The C&W Commercial Real Estate Capital Value Index is showing clear growth in the capital value of prime commercial real estate assets. Albeit not dramatic, the value of the prime properties grew for a third quarter in a row, in Q3 2013 by 5.8% year-on-year, and the growth is accelerating. This indicates, together with other macro and property related indicators that the market has reached the bottom and is recovering from the second dip of the recession. (Capital value is a value at which the property would likely be traded on capital markets.)
“The growth comes from the strong performance of the prime shopping centres in Prague, while Prague’s offices are not picking up due to pressure on rents and industrial is stable,” says Michal Sotak, Head of Research at Cushman & Wakefield. “Capital values of offices are at the level of the year 2005, while prime shopping centres in Prague are already above their 2007 peak,” adds Soták.
“The industrial properties’ capital values are stable and roughly at the level of the year 2004. Due to low vacancy, long term contracts and general absence of bubbles in the segment, we see this sector as extremely attractive for investors looking for safe investment into real estate with reasonable returns,” says Jaroslav Kaizr, Partner in the Industrial Team at Cushman & Wakefield.
The C&W Commercial Real Estate Capital Value Index shows how the Czech real estate market has developed since Q1 2003. On cumulative basis, the market as a whole reached the peak in Q3 and Q4 2007 and trough in Q3 2009. The second dip of the recession brought another, very slight decline ending in Q4 2012. Since then the data are showing constant and solid growth in capital values of real estate assets and the market as a whole has returned to 2006 levels.
The C&W CRECVI is the only locally produced real estate capital values index in the Czech Republic. Its western, long established counterparts are the family of IPD indices or the US NCREIF index. These indices are used by property investors, banks, developers and occupiers to understand the dynamics of the real estate market, value their property portfolios, benchmark their performance to the rest of the market and analyze the property cycle.
The index relates to the Czech Republic only and shows year-on-year change in capital value of a commercial real estate portfolio, composed of prime Prague offices, prime shopping centres in Prague and Czech prime logistics stock. The weights of different sectors in the portfolio are fixed. The changes in the index stem only from changes in rents and yields. The index also disregards the effects of leverage, i.e. it shows the value of the assets rather than equity stakes in them. This methodology is used in order to show a transparent measure of capital value of commercial real estate assets. The data used in the calculations are collected each quarter through an internal survey of C&W’s sector experts.