Publication

Market in Minutes | Prague Office Market Q2 2019

OFFICE STOCK & SUPPLY

During the second quarter of 2019 Prague’s office market saw 51,800 sq m of new premises completed, bringing the total office stock in the Czech capital to 3.57 million sq m.

The largest development completed in Prague during Q2 2019 was the second building of the ČSOB HQ in the district of Prague 5 (30,000 sq m), which was built for owneroccupation. The remaining four projects were Praga Studios in Prague 8, Mayhouse in Prague 4, and refurbishments of Palác ARA and Na Poříčí 5, both situated in Prague 1.

Total supply in H1 2019 reached 80,000 sq m, showing a drop of 11% drop y-o-y.

New office premises covering a total of 254,300 sq m were under construction across the city. This included two buildings being developed for owner-occupation – J&T HQ in Prague 8 and the Prague 12 town hall located in Prague 4. In addition to these new developments, there were additional 65,400 sq m of offices undergoing refurbishment.

At the end of Q2 2019 Crestyl was the “busiest” developer in Prague, being behind 58,100 sq m of new office developments spread over three buildings. All are located in Prague 8, a district with the highest volume of new space under construction.

 

VACANCY

The city-wide vacancy rate edged up to reach 4.6% by the end of June, representing around 162,500 sq m of unoccupied office space.

Just as during the six previous quarters, the majority of these vacant offices are still found in Prague’s biggest office districts, Prague 4 and Prague 5.

Since the end of 2017 vacancy rate in Prague has not exceeded 7%. Over the past 12 months it declined by 230 basis points from 6.9% recorded in mid-2018, while during 2019 it did not even exceed 5%.

The increased amount of speculative space scheduled to come onto the market over the next six months could result in further marginal increases in the capital’s vacancy rate. This will become more apparent if new demand continues the downward trend observed in Q2 2019.

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DEMAND

Total leasing activity during Q2 2019 reached 100,600 sq m, which is slightly below the adjusted Q1 results. The cumulative gross take-up levels for the first six months of this year reached 211,600 sq m, indicating a minor year-on-year slowdown in office leasing activity.

Net take-up levels also showed demand for office space in Prague cooled. Activity recorded in Q2 2019 amounted to 50,600 sq m, which is the lowest level since Q1 2015 and 42% below the previous quarter’s figures. Total net leasing activity in the first six months of the year amounted to 138,500 sq m, 12% below the H1 2018 results.

The largest transaction of Q2 and also the first half of 2019 was the 17,500 sq m renegotiation of Clearstream Operations, belonging to the Deutsche Börse Group, at Futurama Business Park in Prague 8. Like the previous quarter, Prague 8 ended up being the most active submarket in the city.

Compared to the previous three quarters, leasing activity of coworking & flexible workplace operators slowed down in Q2 2019. Only one new commitment was signed which brought the share of this sector on the H1 2019 net take-up to almost 9%.

 

RENT LEVELS

Headline rents remained unchanged from the previous quarter. Prague city centre offers buildings of varying quality, ranging from some of the best premium grade buildings in town to older grade B premises. The highest-quality office units on higher floors in the city centre were being offered at €25.00-plus per sq m a month, but there were also modern units available for €16.50 - €20.00 per sq m a month.

Headline rents for modern office space outside the city centre and at more peripheral locations stayed in the range of €13.00 - €16.50 per sq m a month.

Incentives offered by landlords still typically amount to one month rent free for each year of the lease. Fit-out contributions generally reached €80 - €150 per sq m.

Monthly service charges for office space remained between CZK 85 - 135 per sq m in Prague 1, and around CZK 75 - 120 per sq m in other parts of the city.

Rents for parking in Prague 1 (city centre) were mostly charged at €160 – €290 per parking place a month and around €90 – €130 in the Prague districts.

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