Brno real-estate - how does it fare post-covid?

We realise it’d be rather naive to consider these days truly post-covid but still, we offer you a quick overview as to how the Brno real-estate market is doing now, half-way through 2021, after a rather tremulous year (and more) of lockdowns.

Roderick Barker has been active in the Brno real-estate market for over 23 years, in both commercial and residential sectors. He’s been involved in many of the city’s largest leasing project, for example as the General Manager of Brno’s Technology Park. These are his observations:

The month of June has seen a significant easing of restrictions and re-opening of shops and restaurants so that a return to normality is being felt. Simple activities such as clothes shopping and enjoying a drink with friends are again possible and there is a noticeable feeling of relief all round.

Unfortunately, this has come too late for many service sector businesses and their employees and this has resulted in closures and redundancies of many small operators. Nevertheless, as the situation improves there will be growth in the sector and experienced staff should be sought after for recruitment to meet the pent-up demand from consumers.

Post-covid offices – will they fill up again?

Brno is a city with an increasingly significant business occupancy of commercial office space and many companies adopted a work from home arrangement with their employees throughout the pandemic period. This is now on the turn with many companies either already re-occupying their office space and others intending to do so in the near future. 

There is necessarily a re-think in how such large occupiers will utilise their premises in the future with a likely larger proportion of the workforce working from home under flexible arrangements. Indeed many companies are undertaking workplace planning exercises with segregation of employee areas from public access areas and greater space allocation per employee on a m2 basis than was previously the case.

Commentators have predicted a permanent reduction in companies’ use of office premises but it remains to be seen whether this will in fact be the case. Employees are keen to return to the office after such a long period and working from home can also be the cause of stress and difficulties especially in a family situation. 

Real-estate networking starting again

The easing of restrictions and re-opening of pubs and restaurants has also allowed renewal of business networking events and the so called ‘Thirsty Thursday’ informal networking meeting for people involved in the local commercial real estate market took place on 24th June at the Stopkova pub in the town centre.

Sponsored by CBRE and others the event takes place once a month on the last Thursday, restrictions permitting, and provides an opportunity for individuals involved in all aspects of commercial real estate in and around Brno to meet and share market information in an informal setting. The last meeting was well attended and many there had come directly from the foundation stone ceremony of the developer Renfield’s new project site Smart Zone D1 in Troubsko earlier in the afternoon. This is the second such project launched by the developer following their first Smart Zone in Kurim which aims to provide small scale industrial units for rent for production operations around Brno.

On 17th June the premises of MIG POINT were opened with an introduction ceremony. Located on Cejl Street close to the City centre the newly constructed building provides 24 luxury furnished apartments of 1+kk and 2+kk for rental. Characterized by a timeless industrial design the project represents a growing trend for urban living in what was previously a somewhat run down area of the City.

Flat prices went from CZK 75k to 95k/m2 in two year’s

The price of residential real estate across the Czech Republic has seen a sharp increase over the last two years and this has been particularly evident in the Brno apartment market where the cost of apartments has risen from circa CZK 75,000 to 95,000/m2 and beyond. It is not uncommon to see apartments for sale at the higher end of the market priced at CZK 15m and higher. At the lower end of the market the size of apartments being offered is reducing in order to provide entry level opportunities in such high price conditions. Studio apartments of 15m2 are available on Videnska street at a price which equates to a rate in excess of CZK 130,000/m2.

The supply of new build apartments has steadily increased and new developments have been constructed to match the growth of new commercial areas and office projects such as Vlnena and Nova Zbrojovka. Despite the increased supply there seems to be no slow-down in the pace of sales and for the most part all new apartments projects are fully sold out prior to completion.

The pandemic has also had an effect with construction materials increasing in price and developers passing these increased costs onto the consumer via higher sales prices. Existing apartments in good locations such as Veveri close to the City centre have also experienced sharp prices increases and these remain sought after by both owner occupiers and investors often leading to out-bidding by competing purchasers

But flat rents might reduce?

As prices have risen beyond the range of affordability for many the rental market remains buoyant with both a mixture of domestic and international demand from foreign employees working at the many international companies in the City. The likes of IBM, Red Hat, Zebra, AT&T and others employ a high number of foreign nationals that are more likely to rent their accommodation and this has attracted investors and developers to enter the rental market.

Despite record low interest rates on mortgages the high cost of purchasing now means that rental yields have reduced somewhat. This coupled with increasing supply means there are signs of downward pressure on rents in the city centre as tenants have a wider choice.

The cost of real estate outside the city has also increased markedly in recent times and there remains a low supply of quality housing accommodation within reasonable commuting distance of the city. The option of purchasing an older property which requires reconstruction or renovation provides a means of breaching this affordability hurdle but this requires skills which are not available to all. Foreigners without a basic understanding of Czech would find it extremely difficult to manage a reconstruction project in the countryside and finding reliable tradesmen remains a challenge.

The article was written by Roderick Barker who has been active in the Brno market as both a commercial real estate manager and on a personal basis within the residential sector for over 23 years. Formerly the General Manager of Brno’s Technology Park, Roderick has been involved in many of the City’s largest commercial leasing transactions over the period. On a personal basis, Roderick has undertaken the renovation of several apartments and houses both in the City and countryside beyond.


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