Jacy Meyer in Prague -

Investors, local and international, see the Czech property market as confident and maturing, while real estate consultancies are murmuring that the wild east is settling down into a stable, grown-up investment market. Even after a couple of turbulent economic crisis years and a recent return to more volatile markets, brokers believe that the property industry in Central Europe is now on a firmer footing.

"In 2008, investors pulled out of the [Central and Eastern Europe]. This time we aren't seeing that," says James Chapman, partner at Cushman & Wakefield Czech Republic. "The trend is that the Czech Republic and Poland are increasingly being viewed as Western European markets - we aren't there yet, but that's the direction it's going."

The end of summer and beginning of autumn saw instability return to the markets from the sovereign debt crisis in the Eurozone, but neither Chapman nor Omar Sattar, managing director of Colliers International Czech Republic, believe another crisis is on the doorstep. "The markets are improving, we can see it in the statistics and we hear it from our clients, but there's still a cloud of uncertainty due to the global economic difficulties," says Sattar.

One local company that is having a banner year is the CPI Group. At the beginning of October, they announced the acquisition of 19 office buildings throughout the Czech Republic from Czech billionaire Petr Kellner's PPF Group. The company has stated they expect to spend CZK15bn (€600m) on property investments this year, exceeding the amount they invested in 2010. The buildings from PPF alone cost nearly CZK5.4bn. Contrast that with Prague-listed property group Orco who announced a €7.5m loss for the first half of the year, compared with a profit of more than €237m for the same period in 2010.

Chapman estimates about €1bn have already been done across the market and Cushman & Wakefield themselves expect to close deals totalling a further €500m by the end of November. He adds that in 2010, the total market only saw €550m. "We've seen significant improvement on the year and expect full-year volumes close to €2bn," says Chapman. "That's second only to 2007, which was €2.3bn. It demonstrates how significant this upturn has been."

"This is a significantly improved market and I think it is great news," Chapman goes on. "There is confidence in the market, banks have the ability to lend - the fact is the Czech Republic has been remarkably robust in the past three years and people are seeing that."

The office market has been a particular focus. "This year, we haven't seen that activity, but the year isn't over yet, and there will be some significant transactions over the next six months," he said, citing as an example The Park in Prague 4-Chodov, which is close to selling for about €350m.

Big deals like that can skew the statistics, making it seem one sector is doing particularly well. So far in 2011, it seems like the industrial market is huge, with 38% of the transactions happening in this segment. In reality, though, according to both Chapman and Sattar, the purchase of an 80% interest in VGP Parks 1 portfolio by EPISO worth €350m gives the sector a more hardy appearance.

Foreign capital

Who is investing locally has changed from pre-economic crisis through the crisis and onto what can tentatively be termed post-crisis.

Colliers International mid-year research and forecast report stated that foreign investors, mainly British and Austrian funds, are once again paying attention to the Czech market; in the first half of 2011, groups based in these two countries represented 70% of all investment deals. In 2010, the market was dominated by Czech-based investors for the first time. "The amount of foreign capital is increasing again, however domestic capital still plays an important role," says Sattar. "We started to see the emergence of domestic capital in 2010 and that is a good sign of a maturing market."

In 2009, Colliers found that, as a percentage of total volume, 45% of investors here were German, compared with 22% Czech. In 2010, 68% of the investors were Czech, with 20% coming from the US. So far in 2011, the largest group at about 38% is from the UK. Cushman & Wakefield believe that is one of the most exciting new elements to the local investment market. "Funds in London are looking at how to get more money into CEE," says Chapman. "UK money managers are channelling money from the Far East, South Korea, Malaysia as well as North America, and it's very easy to phone someone in London, tell them what's happening and people want to listen."

While the Czech Republic and Poland, and more specifically Prague and Warsaw, are feeling good in terms of property investments, Chapman believes there is growing interest in other CEE countries. "Hungary is becoming interesting again, but interest is coming from people priced out of the Czech Republic and Poland," he says. "The ones taking it seriously have bought there previously, in 2003-2007, so they know the market, the operators and are considering it again."

He adds, however, that Bulgaria and Romania are tough to prove big deals can be done there, Cushman & Wakefield are in the process of completing a €70m transaction in Bulgaria with an opportunity fund.

But even with continued worldwide economic uncertainty, Sattar remains positive. "I expect fund investors to return in higher numbers; the market is mature enough, there are a lot of prospects for growth and returns and that is what attracts investors."