,000 sqm facility at Panattoni Park Chomutov North to handle distribution for Vileda cleaning products across Western Europe. The warehouse offers 50,000 pallet capacity and serves Germany, France and Benelux countries. Located 30 kilometers from the German border with connections to highways D6, D7 and D8, the facility provides co-packing services for Freudenberg Home and Cleaning Solutions.
The CZK has surged over 13% against the dollar in six months, its strongest performance since 2008. One dollar now buys 21 koruna compared to 24.5 in February. The rally benefits travelers heading to the Americas but hurts Czech investors holding US assets. The CZK has also strengthened against the euro, but both currencies are outperforming the greenback thanks to economic growth concerns, Trump's tariff uncertainty and pressure on the Federal Reserve to cut rates.
Českomoravská Nemovitostí has completed a two-year renovation of Václavské náměstí 62, offering over 2,800 sqm of office space near Prague's St. Wenceslas statue. The building features onyx walls, terrace views and flexible floor plates of approximately 325 sqm each. With all the construction atop Wenceslas Square, it’s hard to appreciate the work, but that just underscores the building’s strong location. A luxury mezzanine spans two floors with 500 sqm and outdoor terraces.
Sixteen new brands entered the Czech retail market in the first half of 2025, with fashion and gastronomy leading the charge. According to Cushman & Wakefield, fashion accounted for six entries while food and beverage brands added five locations. Prague dominated new openings with 14 launches. Among the newcomers were German lifestyle food bar dean&david (at Máj), the Ukrainian seafood restaurant Chernomorka, and a Croatian bistro called Koykan. Fashion newcomers feature Slovak barefoot brand BeLenka at Arkády Pankrác and American cap maker New Era on 28. října street. C&W expects a wave of luxury brands to show up in Czechia in the second half of 2025.
Orlen Unipetrol plans to expand its Stop Café brand beyond gas stations into grocery stores, shopping centers and hospitals. Non-fuel sales generate 40% of Czech revenue - Orlen's highest proportion across all markets. The company is negotiating partnerships with major retailers to place Stop Café corners in grocery stores, featuring coffee, sandwiches and private-label products. The company has launched vending machines in Slovakia and Czechia, with expansion planned for Germany and Poland. Orlen recently completed the CZK 450 million re-branding of the Benzina network of filling stations it bought in 2015.
Speaking of odd retail concepts, Lidl opened its relocated outlet store in Olomouc after its Prague Štěrboholy lease expired. You’d think a Popeyes was opening, as the opening sparked a 100-meter line that required enhanced security. The discount store sells unsold merchandise from regular Lidl shops at steep markdowns. The Prague location was wildly popular, causing traffic chaos with customers parking illegally and abandoning shopping carts in nearby parks. Adequate parking is being promised for this one.
Which reminds me, I saw a new Popeyes restaurant being built at the corner of Kaprova and Žátecka. That’s a power move, considering that one of KFC’s oldest restaurants in Prague is located just two doors away. But when you consider where Popeyes chose to open on Wenceslas Square, it definitely looks like a decision to go head-to-head.
Q&A: Office supply survey
Why is so little office space getting built? Remote work? Stricter lending conditions? Or higher rents?
Pavel Novak (Savills): We don’t view remote work as a long-term trend significantly affecting office demand anymore. In fact, physical occupancy rates have now surpassed 60 percent for the first time since the pandemic, nearing pre-COVID levels. This indicates that businesses are increasingly returning to office spaces, and the demand for physical office locations remains strong. The challenge, however, lies in the availability of high-quality office options, which remains limited in the short term. The situation is more influenced by traditional factors such as slow market processes, rising costs, and tightening lending conditions, which have compounded over time. These elements, combined with rents which are not growing fast enough (from the landlords perspective), could be seen as partially alleviating some of the challenges for landlords.
How do you explain the lack of new construction?
Radka Novak (Cushman & Wakefield): Lack of financing and high construction costs would be on the top of the list, but there is also uncertainty about whether tenants can pay the rental levels needed to make new development feasible and what the future exit yield will be. Some developers therefore decided to focus on residential construction that seems to be more profitable at this moment. Nevertheless, we see strong activity on the office investment market showing the returning trust into office segment by investors and that can give developers more confidence to start office projects.
In the past, relocating often meant a better deal – shiny new space, generous fit-out, solid rent-free periods. What’s changed?
Petr Florian (Avison Young): Landlords are more selective. Fit-out contributions are still there, but rarely enough to cover the full build-out – especially with inflated construction costs. And the delta between existing and new rental levels is wider than ever. So unless you’re moving into significantly better, more efficient space that aligns with your team and brand – relocating can be an expensive upgrade. In many cases, renegotiating and reconfiguring your current premises is simply the smarter play.
There’s very little new space coming online, but vacancy isn’t falling very quickly. Why not?
Milan Kilik (iO Partners): It’s a mix. One reason is that there was a lot of sublet space. If you took this out, vacancy would be falling more quickly. But companies are just more cautious with their moves now. And they're not taking as much space as they used to. The average amount of demand has fallen from 1,100 sqm a few years ago to about 600 sqm according to our latest report. In part, I think that’s because more of them are using services of workspace professionals. They’re doing their analysis before they move, because the one thing you don’t want to do is overpay for space you don't actually need.
I’ll be publishing the full results of the survey soon in ThePrime
Quotes
🗞️"Real estate companies are leveraging AI to significantly enhance customer interactions and administrative processes. Customers can now expect to interact with virtual leasing assistants, streamlining the initial stages of engagement. Furthermore, AI can draft lease documents in minutes, a task that traditionally took hours or even days, dramatically improving efficiency. AI is also proving transformative for apartment companies, allowing them to achieve considerable operational efficiencies. Since 2021, these companies have reduced their full-time staff by about 15%.” Ron Kamdem (Morgan Stanley), speaking on YouTube
🗞️“We don’t feel comfortable in U.S. Treasuries anymore. We are going to the German bund market,” said Greg Hirt (Allianz Global Investors). “There will be more issuance in bunds because of German fiscal policy, but that is good because it makes it a more liquid market.”
People
In a move that apparently took effect in July, Fraser Watson has joined Axelor Group as Head of Real Estate. He’ll be responsible for acquiring assets for its retail fund Aurelia as well as developing the group’s overall real estate strategy in Czechia, with a view towards European expansion. Watson worked previously at Savills as head of investment for the Czech Republic and Slovakia.
Biz News
The Czech Chamber of Commerce expects the domestic economy to grow by two percent this year, accelerating to 2.3 percent in 2025. Household consumption will drive growth in both years, while investment contributions should strengthen next year. Inflation will average 2.5 percent this year before slowing to 2.3 percent in 2025. Real wages should rise 3.6 percent this year and 2.7 percent next year as lower inflation boosts household purchasing power. Unemployment will remain low at 4.3 percent both years.
Prague's hotel sector is experiencing stronger-than-expected recovery, with occupancy rates reaching 82% and the city maintaining its position as the most visited destination in Central and Eastern Europe. Hotel investment volumes jumped 12% in 2024, with Q1 2025 transactions totaling €417 million, according to research by CBRE. The sale of Hotel Hilton Prague is the region's largest transaction. US visitors lead recovery with 18% growth over 2019 levels, while Western European arrivals have largely recovered.
Prague also commands the highest office rents in Central and Eastern Europe at €30 per sqm, followed by Warsaw at €28.50 per sqm, according to Colliers research covering six CEE markets. Across the region, the gap in performance between Class A buildings with green certifications and older Class B properties is widening. Sofia is the only city seeing strong construction activity while major cities like Warsaw, Prague and Budapest show reduced development. Lease terms have extended to 7-10 years in Prague and Warsaw, while Bucharest tenants seek greater flexibility.
Generali nearly had to file its own insurance claim Monday when a giant banner atop its Milan headquarters partially collapsed during a heatwave. The banner on the 170-meter Hadid Tower bent and came to rest against the building as temperatures hit 36°C. Authorities cordoned off the area while staff worked from home. Generali reported no injuries or structural damage. The tower, completed in 2017 and designed by Zaha Hadid, is known locally as "Lo Storto" - the Twisted One - for its curved design. Italian media linked the collapse to extreme heat affecting Milan.
Lastly: I really enjoyed moderating a Colliers podcast on the huge importance business services have for the office sector with Jana Vlková (Colliers) and Joe Appleton (ABSL). ThePrime will be a media partner for the ABSL Conference 2025 in Brno this November.
ThePrime Reader
-Savills strengthens Prague valuations team
-Gen Z’s Return to Office Comes at a Price
-Fond Českého Bydlení on track to raise CZK 1bn
-Pavel Malecha (ČSOB): Rental Resi Fueled our Recent Lending
-Conseq buys 40,000 sqm industrial asset in Olomouc
-Petr Florian (Avison Young): Want to save on rent? Pay your agent!
-Conseq buys 40,000 sqm industrial asset in Olomouc
-Pavel Malecha (ČSOB): Rental Resi Fueled our Recent Lending
-ThePrime Pod: Karel Stransky on the regionalization of supply chains
-Demand Returns to Czech Sheds, But What’s Really Vacant?
-Prague Office Districts Transform As Tech Drives Demand
-Skanska’s Habitat projects gets underway
-Martin Šmigura (Wood & Co.): Our office valuations held up
-CPI’s 2024 disposals help LTV slip below 50%
-PDS targets construction of 8,000 affordable flats
-Germany re-opens nuclear question
-$108bn! Global data center investments tripled in 2024
-A Conversation with urban planner David Sim