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Allan Saunderson is managing editor of Property Finance Europe and a contributor to GlobeSt.com.

PRAGUE-Czech Republic property investment activity picked up in third quarter due to progress on long-awaited transactions, with three deals worth €48 million, but volume in the first three quarters was still 89% lower at €100 million, according to the latest DTZ Property Times. Full-year volume is forecast at around €300 million.

Yield decompression has resulted in prime yields holding at around 7% for office and retail and above 9% for industrial property. Vacancy rates in office and industrial markets have risen slightly due to lower demand combined with occupier downsizing and new supply.

Office take-up has been rescued from a historic low by renegotiations – extension of contracts – accounting for almost half of gross take-up. Net take-up was down 45% from Q2 2009 and 62% year-on-year at 24,900 square meters. Including renewals/extensions, the falls were 15% and 33% respectively. Prague vacancues edged up to 10.6%, and prime rents fell 8.7% from a year earlier at €20 to €21 a square meter.

DTZ said that due to the credit crunch, developers require significant pre-leases before starting construction, so the bulk of some 1.4 million square meters of scheduled office projects in Prague is being postponed to 2011-2013 which could mean a shortage of prime office space between 2010 and 2011. In the retail market, a widening gap is seen between performing shopping centers with full occupancy and those facing problems prior to the economic downturn. Pressure on office and industrial rents has persisted and DTZ expects further decreases towards year-end.

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