Arcona Capital, which manages €400 million of property assets in Central & Eastern Europe, has issued a forecast predicting strong regional and international support for retail property in the Czech Republic in the coming year.
Chris Sheils, Arcona’s Head of International Business Development, says the company is confident that the 100 per cent growth in Czech commercial real estate investment volume between 2024 and 2025 will continue, with retail opportunities attracting an increasingly significant share of investor interest.
He cites a €160 million refinancing which Arcona completed for a Prague-based private client in December. “The new loan was secured for a fixed seven-year term at very competitive market rates,” he says. “It covers a portfolio of thirteen fully-leased hypermarkets in Prague and other Czech cities.”
Jaroslav Sedivka, Arcona’s Head of Treasury, says that the two international banks providing the new funding were impressed by the portfolio’s investment quality. “The thirteen properties enjoy average fifteen-year lease terms. The lessee is a highly-regarded multinational supermarket brand. In addition, the properties themselves have benefitted from substantial investment in environmental improvements and are BREEAM certified.”
FOCUS ON RETAIL GROCERY TRENDS IN THE CZECH REPUBLIC
Chris Sheils points out that Czech disposable income is set to grow by 2-2.5 percent per annum in the next two years, boosted by forecasts of lower inflation. “This naturally has a significant effect on household expenditure in the retail grocery sector, and investors are making decisions based on perceived trends in evolving consumer preferences.”
“Grocery-anchored retail parks have proved to be a strong and stable segment in recent years, driven by non-discretionary consumer demand, high-quality tenant covenants and locations embedded within local communities. We expect this to continue. In addition, we anticipate growing investor interest in convenience retail parks, with consumer behaviour in the region increasingly favouring accessible, everyday retail formats. For investors, these opportunities offer a good combination of defensive characteristics and sustainable growth potential.”
Arcona believes the retail park sector is set to benefit significantly from the growth in e-commerce, being ideally-positioned as hubs for distribution and returns.
“We believe that retail parks will progressively bridge the gap between traditional retail and the urban logistics centres required to meet consumers’ demands in ever-shorter timeframes,” says Chris Sheils.
Looking ahead, Arcona foresees sustained and increasing investor interest in the retail grocery sector in both the Czech Republic and Poland. According to Guy Barker, Managing Director, “We remain very confident in the fundamentals of the convenience retail sector and are advising our investors accordingly. We are encouraged by the depth of the occupier market, by continuing urban and suburban growth, and by the evolving balance between conventional retail preferences and online alternatives. We believe the sector stands out by offering investors stable and sometimes exceptional performance while maintaining a conservative risk profile for their portfolios.”
