The data confirm not only their viability but also their interesting investment potential. This creates space for everyone who wants to become part of the next progress. In this article, we will look at opportunities for those interested in investing in commercial real estate.
What do the numbers say?
One of the universal indicators that speak of the living standards of the region is GDP per capita. According to Eurostat, in the "pre-ancestral" year of 2019, Prague reached the highest level with a value of 205% of the EU average. It was followed by the Bratislava region with a level of 162%, followed by the Warsaw region with 160%. Budapest closed the mini-ranking with 151%. Despite the fact that we are still waiting for more up-to-date data, it seems that even the capital will not significantly mark the strong position of the metropolis.
Firms, with the exception of gastronomy, sports and hospitality, "stabilized" the restrictions relatively well - which is confirmed by the fact that, thanks to government assistance, they did not have to lay off employees significantly. In Bratislava last year, the unemployment rate rose from 2.4% to 3.4% and in Prague from 1.3% to 2.3%.
Commercial real estate is resilient. You just have to choose well
How are these macro data reflected in the commercial real estate business? In the case of quality office buildings and shopping malls, which are located in good locations and have a high Wault (average length of leases per building), they turn out to be surprisingly good given the circumstances. This confirms the performance of real estate funds WOOD & Company, on which the growth curve was almost never reflected.
This applies not only to the Office sub-fund, which focuses on Bratislava and Prague administrative buildings, but also to the Retail sub-fund, which covers the Prague shopping centers Galerie Harfa and Centrum Krakov. While in the case of the first fund the performance curve continued to grow during the period accompanied by lockdowns and the transition of tenants to a partial home office, in the case of the Retail sub-fund there is a rapid return to growth (from June 2020 and March 2021) immediately after the measures were relaxed.
The basis of success is the purchase of a quality building and professional management
The commercial buildings in the WOOD & Company portfolio are thriving due to several important factors. In addition to the aforementioned Wault (4.4 years in the case of the office portfolio and 4.2 years in the case of shopping centers), the consistently high occupancy of buildings is also an interesting indicator. It is currently 95% for the office portfolio and 94% for the retail portfolio.
The prime yield indicator also confirms a good perspective for those interested in investing in commercial real estate in the metropolises of Slovakia and the Czech Republic. This is the average net percentage yield of a building in a first-class location. In the case of the largest European capitals such as Paris, Berlin or London, the prime yield ranges from 2.5 to 3.5%. Prague currently generates 4%, Warsaw 4.5% and Bratislava up to 5.5 percent yield.
Source: WOOD & Company / Michal Kasana, sales manager of WOOD & Company
The buildings that WOOD & Company acquires in its portfolio have a standard yield of over six percent at the time of purchase. This is one of the factors thanks to which the funds can generate interesting returns for investors. In the case of the Office Sub-Fund, it is 62.5% from the moment of its establishment in 2017 and in the case of the Retail Sub-Fund established in 2016 even 110%.
"Combined with the quality management of the building, which is in charge of our subsidiary WOOD & Company Real Estate and other certified managers, we have the building under full control. The correctness of our strategy is also confirmed in the current period. Since the beginning of the year, the shares of the Sub-Fund's Office have gained 8.69%, with a 12-month return of 9.74%. The Retail sub-fund was also successful, with shares gaining 5.28% despite partially closed trades and a yield of 7.56% in 12 months, ”says Michal Kasana, sales manager of WOOD & Company.
The intention of WOOD & Company is to supplement the Czech-Slovak portfolio with quality commercial real estate in Poland in the near future. Management is in the final stages of negotiations regarding an office building located in a dynamically developing part of Warsaw, fully occupied by renowned and long-term tenants.