Brno Property - Examples and Trends

In looking through our files recently I came across a clipping from a June 2005 real estate magazine that really served to prove what the market has done in Brno over the last two years.

From one of the two large real estate magazines, Grand Reality, it is a clipping that listed the average CZK/m2 of the listed properties in the magazine for each district of Brno. They only actually did this for a few months and then stopped, probably from complaints of those whose prices were above the average. In fact, after we noticed they stopped running this feature, I personally went into their head office to see if we could still somehow get this information. However, they informed me that it was definitely no longer available. Too bad!

From this clipping it is possible to see that in June 2005, the average CZK/m2 for Brno across flats in all districts was around 21 000. This is the listed price although the actual sale price would not differ greatly.

What is happening in June 2007?

If you look in the same real estate magazine now, it is difficult to find anything under 30 000 CZK/m2. In any district close to the center, prices are from 32 000 CZK/m2 to 36 000 CZK/m2 based on the size of the flat. The smaller studios have seen the biggest price increase. In fact one developer told us that the last small studios (around 30 m2) they sold in their most recent development for 52 000 CZK/m2.

Using a conservative CZK/m2 of 30 000 for June 2007 and a June 2005 figure of 21 000 we get an annual increase of around 19 to 20% over all types and sizes of flats, including Communist style 'panelaks'.

Some developers have been caught as they list their new build construction for a certain CZK/m2 that they probably used in their initial project calculations. Soon after they advertise these prices, the volume of interest makes them reassess and they move their figures upward.

While we were negotiating on one project for a client, the developer moved their CZK/m2 up three times over a two week time scale. Each jump was in the range of 2000 CZK/m2.

Does the market show signs of continuing to keep this trend?

The market seems to show no signs of cooling although recently a large number of new build projects have been advertised.

Brno also continues to see a large influx of foreign workers from Romania, Bulgaria and India as local tech firms (IBM, Siemens, Symbol Technologies, Infosys, etc.) find that the Brno tech university is not pumping out enough graduates to fill their hiring needs.

This is putting pressure on the rental market and, we expect, will also pressure the apartment sale market in one to two year's time.

The city of Brno has won the competition for European City of the Future for both 2004/2005 and 2005/2006 which is organized by the prestigious FDI magazine, a Financial Times publication, in the category of Visegrad group cities. It even beat out Prague, Budapest, Warsaw and Bratislava in this category.

What was said in 2004/2005: "Brno’s fast economic growth and high GDP-per-capita helped to push it ahead of other cities in the region. The judges also gave top marks for its economic potential and recent FDI deals involving UK-headquartered engineering firm IMI International, US technology group Honeywell and US advanced engineering company Danaher Motion, which between them created 900 jobs. Brno also scored well for its international promotion strategy and incentives.”

What was said in 2005/2006: "Brno, the Czech Republic’s second largest city and economic centre of the Moravian region, has seen rapid and sustained economic growth in recent years, averaging more than 9% a year for the past decade. Brno pulled ahead on economic development strategy, scoring top marks for investment promotion, clear incentives and public investment projects. It also ranked top for IT and telecommunications." Click here to read the full article.

Swiss company Aguna chose to build their new plant in Brno. The company intends to invest almost 250 million crowns during the first two years. They will be able to employ at least 80 people in production and development of precision instruments. A large part of the employees will be college-educated specialists.

“The quality level of the work force was the deciding factor for Aguna."

"Their representatives are convinced that they will find engineers in Brno who are just as capable and qualified as in Switzerland,” said Tomáš Bohrn, Project Manager at CzechInvest, and added: “This precision engineering project demonstrates the huge potential of Brno as well as the South Moravian region to attract technically advanced engineering R&D investments.”

Daikin Industries Ltd. is a world leader in the production of modern air-conditioning equipment. After the double-billion investment in Plzen, the Daikin company has decided to build a new factory for the production of compressors into air-conditioners in Brno. In the first stage, the company intends to invest 1.2 billion crowns and to create more than 500 skilled jobs.

“Our decision to invest at first in Plzen and now also in Brno is strategic and very important for the future. The Czech Republic should become the important base for our production for the fast-growing markets of the European Union,“ says Jiro Tomita, General Manager of Daikin Europe, and continues: “The factory in Brno will deliver compressors to our subsidiaries in Plzen and in Oostende, Belgium. It is the compressors that are the most important part and 'heart', which secures the functioning of air-conditioning units."

Symbol Technologies launched operation of their new centre in Brno for shared customer support and financial services for Europe, the Middle East and Africa (EMEA). Symbol Technologies has already invested more than seventy million Czech crowns into technological equipment and within three years plans to set aside another almost half a million crowns for wages, training and operation. The centre will initially employ 200 people and this number is expected to increase by another 550 employees.

“We chose Brno for several reasons, namely the good offer of qualified labour, a good site and the good position of Brno in proximity to Symbol’s existing centres and customers in Europe,” said Steve Priestley, Vice President and General Manager of Symbol for EMEA. “By concentrating repair, customer call support and administration of finances, contracts and orders into one European centre we will be able to improve the overall standard of our services and keep it at a high level for the long-term.”

Austrian-German producer of health care and hygienic products Lohmann & Rauscher announced publically the end of December, 2004 that they will build their new plant in South Moravia. The company is investing more than 41.5 million euros into expansion and modernization of its production facility here and will create over 160 new job opportunities.

“While the company in Germany concentrates on a selected part of health care products like plaster casts and bandages, we are gradually 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 be launched within two years and the main customers will be the European subsidiaries of Lohmann & Rauscher,” said Rudolf Vonys, procurator of Lohmann & Rauscher s.r.o, and added: “Our final customers are health care facilities all over Europe, for example German, French and Austrian hospitals and Dutch, Swedish and Italian pharmacies.” 

Japanese Company Ohmori Technos Corporation has decided to build a new factory in the area of Brno. At the outset, the company will invest about 15 million euros.  Estimations suggest that at least 150 new positions will be provided in the Brno area.  Production in the new plant is scheduled to start by the end of 2006.  

“Today, the Czech Republic is known as the center of industry in Europe. In fact, a broad range of Japanese companies have successfully established their plants in the country. Assessing these 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, has officially committed, as of the end of February 2005, to opening a new shared services centre in the Moravian side of Czech Republic. The new centre, which will be located in Brno, will assist customers of Central and Eastern Europe. It is expected to employ up to 100 people. This tenth call centre for Lufthansa, named Global Telesales Brno s.r.o., will start operations on June 1st 2005.

“Central and Eastern Europe is a strategic market for us where we plan in the coming years to double the volume of our activities,” commented Stephan Semsch, Lufthansa’s Director for Central and Eastern Europe, and added: “We thoroughly assessed 30 possible localities in total and ultimately chose Brno for its strategically favourable position within the region and its proximity to the important airline hubs of Munich and Frankfurt. Other great advantages of the Czech Republic are its membership in the EU, quality telecommunications and technical infrastructure and the motivated, qualified and cost-effective work force.”

Daido Metal, producer of bearings for the automobile industry, signed an agreement on future agreement on the purchase of land with the city of Brno today to build a new production plant. The investment of Daido Metal will amount to nearly 13 million euro and the plant will employ up to 100 persons in the first stage. The production should be launched at the beginning of next year.

“The Czech Republic has a very strong position in Europe in the automobile sector and even many of our clients have their production plants here. The production of our Czech plant will cover the demand generated both in the Central European countries and on the entire continent,” says Issei Yoshida, Managing Director of Daido Metal Europe.

“Our Czech branch, Daido Metal Czech, will be the first company within the entire group to operate fully independently, without a strategic partner from the same field. The only partners in the Czech Republic will be the locals, in particular in the area of technical engineering and development, We also intend to cooperate 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 will opened a new service center, with a related call-center for customers in Europe, Middle East and Africa (EMEA). The Acer shared services centre opened on July 1st in Brno, within the industrial complex Cernovická Terrace and is expected to provide at least 60 new jobs.

“We have been experiencing great market growth in the last two years in the countries of Europe, Middle East and Africa. The new centre will replace the current solution, where customer service is being provided via external service providers,” stated Stefan Engel, Region Manager North + Central Europe and added: “Our goal is to provide even better support to all countries involved in their native language and double the staff within one year.”

GigaByte Technology, a producer of computer components, is building a high-tech repair centre in Brno - Cernovicka Terasa where customers from all over Europe will send their laptops, graphics cards and motherboards. 25 million CZK is being invested with a projected 50 employees being required.

GigaByte Technology chose the Czech Republic over the other Central European countries, including Hungary, which was the Czech Republic’s main competitor. Brno won mainly owing to its quality infrastructure and sufficient, qualified work force.

The service centre will be built in Brno despite the fact that the company will not be receiving government investment incentives. Its executives thereby confirmed that Czech Republic has a lot to offer foreign investors.

Progeon Ltd, a leader in third party outsourcing in India, has completed its first phase of its project in Brno. The company currently employees 80 people in its downtown Brno office and provides process management services in sixteen European languages. Future growth plans will eventually offer career opportunities for hundreds of people from Brno and the surrounding area.

“The Czech Republic is an attractive destination for companies like ours that hope to reach a wide European market,” said Akshaya Bhargava, managing director and CEO, Progeon Ltd. “Brno has excellent infrastructure and facilities, a supportive government, and people with multiple language skills.

The best quality and most beneficial industrial zones in the Czech Republic were handed awards by the Czech ministers. The fifth annual “Industrial Zone of the Year” awards were presented according to the recommendations of the Ministry of Industry & Trade and CzechInvest in cooperation with the Association for Foreign Investment (AFI) and partners in the “Partnership to Support Foreign Direct Investment in the Czech Republic”.

The award for Industrial Zone with the Most Economic Benefits was given to the "Cernovicka terasa" Industrial Zone in Brno, while the Zone with the Most Social Benefit in 2004 was the Ostrava Hrabova Industrial Zone - 1st Stage. The Industrial Zone with the Best Town Planning Solution is being prepared by a private developer in Ostrava -– CTPark Ostrava, and the “Brownfield of the Year” was won by the Skoda Plzen Industrial Zone.

ADC (NASDAQ:ADCT)(www.adc.com), on January 19, 2006, announced it's opening of a new manufacturing facility in Brno, Czech Republic. The facility is to supply ADC's products, including copper and fiber networking, to ADC's Europe/Middle East/Africa customers. To date the facility employs 45 people but by the end of 2006 over 200 people could work here.

"This new location gives ADC several advantages going forward," said Mary Quay, vice president of global operations for ADC. "First, the Brno site moves us to a more central location to better serve our widespread carrier and enterprise customers based in the EMEA region. Secondly, the Czech Republic offers a highly skilled, low-cost labor force, which means we can grow efficiently as the EMEA market continues to expand. Finally, we are able to consolidate our labour intensive operations, formerly conducted in several locations, to the Czech Republic, lowering our overall costs of doing business."

K. Hartwall (www.k-hartwall.fi), of Finland, is in the final stages of purchasing land near Brno for its new production plant. At the initial opening the plant is expected to employ 50 people but at full capacity, 250. K. Hartwall supplies products to leading retail chains, dairy producers and logistics companies. Their clients include the logistics company DHL, food retailers Tesco and J Sainsbury, among others. The investment in the factory of up to 6,000 square meters is worth some E 2-4 million (CZK 56-113 million), Hartwall said.

“We chose the Czech Republic because we want to be close to our suppliers as well as to customers in the CEE retail market,” Hartwall said. (Read more at Czech Business Weekly)

Siemens (www.siemens.cz) launched a new 390 million CZK facility in Drasov, 15 km from Brno on May 17 2006. It will employ 150 staff to start with another 20 to 30 expected to be added by year's end. Siemens has 11 production plants in Czech Republic and employs about 14 000 people. (Read more at Prague Daily Monitor)

Andrew Corporation (NASDAQ:ANDW) (www.andrew.com) opened a new state-of-the-art factory in Slatina Brno for the manufacture of base station antennas. Customers to be supplied from this new facility include wireless operators in Europe, the Middle East and Africa (EMEA). The factory currently employs 50 people but has been designed with the capacity to triple production levels as the demand increases. This Slatina plant is Andrew's second Brno area plant as their also operate a cable and microwave antenna manufacturing facility in the Modrice area of Brno.

On why Brno is being chosen, Andrea Cassini, Andrew Corporation’s President of EMEA Sales and Marketing told an interviewer: “Brno offers us low labour costs but high efficiency. We are looking forward to making Brno a major focus for production. There has been little market share in the region to date.”

Further comments from John DeSana, Group President of Andrew’s Antenna and Cable Products Group contributed to this: “Our expanded manufacturing presence in Europe enables Andrew to offer high quality products, local engineering assistance, and experienced support to our many customers in the region…We have now further invested in this important market, where base station antenna customers can more easily visit our production facility.” (Read more at Developing Telecoms)

December 2006: The AMI Semiconductor's design center in Brno celebrated its 10th anniversary this year. AMIS's excellent experience in Brno has convinced the management of the company to expand their work force. The current 50 employees of its state-of-the-art IC center are expected to expand to 60 by 2009.

December 2006: Dutch firm Synthon plans to invest more than 250 million CZK in the conversion of its Brno area (Blansko) chemical plant to the production of pharmaceuticals by 2009. 25 to 30 high-skilled jobs in the pharmaceutical industry are then expected to be produced.

January 2007: Internationally renown open source company, Red Hat (www.redhat.com) from the US, has established a development center in Brno. It will be located in the area of the Masaryk University's Faculty of Informatics and will initially employ 207 specialists.

“Red Hat is pleased to choose Brno as a center of technological advancement for Red Hat solutions. We have chosen Brno because of the rich talent base,” said Paul Cormier, Executive Vice President of Engineering at Red Hat. “We are excited about the great potential for innovation and collaboration as this team integrates with our global engineering organization.”

Read full story at CzechInvest.

January 2007: Accenture (NYSE: ACN) (www.accenture.com) has expanded it's operations in Czech Republic to include another delivery center for European outsourcing clients. The new center if Brno is the sixth operating in Central and Eastern Europe. Accenture has another delivery center in Prague which it opened in 2001.

“We selected Brno for its proximity to our existing Prague and Bratislava delivery centers, as well as the region’s highly qualified workforce of talented information technology professionals who are fluent in multiple languages,” said Jozef Kokoška, managing director of Accenture’s Brno delivery center.

February 2007: IBA Group (www.iba-it-group.com) will expand it's development center located in Brno as an investment project being supported by the Czech Government. 50 jobs are estimated to be created for Brno IT professionals.

Commenting on the event, Sergei Levteev, IBA Group President, said: “The reasons behind the decision to invest in the expansion of the Brno branch are conducive business environment in the Czech Republic, the country's EU membership, and the growing interest in IT outsourcing of the European business community”.

April 2007: Infosys Technologies, an Indian company, has expanded its facility in Brno to provide extra IT service capacity. The center has 400 seats and offers 24-hour service in 20 languages.

April 2007: DSG International, owner of the Electro World retail chain, will open its financial center in Brno in the next two years. The center will employ 50 people from September 2007 and should increase to 200 within the two years.

May 2007: Psida, originally from the US, will hire 25 new top engineers over the next two years. The firm is on the cutting edge for the design, development, verification and testing of modern integrated circuits.

September 2007: DSG International (www.dsgiplc.com), owner of the chains Dixons, Dixons Tax Free, Currys, Currys.digital and PC World as well as the Electro World chain in Czech Republic, will move its financial center from the UK to Brno as of September 7. To start with the center will employ 50 but it should have 200 employees in a matter of two years. DSG International is one of Europe's largest electronics chains.

March 2008: IBA Group (www.ibacz.eu), a global IT service provider headquartered in Prague, is expanding its development center in Brno, Czech Republic. IBA Group is the largest IT service provider in Eastern Europe performing onshore, near-shore and offshore projects with more than 2,100 professionals. Within the project, IBA is planning to create 50 new jobs for Brno IT professionals, including local university graduates.

Property Description

Link

2007 Est. Rental

Studio apartment (1 + 1). Seven minute walk to main town square. One minute walk to trams and biggest park in the downtown Brno area. Newly renovated apartment in a heritage building.

2005 listed price: 750 000 CZK
2007 estimated price: 1 200 000 CZK
2008 estimated price: 1 400 000 CZK

Two bedroom (3 + 1) flat on Merhautova St. Completely reconstructed. One minute walk to the trams. Balcony. 90 m2. Big storage space in the basement.

2005 listed price: 1 590 000 CZK
2007 estimated price: 2 750 000 CZK
2008 estimated price: 3 200 000 CZK

Three bedroom (4 + 1) flat in heritage building. Eight minute walk to downtown square. One minute walk to the trams. Window view of the biggest park in the downtown area. Newly renovated. Balcony off the master bedroom. Around 140 m2.

2007 estimated price: 3 750 000 CZK
2008 estimated price: 4 400 000 CZK

More examples added when possible...please email us if the links become invalid...