Zara’s fitout on Wenceslas is expected to be spectacular
Meanwhile…
In the biggest non-event of the week, the Czech National Bank decided yesterday to leave its base interest rate right where it is: at 3.5%. It’s the fourth consecutive time a CNB meeting has refused to cut rates, and the bank’s governors gave four inflationary justifications for doing so: wage growth pressure, fiscal expansion, a growing volume of loans, and property market distortions.
This last point translates into English as “rapidly rising resi prices.” The central bank’s main job is to keep inflation as close to 2% as possible, so it’s always on the lookout for inflationary hotspots. Rapid price increases in typical consumer goods, services or industrial components can be a signal for the bank to raise interest rates.
But there’s a big debate worldwide about how to treat rising resi prices. On the one hand, people don’t buy new homes every day, and for some people, apartments are an investment substitute for stocks or bonds. On the other hand, rising home prices inevitably lead to higher construction costs. And as anyone involved in development knows, if you can find a construction company with enough people to build your project, you’re going to pay dearly for it.
As expected, though, home prices haven’t jumped fast enough to push the ČNB into higher interest rates. This sort of interest stability is great news. While it’s not a hard and fast rule, countries experiencing volatile interest rates tend to be going through periods of dangerous societal/political volatility.
But arguably for the first time since the Great Financial Crisis, both interest rates and inflation seem to be at something like predictably normal levels.
Of course, one man’s idea of calm is another’s description of stagnation. Last week, at an excellent conference hosted by the Association of Foreign Investment, I listened to a string of economists, industry leaders and politicians talk about the good, the bad, and the ugly.
If “location, location, location” is the mantra of anyone in property, speakers from the manufacturing sectors were fixated on “regulations, regulations, regulations.” As in, there’s too much and too many. Everything from the bureaucracy involved in getting foreign workers in, to green regulations that are killing off hopes of competing with China in automobiles.
Transportation minister Martin Kupka spoke in glowing terms about the government’s achievements over the past four years. He has to do this, obviously, in light of the upcoming elections. “What is the fundamental role of the state?” he asked. “To create a stable, predictable legal environment with clear accountability. I think we have really been through a period in this regard where the Czech Republic stood very firmly and showed where it is going.”
Whether this is the right time to be campaig on how great everything is remains to be seen. Certainly, the basic Czech economic indicators are reassuring. Inflation is lower than the other CEE countries, and interest rates are set at a rational level.
It’s the rest of Europe I think we have to worry about. Inflation is now running at 2.4% in the eurozone, but the ECB’s base rate is lower — 2%. That’s backwards. That’s a policy that leads to greater inefficiency of the entire economy. Interest rates are supposed to be high enough to keep companies honest…not low enough to keep them afloat.
RE News
First things first: Tickets, Tables and Partnerships are on sale for ThePrime Gala, which takes place on January 28, 2026 at Obecni dum. In fact, 15 tables have already been sold, along with half a dozen partnerships. Things are moving quickly, so please don’t wait until the end of the year. Not least because prices will go up as of Dec. 1. (corporate tables are CZK 88,500 + VAT).
Things are beginning to kick off at Prague’s airport. First of all, we could actually get a rail connection there by 2030-ish. But airport maangement has begun speaking publicly about an ambitious Airport City project, which would transform hundreds of unused hectares around the 27-kilometer perimeter into mixed-use development. Its director says potential projects for the zone include a hospital, hotels, congress centers, educational facilities, research hubs, or even a new national football stadium. Recent aviation law amendments now permit non-aviation commercial use of surplus airport land.
Savills brokered a 10,400 sqm lease that will bring Knihobot to Logicor Prague Průmyslová. The second-hand book retailer expects to send 10 million books annually through its new distribution center on their way to nine different countries.
PSN has broken ground on Brno Jedna, a major brownfield transformation of the former Innogy facility. The project will deliver 188 residential units in two buildings (Neon and Xenon) plus retail spaces. The targeted completion date is late 2027. New apartments in Brno cost an average of CZK 140,000/sqm.
Investors in mountain resort sites will be interested to hear that Papírna Františkov s.r.o. has put a 38,000 sqm development site between Kvilda and Borová Lada on sale. The historic paper mill location includes architectural plans for 74 residential units, plus a museum, microbrewery, and restaurant. GAVLAS is handling the sale of what amounts to 12,136 sqm of buildable land.
Meanwhile, Skanska has sold half of the third phase of Modřanský cukrovar, which includes 132 energy-efficient apartments centered around the new Cukrovarnické náměstí square. It’s a CZK 1.2 billion investment which should be done by 2028. The flats went on sale in March.
Passerinvest Group released its third voluntary non-financial report covering 2024 performance. Among its achievements were 98% building occupancy in Brumlovka with 96% tenant satisfaction. The company organized 275 public events and achieved Europe's only three-star Fitwel certification for health and wellness. The company has reduced its total carbon emissions by 18% reduction since 2021. Passerinvest maintains 75%+ employee satisfaction among its 76 employees and produced CZK 1.6 billion in revenues. Five buildings earned BREEAM sustainability certifications.
Zeitgeist Asset Management has sold six fully renovated residential buildings in Prague 1, 2, and 5 locations to BHM group. The consultancy Charles Irvine brokered the transaction, which involved a portfolio of 94 apartments and 5 commercial spaces totaling 7,500 sqm. All were fully-occupied following their complete reconstruction. BHM group has retained Zeitgeist for ongoing asset management.
If you haven’t signed up for the upcoming mixer on October 1, please get in touch ASAP. ThePrime has teamed up with REassurance, JŠK advokatni kancelář and TRANSACT. An interactive W&I panel discussion from 4:30pm will be followed by the mixer at 6pm. Subscribers are welcome for either part, but space is limited on this one. It’s also restricted to non-legal guests, out of respect to the co-sponsors. Drop a line soon to see if there’s still space.
Q&A: Markéta Vrbasová (Knight Frank)
Is current demand tilting either towards logistics or towards manufacturing?
As of H1 2025, manufacturing accounted for 33% of net take-up, compared with a 50% share in the previous year. The balance is largely influenced by a handful of major transactions; if these materialize, the share could shift significantly in either direction. During COVID, distribution and logistics substantially increased their share of take-up, but this has since returned to pre-pandemic levels. Nowadays I would say we are facing 50 / 50 share of logistics / manufacturing enquiries.
The post-Covid rental boom is over...but where are we now? Are you worried about rising vacancy?
During the pandemic, the market experienced strong growth, fuelled by surging e-commerce demand and a shortage of available space. By 2022, vacancy had reached a historic low of nearly 0%, signalling an overheated market. Since then, vacancy has risen steadily to more than 5% in 2025. The shift reflects an increase in new project deliveries alongside easing tenant demand, bringing greater balance to the market. It’s not a crisis, but rather a return to more normalised conditions.
Right now, supply significantly exceeds demand. Along with growing vacant stock, the pipeline remains at historically high levels. And remember, nearly a quarter of the space is still in shell-and-core condition. This places additional pressure on rents. There’s no way to avoid it: rising material, labor, and financing costs since 2020 have made new developments more expensive, forcing developers to pass their costs on to tenants. As a result, the new “normal” for rents will remain above pre-pandemic benchmarks.
Quotes
🗞️”Since 2017, Germany's share of global automotive exports has been declining. Czechia, has so far heroically resisted this trend. But I’m certain that this has its limits, because we’re so closely tied to our neighbor. And while we can do a lot to keep our own Czech engine running, I think it will be very difficult for us to do so without the German one." Jan Bureš (Patria Finance)
Biz News
Ostrava has become one of only two European locations offering public access to quantum computing. It means research institutions, universities, industrial companies, and public sector users can tap into next-generation processing power. The city's new VLQ quantum computer, a CZK 125 million machine funded by EuroHPC JU and eight European nations, targets drug development and satellite imaging.
Eurozone inflation reached 2.4% in December 2024, rising from September's low of 1.7%, with services driving price increases at 4.0% while energy inflation turned positive for the first time in months. Slovakia's inflation rate was considerably higher as of August - 4.2%. That's on a par with Hungary's 4.3% rate, though better than Poland's worrying 5.3%. By contrast, Czechia is the over-performer, limiting inflation to just 2.5%.
Put it a different way: Seznam Zpravy reports that the traditional shopping sprees in Poland that Czechs used to love aren’t always worth it these days. Poland experienced 32% inflation since February 2022 versus 24% in Czechia and 20% in Germany, narrowing the gap significantly. Czech Lidl stores remain regionally most expensive, but Polish shopping now requires careful bargain-hunting rather than guaranteed savings. Poland's zero VAT on basic foods ended March 2024, accelerating price convergence across borders.
Conversant Capital LLC partnered with Castleforge to invest over £1 billion in London offices, signaling US investor confidence in the market's recovery. The venture committed £150 million initially and secured two deals, including refinancing in the insurance district and equity in 75 London Wall redevelopment. Supply constraints are driving double-digit rental growth in prime locations as pandemic-wary investors return.
“996” is coming to Europe. If you don't know that term, then your life doesn’t revolve around the 60 hour work weeks employed by many American and Chinese start-ups. Now, Czech-based Better Stack is testing the idea by offering double pay to employees willing to work from 9:00 am to 9:00 pm, 6 days a week. Will the idea survive in Europe? Can Europe be competitive if it doesn’t?
“In Silicon Valley, 60-70 hour weeks aren’t the exception. I don’t want to celebrate the over-work culture, but are we moving fast enough in Europe? We may have people who are just as clever and just as ambitious, but if they’re working more than we are, we can’t win.” Sebastian Becker (Redalpine).
ThePrime Reader
-Marketa Vrbasová (Knight Frank): Auto Suppliers Face Indirect Hit from Trade Wars
-Pavel Sovička (Panattoni): Productivity is the problem. Not developers
-David Sajner joins Savills
-Energy efficiency still low in Prague office sector
-Crestyl achieves planning breakthrough on Savarin
-Michal Sotak (Cushman & Wakefield): Emotions drive investment
-Michal Bilý (108 Real Estate): Q2 new industrial leases strengthen
-Robert Ides (ARETE): We’ll recycle our equity abroad
-Martin Klán (Amadeus): Nový Máj’s butterflies should stay
-Karin Shalev Shogol (AFI CZ): We want 5,000 flats in 5 years
-Savills: H1 investments soar to €2.1 billion in Czechia
-Fred Hlobil (FH+ Real Estate): New money is coming into young sectors
-CPI offers to buy back 7% bonds at 7.75%
-Reality check for landlords: Prague Q2 resi rents fall
-New Podcast with Mark Robinson (EnCor Wealth Mgmt)
-Weak demand & resi boom stunt office development
-Huge changes coming to Prague’s high street
-Savills strengthens Prague valuations team
-Gen Z’s Return to Office Comes at a Price