Labor Shortages Are Changing Prague’s Real Estate Development: UBM Is Betting on Wooden Buildings

Austrian developer UBM in Prague has definitively abandoned hotel and office projects and is focusing exclusively on residential construction. This decision is driven not only by market preferences but also by a chronic shortage of construction workers and rising construction costs. The solution UBM is pursuing could even change the way buildings are constructed in Prague.

Why UBM Is Moving Away from Offices and Hotels

According to Josef Wiedermann, head of UBM’s Czech office, this is a purely economic decision—office projects have ceased to be profitable for the company under current market conditions, so it has shifted its entire Czech portfolio toward residential development. Its track record reflects this: following the sale of the last unit in the Neugraf project in Smíchov (a 50:50 joint venture with Crestyle) and the completion of 138 apartments at Astrid Garden, UBM is now building the Na Plzeňce Residence —160 residential units in Smíchov, where construction has already begun. Meanwhile, the company is actively seeking additional plots with building permits despite high costs and a labor shortage—it is betting that these conditions will persist for some time.

Labor Shortage: What Will Happen After the War?

Construction crews in Prague are increasingly made up of workers from Ukraine and increasingly distant countries, which creates language barriers that risk affecting the quality of work. It remains to be seen what will happen once the war in Ukraine ends—Wiedermann warns that the return of these workers to their home countries could paralyze the construction sector.

Wooden Construction as a Partial Solution

UBM is responding to this problem by shifting to wood-frame construction, which moves part of the work from the construction site to a controlled factory environment and reduces the need for workers directly on-site. A key factor was this summer’s change in building regulations, which now allows for hybrid (wood-concrete) construction up to a height of 22.5 meters (roughly seven stories) without requiring an exemption—making timber construction commercially viable in Prague. UBM’s next project will be built precisely according to these new parameters.

Despite rising costs and evolving technologies, the developer’s margins remain stable—Wiedermann states that they range from 15–20%, which corresponds to the risk profile of residential construction.

Source: ThePrime.cz