The amount of office space currently under development in Prague is higher than ever. 136,000 sqm was completed in 2017 and an additional 165,000 sqm of modern office space should be delivered to the market in 2018. This is the highest development rate since 2008. Despite that, the vacancy rate has dropped to a record low 6.2 percent. This is a year-on-year decrease by more than 3 percentage points. This should change, however, with seven new office buildings due to be completed this year.
The office space volume has grown year-on-year by just under 4 percent to 3,357,500, sqm. Almost 39,000 sqm of office space was completed in the first quarter of 2018, the highest figure for the first quarter in history. As much as 41 percent of the new office space had already been pre-leased before completion.
The development activity has been the strongest in Prague 4, 5 and 8, the municipal districts that have been at the top of the statistics for a long time, offering the best opportunities for developers. This is also confirmed by the fact that 90 percent of stock in these districts is attributable to Class A buildings. By contrast, up to 50 percent of buildings in Prague 1, where space for new development is limited, are Class B. The completed projects include the Visionary (20,500 sqm) in Prague-Holešovice, the City West A1 (9,300 sqm) in Stodůlky, the Nekázanka 11 (5,600 sqm), and the Mango Building (3,300 sqm) in Prague 1. At the end of Q1, Prague offers 2.6 million sqm of new office space, including 790,000 sqm of Class A office space in Prague 4.
Out of the total 334,000 sqm of office space in the pipeline, a half of the projects now under construction should open this year, including the ČSOB headquarters in Radlická and the Trimaran in Michle. The Dynamica on the premises of the former Walter factory opened in June.
Despite the high volume of office space delivered in 2017 and Q1 2018, the office vacancy rate is at a record-breaking low of 6.2 percent. The positive absorption is continuing into the third year. Vacancy has decreased in almost all parts of Prague, with Prague 2 in the lead (3.6 percent). Conversely, Prague 3 has traditionally been a municipal district with some of the highest vacancy rates in the office sector (11.1 percent).
“Considering the continued strong take-up, we do not expect the vacancy rate to grow significantly in 2018 despite the attractive additions of new buildings,” says Radka Novak, Head of the Office Agency Team at Cushman & Wakefield.
