Uncertainty surrounding the permitting process is dampening demand for development land—developers are waiting for both investors and tenants
Five or more hectares, at least 20,000 square meters of buildable area, and a valid building permit. This is the most common profile of demand for development land in the Czech Republic. However, according to the real estate consulting firm 108 REAL ESTATE, other requirements and conditions in this market segment have changed year-over-year. Developers are no longer buying land for future projects but are now purchasing almost exclusively to meet the specific needs of individual tenants or end owners. The traditionally most attractive locations around Prague, Brno, and Plzeň have been joined by regions associated with announced major investments—for example, the Cheb area, where Mercedes-Benz plans to build a large logistics center for spare parts. According to 108 REAL ESTATE, buyer interest is also focused on areas near newly constructed highway sections, particularly the D6 and D35.
However, in addition to a good location, a valid permit is particularly important. Large plots of 4 ha or more are practically unsellable without a permit. And even for smaller plots, the absence of a project permit reduces the price by up to half. This represents a significant amount of money: the average price of medium-sized industrial plots has reached 95 EUR/m², which represents an increase of approximately 25% over three years. In Prague and the surrounding area, however, prices often exceed 250 EUR/m². “Demand is high, but there are few plots ready for development. No one knows what will happen to the permitting process following further amendments to the Building Code. The risk of further delays or even a complete halt is significant; therefore, the vast majority of plots being traded are those for which this process has already been successfully completed,” notes Michal Diviš, Head of Investment at 108 REAL ESTATE, whose team trades approximately 700,000 m² of development land annually.
“Built-to-suit” projects—that is, construction for a specific tenant or future owner—were the dominant driver of interest in development land in the Czech Republic during the first half of this year. Developers’ interest in land for speculative development—that is, industrial construction without a known user—has dropped to a minimum. This makes a valid project permit, or at least compliance with the zoning plan, all the more important.
According to the 108 REAL ESTATE team, the real estate market in the first half of this year has been affected by the unsatisfactory state of the permitting process, which has persisted since the summer of 2024. The stated monthly deadlines in building permit proceedings are not being met—not least because it often takes up to a year before the relevant building authority even gets around to reviewing a submitted application for a project permit. “We commonly encounter situations where, before the authority even initiates proceedings—or during the proceedings—the developer’s approvals from utility providers and other relevant agencies expire, as these are typically valid for only twelve months. As a result, the entire process is disproportionately prolonged and made more expensive precisely because of the authority’s inaction,” Michal Diviš describes this disheartening experience.
Investment experts are thus looking with great uncertainty toward another proposed amendment to the (new) Building Code, which would transfer building authority staff to the state administration and centralize them. They see the main risk primarily in staffing and professional capacity, which are already insufficient. A more significant reduction in the number of building authority staff could slow down the entire permitting process even further. The available draft amendments also do not provide for enforcement mechanisms or any form of penalty for a building authority if it fails to meet the deadlines set by law. Yet guaranteeing that deadlines—including those set by law—are met is crucial to resolving the dire situation in the building permitting process.
On the other hand, according to 108 REAL ESTATE, a more positive change to building law could be making it easier to remove high-quality land from the agricultural land fund—but exclusively in connection with highways and first-class roads. “A distance of five hundred meters to a maximum of one kilometer from a transportation structure makes sense for the location of an industrial facility. In our view, heavy traffic is incompatible with high-quality agricultural land. Conversely, it is crucial for the siting of industrial facilities. Environmental impacts are also concentrated and thus mitigated,” says Michal Diviš. According to his team, the proposed changes to building legislation should help speed up the permitting process and other procedures when locating a facility on a so-called brownfield site.
The overall situation in the development land market in the first half of this year is characterized by caution and a wait-and-see attitude. There is a relative abundance of land with approved permits that is awaiting a specific tenant or investor. Owners in regions targeted by strategic investments will have an advantage; this applies, for example, to the planned “Gigafactory,” which the Czech government is also seeking to build as part of a European competition.
Unlike other segments of the real estate market, the industrial real estate segment is not affected by the cost of construction work or materials. The projects backed by 108 REAL ESTATE remain at a similar level in terms of construction costs as last year.