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Czech investment and development company Passerinvest Group is raising asking rents across all its office buildings at Brumlovka and Nové Roztyly in Prague.
The increase also applies to projects currently under preparation.
The company is introducing a uniform increase of €1 per sqm per month.
Passerinvest said the move is a response to changes in the interest rate environment and their impact on real estate project economics.
Higher Interest Rates Affect Project Economics
According to Passerinvest, the European Central Bank has raised its key interest rates repeatedly this year.
The company's financial model had originally been based on expectations of a gradual decline in interest rates.
The changed environment has an immediate effect on newly planned projects. Existing buildings are affected more gradually, particularly when their loans come up for refinancing.
Eduard Forejt, director of development and business at Passerinvest Group, said the company decided on a partial rent increase rather than passing on the full impact of the changed financial environment.
Company Seeks Long-Term Stability
Forejt said Passerinvest takes a long-term view of the economics of its buildings. The company aims to adjust project economics on an ongoing basis rather than respond with sudden rent increases in the future.
He also said stable and resilient project economics are important for the continued development and operation of buildings.
Passerinvest's business model allows it to consider development, ownership, operations and financing together when responding to changing conditions.
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Financing Costs Could Affect New Office Supply
Passerinvest also highlighted the wider impact of higher financing costs on the real estate market.
According to Forejt, increased financing costs can significantly affect the economics of planned projects and may lead to construction delays or project reassessments in some cases.
He noted that the availability of new office space remains limited. A significant share of space currently under construction has already been pre-let.
In this environment, weaker economics for new projects could contribute to a shortage of genuinely available new office space, according to Forejt.
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Passerinvest Develops Brumlovka and Nové Roztyly
Passerinvest Group was founded by Radim Passer in 1991. The company has been primarily associated with the Brumlovka district in Prague 4.
Passerinvest is also developing the Nové Roztyly area. The district includes the completed Roztyly Plaza office building and the planned Sequoia office building.
The Sequoia project forms part of a broader transformation of Nové Roztyly into a mixed-use urban district.
The company continues to develop and operate its portfolio while adjusting its approach to changing financing conditions.
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