Investing In The Czech Republic - Outside Of Prague - Part 1:
By Nathan Brown, Fri Dec 9th
Imagine if you had bought property in Prague 8 years ago....
Brno property has been getting a lot of exposure lately. And forgood reason. Attractive deals in Prague are getting harder tofind. Attention is beginning to turn elsewhere.
Brno is the second largest city in the Czech Republic. Being thebusiness capital of Moravia it boasts some big name companiessuch as IBM, Siemens, Minolta CR, Honeywell Controls and FEI.
At the end of March 2005, RyanAir began daily directflights from London to Brno. Flights from Dublin to Brno arerumored to be next on the list of priorities.
In 2008 a major motorway is planned to be completed that willlink central-northern Moravia with Poland making the area moreattractive for Polish investors and traffic.
Currently, property prices are a third of what is available inPrague and there is a strong and growing rental demand forquality properties.
What are outside sources saying about Brno? The city of Brno haswon the competition for European City of the Future2004/2005 which is organized by the prestigious FDImagazine, a Financial Times publication, in the category ofVisegrad group cities. It even beat out Prague and Budapest.
"Brno's fast economic growth and high GDP-per-capita helped topush it ahead of other cities in the region. The judges alsogave top marks for its economic potential and recent FDI dealsinvolving UK-headquartered engineering firm IMI International,US technology group Honeywell and US advanced engineeringcompany Danaher Motion, which between them created 900 jobs.Brno also scored well for its international promotion strategyand incentives."
Swiss company Aguna chose to build their new plant inBrno. The company intends to invest almost 250 million crownsduring the first two years. They will be able to employ at least80 people in production and development of precisioninstruments. A large part of the employees will becollege-educated specialists.
"The quality level of the work force was the deciding factor forAguna."
"Their representatives are convinced that they will findengineers in Brno who are just as capable and qualified as inSwitzerland," said Tomáš Bohrn, Project Manager at CzechInvest,and added: "This precision engineering project demonstrates thehuge potential of Brno as well as the South Moravian region toattract technically advanced engineering R&D investments."
Daikin Industries Ltd. is a world leader in theproduction of modern air-conditioning equipment. After thedouble-billion investment in Plzen, the Daikin company hasdecided to build a new factory for the production of compressorsinto air-conditioners in Brno. In the first stage, the companyintends to invest 1.2 billion crowns and to create more than 500skilled jobs.
"Our decision to invest at first in Plzen and now also in Brnois strategic and very important for the future. The CzechRepublic should become the important base for our production forthe fast-growing markets of the European Union," says JiroTomita, General Manager of Daikin Europe, and continues: "Thefactory in Brno will deliver compressors to our subsidiaries inPlzen and in Oostende, Belgium. It is the compressors that arethe most important part and 'heart', which secures thefunctioning of air-conditioning units."
Symbol Technologies launched operation of their newcentre in Brno for shared customer support and financialservices for Europe, the Middle East and Africa (EMEA). SymbolTechnologies has already invested more than seventy millionCzech crowns into technological equipment and within three yearsplans to set aside another almost half a million crowns forwages, training and operation. The centre will initially employ200 people and this number is expected to increase by another550 employees.
"We chose Brno for several reasons, namely the good offer ofqualified labour, a good site and the good position of Brno inproximity to Symbol's existing centres and customers in Europe,"said Steve Priestley, Vice President and General Manager ofSymbol for EMEA. "By concentrating repair, customer call supportand administration of finances, contracts and orders into oneEuropean centre we will be able to improve the overall standardof our services and keep it at a high level for the long-term."
Austrian-German producer of health care and hygienic productsLohmann & Rauscher announced publically the end ofDecember, 2004 that they will build their new plant in SouthMoravia. The company is investing more than 41.5 million eurosinto expansion and modernization of its production facility hereand will create over 160 new job opportunities.
"While the company in Germany concentrates on a selected part ofhealth care products like plaster casts and bandages, we aregradually transferring production of medical dressings,operating masks and other surgical products to the Czech plants.Production at the enlarged plant in Slavkov near Brno should belaunched within two years and the main customers will be theEuropean subsidiaries of Lohmann & Rauscher," said Rudolf Vonys,procurator of Lohmann & Rauscher s.r.o, and added: "Our finalcustomers are health care facilities all over Europe, forexample German, French and Austrian hospitals and Dutch, Swedishand Italian pharmacies."
Japanese Company Ohmori Technos Corporation has decidedto build a new factory in the area of Brno. At the outset, thecompany will invest about 15 million euros. Estimations suggestthat at least 150 new positions will be provided in the Brnoarea. Production in the new plant is scheduled to start by theend of 2006.
"Today, the Czech Republic is known as the center of industry inEurope. In fact, a broad range of Japanese companies havesuccessfully established their plants in the country. Assessingthese situations, we have decided to carry out this investment,"commented Fumio Ohmori, president of Ohmori Technos Corporation.
The world's largest airline, Lufthansa from Germany, hasofficially committed, as of the end of February 2005, to openinga new shared services centre in the Moravian side of CzechRepublic. The new centre, which will be located in Brno, willassist customers of Central and Eastern Europe. It is expectedto employ up to 100 people. This tenth call centre forLufthansa, named Global Telesales Brno s.r.o., will startoperations on June 1st 2005.
"Central and Eastern Europe is a strategic market for us wherewe plan in the coming years to double the volume of ouractivities," commented Stephan Semsch, Lufthansa's Director forCentral
and Eastern Europe, and added: "We thoroughly assessed30 possible localities in total and ultimately chose Brno forits strategically favourable position within the region and itsproximity to the important airline hubs of Munich and Frankfurt.Other great advantages of the Czech Republic are its membershipin the EU, quality telecommunications and technicalinfrastructure and the motivated, qualified and cost-effectivework force."
Daido Metal, producer of bearings for the automobileindustry, signed an agreement on future agreement on thepurchase of land with the city of Brno today to build a newproduction plant. The investment of Daido Metal will amount tonearly 13 million euro and the plant will employ up to 100persons in the first stage. The production should be launched atthe beginning of next year.
"The Czech Republic has a very strong position in Europe in theautomobile sector and even many of our clients have theirproduction plants here. The production of our Czech plant willcover the demand generated both in the Central Europeancountries and on the entire continent," says Issei Yoshida,Managing Director of Daido Metal Europe.
"Our Czech branch, Daido Metal Czech, will be the first companywithin the entire group to operate fully independently, withouta strategic partner from the same field. The only partners inthe Czech Republic will be the locals, in particular in the areaof technical engineering and development, We also intend tocooperate with the city of Brno," says Tetsuro Nishiyama,Managing Director of Daido Metal Czech s.r.o.
Acer, the major manufacturer in the notebook sector willopened a new service center, with a related call-center forcustomers in Europe, Middle East and Africa (EMEA). The Acershared services centre opened on July 1st in Brno, within theindustrial complex Cernovická Terrace and is expected to provideat least 60 new jobs.
"We have been experiencing great market growth in the last twoyears in the countries of Europe, Middle East and Africa. Thenew centre will replace the current solution, where customerservice is being provided via external service providers,"stated Stefan Engel, Region Manager North + Central Europe andadded: "Our goal is to provide even better support to allcountries involved in their native language and double the staffwithin one year."
GigaByte Technology, a producer of computer components,is building a high-tech repair centre in Brno - CernovickaTerasa where customers from all over Europe will send theirlaptops, graphics cards and motherboards. 25 million CZK isbeing invested with a projected 50 employees being required.
GigaByte Technology chose the Czech Republic over the otherCentral European countries, including Hungary, which was theCzech Republic's main competitor. Brno won mainly owing to itsquality infrastructure and sufficient, qualified work force.
The service centre will be built in Brno despite the fact thatthe company will not be receiving government investmentincentives. Its executives thereby confirmed that Czech Republichas a lot to offer foreign investors.
Progeon Ltd, a leader in third party outsourcing inIndia, has completed its first phase of its project in Brno. Thecompany currently employees 80 people in its downtown Brnooffice and provides process management services in sixteenEuropean languages. Future growth plans will eventually offercareer opportunities for hundreds of people from Brno and thesurrounding area.
"The Czech Republic is an attractive destination for companieslike ours that hope to reach a wide European market," saidAkshaya Bhargava, managing director and CEO, Progeon Ltd. "Brnohas excellent infrastructure and facilities, a supportivegovernment, and people with multiple language skills.
The best quality and most beneficial industrial zones in theCzech Republic were handed awards by the Czech ministers. Thefifth annual "Industrial Zone of the Year" awards were presentedaccording to the recommendations of the Ministry of Industry &Trade and CzechInvest in cooperation with the Association forForeign Investment (AFI) and partners in the "Partnership toSupport Foreign Direct Investment in the Czech Republic".
The award for Industrial Zone with the Most EconomicBenefits was given to the "Cernovicka terasa" IndustrialZone in Brno, while the Zone with the Most Social Benefit in2004 was the Ostrava Hrabova Industrial Zone - 1st Stage. TheIndustrial Zone with the Best Town Planning Solution is beingprepared by a private developer in Ostrava -- CTPark Ostrava,and the "Brownfield of the Year" was won by the Skoda PlzenIndustrial Zone.
Brno is a city that is going places. All indications stronglypoint that way.
But let's see some numbers. What are flats currently going forin Brno and what could we expect for rental income?
Studio apartment (1 + 1). Seven minute walk to main town square.One minute walk to trams and biggest park in the downtown Brnoarea. Newly renovated apartment in a heritage building. Listedprice 750 000 CZK. Est. Rent: 8000 to 9000 CZK
Two bedroom (3 + 1) flat on Merhautova St. Completelyreconstructed. One minute walk to the trams. Balcony. 90 m2. Bigstorage space in the basement. Asking price 1 590 000 CZK. Est.Rent: 12000 to 13000 CZK
Three bedroom (4 + 1) flat in heritage building. Eight minutewalk to downtown square. One minute walk to the trams. Windowview of the biggest park in the downtown area. Newly renovated.Balcony off the master bedroom. Around 140 m2. Est. price 2 500000 CZK. Est. Rent: 14000 to 15000 CZK
At Czech Point 101 weare not going to hype you with inflated figures. All prices arebased on our analysis of living and working right here in theBrno market.
One of the most important things about buying investmentproperties is the neighborhood you buy into. We can advise onthe current 'hot' areas and those that will be getting attentionin the near future. Contact me at any time, for free, to getmore information about the Brno real estate market or startprogressing on investment properties now.
About the author:Nathan Brown is the owner of Czech Point 101, abusiness which helps buyers find their perfect home in the CzechRepublic and complete the purchase. Current projects in whichMr. Brown is directly involved include commercial andresidential property investments and a portfolio of individualand corporate business interests in Czech Republic and NorthAmerica.
