Passerinvest responds to a change in the interest rate environment. It is increasing its asking rents by 1 EUR per square metre per month

The Czech investment and development company Passerinvest Group is adjusting the asking rents in all its office buildings in Brumlovka and Nové Roztyly, including projects under construction. In response to a further change in the interest rate environment, it is introducing a rent increase of 1 EUR/sqm per month across the board. This is a partial adjustment, not a full projection of the change in financing costs into the rent.

This year, there have been repeated increases in the key interest rates by the European Central Bank, whereas Passerinvest’s financial model was based on the originally announced assumption that these rates would gradually fall. So, the situation has changed compared to the original expectations and with it also the environment in which buildings are financed and developed. For new projects currently in development the change in the interest rate environment has an immediate effect on their financial viability, whilst for existing buildings the impact is gradual, especially in connection with their refinancing. Nevertheless, thanks to its long-term approach to ownership and development, Passerinvest is continuing to plan and carry out other projects.

“As a long-term owner, we cannot view the financial performance of our buildings only through the lens of the present. Our objective is to adjust the financial structure of our projects on an on-going basis so that we do not have to respond to sudden changes in rent in the future. That is why we have decided to make a partial increase of one euro per square metre per month. However, we are not passing on the full impact of the change in the financial environment to the rent. If we want to continue constructing and operating buildings in the future, the financial aspects of our projects need to remain stable and resilient in the long term. Fortunately, our model allows us to look at development, ownership, operation and financing as a single unit and, if necessary, to respond in good time, as is the case here,” says Eduard Forejt, Director of Development and Sales at Passerinvest Group, a.s., who adds:

“The higher cost of financing is a significant factor for the entire property market. Generally speaking, it can have a major impact on the financial viability of projects that are in development and, in some cases, it can lead to construction being postponed or reconsidered. In a situation where the availability of new office space remains limited and a significant proportion of the supply under construction has already been pre-let, a worsening of the financial viability of new projects may exacerbate the shortage of new space that is actually available.”