Central Group has backed away from its planned construction of 200 luxury flats in Nuselská mlékárna, a former dairy in Nusle. The developer was to pay CZK 177 million to acquire the more than 7,500 sq m lot in Prague 4. “Having weighed the project’s pros and cons, we’ve now decided to withdraw from the contract,” company chairman Dušan Kunovský has confirmed for daily E15.
Nuselská mlékárna was to be Central Group’s first redevelopment of a former industrial complex. The company announced plans to buy the site last autumn and estimated the total investment at CZK 800 million. “Now we have decided to focus on the redevelopment of other sites, including brownfields that could yield more flats,” Kunovský says. “Nuselská mlékárna is too small for us.”
The developer will not share other reasons for the sudden change of plans. One explanation might be that the cost of the cleanup and revitalisation would make the project too expensive.
“Developers decide whether to buy a brownfield based mainly on the location, acquisition price, degree of environmental damage and the property’s potential for generating revenue,” says Jiří Volf from real estate consultancy King Sturge. “There are not many sites that would meet a developer’s expectations in all these aspects.”
In some locations, the price of land has slightly declined in the last two quarters, Volf says. “The sellers had to revise their unrealistic price expectations created during the times of an investment boom in 2007.”
Still, the disappointment at Nuselská mlékárna has not discouraged Central Group from plans to revamp other defunct industrial sites. “We still want to engage in brownfields, as we can see a big potential in them. Their revitalisation does not meet as much hostility as greenfield construction,” says Kunovský. He adds that his company is currently in talks to buy a brownfield in Prague’s Vysočany neighbourhood.