Robert McLean – witness to great change in region’s construction and real estate businesses

Robert McLean is editor-in-chief of the Central and Eastern European Construction and Investment Journal, a publication he helped set up in 1995. He had already been living in Prague for some years at that point, having “caught the bug” while reporting from the region in the late 1980s. When we met at his office on Wenceslas Square we discussed how the construction industry here has changed in the last two decades, and whether property in the Czech Republic represents a good investment. But I first asked McLean what had drawn him to the field of building and real estate.

Robert McLean

“I worked at first for an English-language newspaper called Prognosis, that started up I guess at the end of 1990. I worked there for most of the time, with some breaks. I also got a job as a stringer for [news agency] UPI, as that company was sort of fading in Europe.

“At some point I ran into my business partner, his name is Robert Fletcher. He was more on the sales side of things, but when we were looking at we could do, what our skills were, we came up with the idea of doing a magazine.

“There seemed to be a hole in the market, in terms of real estate and property development, certainly in the Czech Republic and Slovakia. It just started with the idea of doing a magazine, essentially.”

This is a big question, but I’m sure you’ve seen a lot of changes in 15 years in this area. What have been the main developments in construction in the Czech Republic?

“That’s a huge question, obviously…Probably the commercial real estate industry started, I’d say in about 1993, 1994, with the construction of the IBC, over by the river in Prague 8. It started very slowly picking up. You had buildings like the Myslbek office building, which I think was completed probably around ’96 or ’97.

“It was a very slow process at first of starting to build modern office space. You then started getting very slowly logistics and industrial centres; that and all the shopping malls and retail developments.

“If you were here in the early 1990s you’ll remember what eastern Europe used to look like – that’s obviously been completely transformed. The entire region has been ‘malled’ as it were, it’s covered with malls.

“There’s now a couple of million square metres of office space just in Prague. Around the country once the mortgage market got going for consumers there was an entire housing boom that began probably about 2000, that really started taking off as well.”

On the subject of shopping malls, I was reading a couple of years ago that there were more per head in the Czech Republic than in elsewhere in the region. Why would that be, do you know?

“It probably depends on what city. It’s a city to city thing. I mean Prague at this point has just about all the malls it can take. If you’re looking regionally, it’s certainly still ahead of countries like Romania or Bulgaria. With Hungary it’s probably more about the fact that Hungary has small cities…

“I think the Visegrad countries – the Czech Republic, Slovakia, Poland and Hungary – are all roughly at the same level. I think they often compare themselves to western Europe, and the argument has always been that there are somewhat lower figures in that way.”

I know a few years ago that a lot of companies from for instance Israel, Italy and other countries were buying up whole apartment buildings in Prague, and maybe elsewhere in the Czech Republic. Is that still happening?

Photo: archive of Radio Prague

“There was a huge boom in that, probably in the early part of the 2000s, 2003, 2004. And you’re right, there was a lot of Italian buying in the Old Town. The Israeli investors to my knowledge were going more after developments. They were taking entire plots of land and building apartment buildings or apartment complexes on them.

“To a certain extent I think a lot of the downtown has been bought up already. That’s been done, they’ve been renovated…some of it is going on still, but I think the big wave of that is over. We’re more into larger scale, classic apartment complex construction.”

I’m assuming a lot of people would have less money to invest today than they would have had a couple of years ago. But in any case is investment in property here still worthwhile? Is it still good value?

“I suppose it depends a lot on why you’re investing. I think the whole idea of investing in real estate now as a consumer or as an individual is probably for the time being passé. It’s more difficult to get financing for it.

“There was an entire demographic of UK citizens and Irish people coming over and investing, just because they figured they could get 10-, 15-percent returns on their investments per year.

“If that’s what you’re looking for in an investment, I’d say those days are over. Maybe they’ll come again, but that’s almost a generational thing. There are very few people who would see that coming again.

“I think at this point if you want to invest, you have to be very careful. If it’s purely for an investment, you’ve got to make sure you can rent it out. It’s a whole lot trickier. I think it’s very easy to make mistakes these days.”

Recently the Czech National Bank said that flats here are possibly overpriced. Is that the case, do you think?

“That’s the 60 million dollar question. It’s true that developers have been hanging on to their original prices, tooth and nail. They don’t want to give up the prices that they originally borrowed money on. They had certain expectations when they went into the project and they really want to stick to that.

“As far as I know, most of the estimates are that values fell between 5 and 10 percent, maybe even 15 percent. That really may not be enough in all cases. There have been cases of developers who tried to auction some of their flats off and they’ve been very disappointed with the results. Sometimes even with a discount of 30 percent they’ve been unable to sell.

“At this point it’s very much on a case by case basis. I would say for sure there are still apartments out there, maybe even entire developments, where they’re still going to take a haircut. The value’s still going to fall.”

Finally Rob, if I could ask you about your own business. Obviously media is taking a battering internationally. But is the kind of specialised information that you sell a relatively safe area of the media?

“I think the market for quality information is always going to be out there. In a way I think the riskier times become, the more good information has value. All businesses are finding out now that you can’t just count on doing the same old same old. You need to figure out how to adapt what is you do and look for new types of activities and think up new ways of producing new information or services for your customers.

“It’s a classic thing, maybe even a cliché, but you always have to be ready to transform part of your business as you’re going, just to keep up with the new requirements and needs of your customers.”