More expensive money, thinner margins: how rising financing is changing the game for developers

Czech commercial property developers are facing increasing pressure. The cost of euro-denominated loans has skyrocketed due to geopolitical tensions in the Middle East - while koruna loans have risen in price by about a fifth, euro-denominated loans are already almost a quarter more expensive. And it is in euros that the financing and sales of commercial development are largely denominated.

The problem is not just the level of interest rates. The margin between project yields and financing costs was already relatively low for many developers - and every upward movement in rates depresses it further. In practice, this means that projects that made economic sense not so long ago now have to be recalculated. Developers are adjusting their capital structure, bringing in more equity, and banks are being more selective - especially for projects without strong pre-leasing or pre-sales.

If the price of financing continues to rise, experts expect one logical outcome: upward pressure on rents. For commercial tenants, developments in the financial markets may not remain a distant economic abstraction.

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