Prague Research Forum announced office market figures for the fourth quarter of 2021. The members of the Prague Research Forum – CBRE, Colliers, Cushman & Wakefield, JLL, Knight Frank – share non-sensitive information intending to provide consistent, accurate and transparent data about the Prague office market. RICS supports the activities of the Prague Research Forum.
Office Stock and New Supply
Prague’s office stock remained at 3.73 million sqm at the end of 2021. The Viktoria Office Center building (1,700 sqm) of CTR Group was the only building completed in Q4 2021. During the entire year of 2021, 56,000 sqm of office space in eight buildings was delivered to the market, which is 62 percent less than in the previous year. The completion of only nine office projects with a total area of 76,300 sqm is expected in 2022, followed by another 140,000 sqm planned for 2023, assuming the developers meet their scheduled deadlines.
In Q4 2021, the construction of two office buildings commenced: Roztyly Plaza by Passerinvest (20,000 sqm in Prague 4) and Block Karlín by Ungelt (8,200 sqm in Prague 8). Throughout 2021, construction of 127,800 sqm started in eight office projects (12 buildings), almost three times more than in 2020. At the end of December 2021, 195,200 sqm of office space was under construction, 43 percent more than at the end of the previous year.
A-class buildings account for most of the modern office supply (73 percent), with the highest quality AAA-class space accounting for over 17 percent of the total office stock.
The total volume of space immediately available to sublease reached 78,700 sqm in Q4 2021, 27 percent more than in the previous quarter.
Gros take-up (including renegotiations and subleases) totalled 106,000 sqm in Q4 2021, representing a 6 percent year-on-year as well as quarter-on-quarter increase.
The highest gross take-up was recorded in Prague 4 (24 percent), Prague 8 (20 percent) and Prague 5 (18 percent). Companies operating in IT (22 percent), professional and consulting services (14 percent) and finance (10 percent) accounted for the highest demand.
New leases of existing space and expansions accounted for 48 percent of the total gross take-up, while pre-leases of new offices under construction accounted for only 7 percent. Renegotiations of existing contracts represented another 44 percent. The remaining 1 percent is comprised of subleases of already leased space.
Gross take-up for the whole year of 2021 increased by 16 percent compared to the previous year to the level of 387,100 sqm. Most spaces were leased in Prague 4 (22 percent) and Prague 8 (18 percent). The highest interest among tenants came from IT companies (16 percent) and professional services (12 percent).
Major Office Leasing Transactions
The largest transaction in Q4 2021 was the renegotiation of the lease to Thales DIS Czech Republic in BB Centrum (4,400 sqm). The other two significant transactions were the pre-leases of space in PORT 7 by the insurance company Direct pojistovna (4,200 sqm) and the co-working operator Scott.Weber (3,800 sqm).
Office Vacancy and Net Absorption
Net Absorption represents the change in the occupied stock within a market during the survey period. Compared to the previous quarter, the occupied office stock increased by 6,100 sqm. However, year-on-year absorption was negative: the occupied office stock declined by 12,800 sqm.
The vacancy rate decreased slightly from 7.9 percent in Q3 to 7.8 percent in Q4 2021. The vacant space totalled 292,700 sqm at the end of the quarter. The highest amount of vacant space was in Prague 4 (71,400 sqm) and Prague 5 (51,200 sqm). The lowest amount of vacant space was recorded in Prague 2 (9,800 sqm) and Prague 10 (8,600 sqm). However, the highest vacancy rate was in Prague 3 (14.9 percent) and Prague 9 (14.6 percent), the lowest in Prague 7 (4.8 percent) and Prague 10 (5.8 percent).
The prime headline rents increased in Q4 2021 and ranged between €23.50–24.00 per sqm per month in the city centre, €16.00–18.00 per sqm per month in the inner city and €13.50–15.00 per sqm per month in the outer city.
Rising construction costs are also reflected in fit-out contributions and other incentives.