News Article Blanka Vačkova Bratislava Bucharest Budapest CEE iO Partners office Prague
by Property Forum | Office

Higher construction costs and the unfavourable economic situation in Europe are impacting the future development of new offices in the region, especially in capital cities like Prague, Bratislava, Budapest and Bucharest.

Data by iO Partners shows that year-on-year, there was a decrease in gross take-up in Prague (by 34%) and Bratislava (by 23%), whereas it rose in Budapest (by 34%) and Bucharest (by 95%). 

At the same time, all four markets featuring modern office real estate experienced a year-on-year increase in vacancy rates. Prague showed the lowest vacancy rate (7.4%), while Bucharest had the highest percentage of unoccupied offices at 14.5%. The vacancy rate in Bratislava and Budapest surpassed 13% in Q3 2023.

The agency points out that in Prague and Bratislava in 2025, there is an anticipation of insufficient availability of new office space, with the Prague office market witnessing no new office development launch in the last 15 months. 

In Bratislava, the saturated office market is another factor that is influencing the development pipeline. Based on the latest figures there is no new office building to be delivered in 2024 and for 2025 currently there is to date only 10,000 sqm under construction.  In the years 2026 and 2027, the supply will begin to approach the 10-year average, which is at 60,000 sqm. 

Meanwhile, in Bucharest, low net take-up, subleases due to hybrid work adjustments and high vacancy rates are the main factors constraining new construction. In Budapest, around 280,000 sqm of new offices are under development with more than half slated for delivery in 2024.

 “CEE office markets are currently facing a problem of slowing net demand which is stemming from higher rental and fit-out costs, adjustments to hybrid work and overall economic uncertainty. Another challenge is postponing new construction. Even though the CEE markets have registered an increase in office rents over the last years, high cost of finance and construction, combined with rising yields deteriorated economic side of the project to the extent that it is not feasible to commence a construction of new offices,” said Blanka Vačkova, Head of Research, Czech Republic at iO Partners.

Vačkova added that in Prague, Bratislava, Bucharest or Warsaw, the current levels of development are very much below pre-Covid years.