The gross take-up in the Prague office market has increased by 41% in Q2 2022 compared to Q2 2021. The volume of office construction also increased y-o-y by 47%. Leasing activity was driven by IT companies and the rent gap between newly completed and existing buildings continues to widen, says the office market report for Q2 2022 published by The Prague Research Forum.
Key office market figures for Q2 2022:
Office stock and new supply
Total modern office stock in Prague reached 3.75 mils. sqm at the end of June 2022. During Q2 2022, a total of 22,700 sqm of new modern office space was completed in Prague. In total, two new office buildings were delivered to the market. The office building Dock In Five (20,500 sqm), which is part of the administrative complex of Dock In buildings developed by Crestyl, was completed in Prague 8. The second completed building in this quarter was the smaller office building Košířská brána (2,200 sqm) in Prague 5. By the end of the year, we expect six more projects with a total office space of 28,800 sqm to be completed. Over 216,000 sqm of office space was in the active construction phase at the end of the second quarter, with planned completion between 2022 and 2024. In the second quarter, the reconstruction of the first phase of the industrial building E Factory (19,300 sqm) in the Pragovka complex in Prague 9 began. New construction commenced on three office buildings: Hagibor 02 (15,000 sqm), Hagibor 01 (12,100 sqm) in the Hagibor project in Prague 10 and Rohan City A1 (9,300 sqm) in the newly emerging Rohan City district in Prague 8. The majority of the modern office supply (74%) consists of A-class buildings, with the highest quality AAA-rated space accounting for more than 17% of the total office stock.
Total gross take-up (including renewals - renegotiations - and subleases) reached 123,700 sqm in the second quarter of 2022, a quarter-on-quarter decrease of 7% and a year-on-year increase of 41%. The highest gross take-up in the second quarter was recorded in Prague 4 (40%), followed by Prague 8 (18%) and Prague 1 (17%). The highest demand for offices was realized by IT companies (33%), the Pharmaceuticals sector (11%) and the Finance sector (8%). The share of renegotiations reached 32% in Q2 2022, while new leases (incl. pre-leases and expansions) accounted for 65% of the total gross take-up. The share of subleases accounted for the remaining 3%.
Major office leasing transactions
The largest disclosed transaction in the second quarter of 2022 was the pre-lease of SCS Software (9,700 sqm) in Roztyly Plaza (which is currently under construction) in Prague 4. Followed by the renegotiation of a confidential tenant from the IT sector (4,200 sqm) in the BesNet Centrum in Prague 4 and the new lease for the in-house flexible office concept Fleksi (3,800 sqm) by Passerinvest in their Filadelfia building in the Brumlovka office complex in Prague 4.
Office vacancy and net absorption
Net absorption reflects the change in occupied office space on the market over a given period. Compared to the previous quarter, the occupied office space increased by 1,500 sqm. The office vacancy rate stood at the same level as in the previous quarter, the vacancy rate remained at 8.4% in Q2 2022. The total vacant office space reached 313,400 sqm at the end of this quarter. The highest vacancy was registered by Prague 4 (75,800 sqm) and Prague 5 (49,300 sqm). On the contrary, the lowest vacancy was reported in Prague 10 (9,800 sqm) and Prague 2 (10,400 sqm). The highest vacancy rates were recorded in Prague 3 (26%) and Prague 9 (22.4%), the lowest in Prague 7 (4.4%) and Prague 8 (5.6%).
Prime rents in the second quarter of 2022 increased again and is in the range of € 25.00-25.50 per sqm per month in the city centre, € 16.50-18.50 per sqm per month in the inner and € 14.00-16.00 per sqm per month in the outer parts of the city. While rents for newly completed buildings in the best locations have been rising steadily since the beginning of the year (currently, by 13% year-on-year), the pace of rent growth for existing office buildings is not that substantial. The price difference between newly built and existing office buildings is thus constantly widening, and this trend can be expected in the following periods as well.
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