Prague Research Forum announced office market figures for the second quarter of 2023. The current members of the Prague Research Forum – CBRE, Colliers, Cushman & Wakefield, iO Partners, Knight Frank and Savills – share non-sensitive information intending to provide consistent, accurate and transparent data about the Prague office market.
Radana Williamsova, Associate Director of Office Agency, Colliers, comments: “Over the past 12 months, the Prague office market has shown signs of stagnation with no new projects initiated. Vacancy rates have been slowly decreasing due to limited new supply compared to the absorption of office space, pointing to a potential shortage of high-quality offices for lease.
Lower office vacancy rates, rising interest rates and rising construction costs have caused rents, which have been relatively stable over the past 10 years, to rise significantly in recent months. We expect that this trend may continue in part of the market.
Some businesses are re-evaluating their office needs, aiming to reduce space while fostering collaboration and face-to-face interactions to encourage employees back to the office.”
Office Stock and New Supply
The total size of modern office stock in Prague remained at 3.85 million sqm in Q2 2023. No office building has been completed and there has been no construction commencement within Prague. However, another seven office projects totalling approximately 66,800 sqm of office space are scheduled for completion by the end of 2023.
Around 143,600 sqm of office space was under construction in the second quarter of 2023. The majority of this space is located in Prague 1 (26 percent), Prague 10 (20 percent) and Prague 5 (19 percent).
Most modern office inventory (74 percent) consists of class-A buildings, with the highest quality AAA-rated space accounting for 17 percent of the total office stock.
Office Take-up
Total gross take-up (including renegotiations and subleases) reached 148,800 sqm in the second quarter, representing an increase of 23 percent year-on-year and an increase of 10 percent quarter-on-quarter.
The highest gross take-up in the second quarter was recorded in Prague 4 (41 percent), followed by Prague 5 (16 percent) and Prague 1 (14 percent). The highest demand for offices was realised by technology (42 percent), financial institutions (9 percent) and pharmaceutical companies (7 percent).
New leases of existing space and expansions accounted for 41 percent of the total gross take-up, while pre-leases of new offices under construction accounted for 4 percent. Notably, renegotiations of existing contracts represented a significant share of deals at 53 percent.
The remaining 2 percent accounted for subleases of already leased space.
Major Office Leasing Transactions
The largest transactions in the second quarter of 2023 were renegotiations of DHL Information Services (18,000 sqm) at The Park in Prague 4 and Microsoft (16,100 sqm) at Delta building in Brumlovka in Prague 4. The largest new lease was signed by Sandoz at the Enterprise building (5,700 sqm) in Prague 4.
Office Vacancy and Net Absorption
Net absorption reflects the change in occupied office space on the market over a given period. The occupied office space increased by 13,600 sq m compared to the previous quarter.
The office vacancy rate decreased from 7.6 percent in Q1 2023 to 7.3 percent in Q2 2023. The total vacant office space at the end of the second quarter reached 279,600 sqm. The highest vacancy was registered in Prague 4 (53,800 sqm) and Prague 5 (50,700 sqm). The lowest vacancy was reported in Prague 10 (7,700 sqm) and Prague 2 (8,700 sqm).
The highest vacancy rates were recorded in Prague 3 (20.4 percent) and Prague 9 (14.4 percent), while the lowest was in Prague 8 (3.9 percent) and Prague 10 (5.0 percent).
Rents
Prime rents stabilised in the second quarter of 2023, ranging at levels around €26.50–27.00 per sqm per month in the city centre, €17.75–18.25 in the inner city and €15.00–16.00 in the outer parts of the city.
In addition to rents, the increasing construction costs are now reflected in the total volume of fit-out contributions or other forms of incentives provided by landlords.
