Only one new office building has been completed in Prague in Q3 of 2024. On the other side, efforts to upgrade some older properties have continued either on an ongoing basis or by temporarily taking them off the market, according to a survey prepared by Colliers.
A refurbishment called Riveroff Office House, located near the PORT7 project in Prague 7, close to an important public transport hub represents the only office building completed in Prague in the third quarter of this year. "The renovation of the original property started in 2019. The project had changed owners several times, it dragged on for several years. As the building will be used primarily for the needs of the current owners, this completion had virtually no impact on the local market vacancy rate," said Josef Stanko, Director of Market Research at Colliers.
In total, developers completed 69,500 sqm of new offices as part of 7 projects in Prague in the past three quarters of this year. By the end of the year, only about 3,500 sqm will be added. Colliers experts expect the market to grow by only 23,400 sqm in 2025. This will represent one of the weakest results in the market's history. "Fortunately for the market, its growth potential is promising. We are registering several projects in the pipeline," comments Josef Stanko, adding that ongoing difficulties with financing, planning, permitting and pre-leasing may dramatically affect developers' plans. However, some developers are confident and should soon start construction of their new projects on a speculative basis.
The total size of the Prague office market at the end of Q3 2024 was approximately the same as in the previous quarter, i.e., 3.95 million sqm. The vacancy rate increased by 74 basis points year-on-year to 8.1%, but only temporarily, according to Colliers experts. "We expect vacancy to start decreasing due to the current level of activity on the market, the limited new supply coming onto the market and optimistic reports from some landlords with vacant space," explains Josef Stanko, adding that a total of approximately 318,200 sqm is currently available.
According to Colliers' statistics, gross uptake in Q3 2024 was 132,600 sqm, with 64% of this coming from renegotiations and subleases. Net demand then reached 48,200 sqm. "This year's figures show that the market can generate demand for approximately 200,000 sqm of new office space. We know from the market that several companies are currently looking for new space, but because they have not found suitable space, they are staying in their existing premises for the time being and postponing potential moves for a few years to get more options," clarifies Josef Stanko, adding that the market is currently unable to satisfy all the requirements of large tenants, especially in terms of the combination of location and time.
Rents on the Prague office market have been increasing slightly over the last three quarters. At the end of the third quarter of 2024, the so-called "prime" rent in the city centre reached approximately €29.00 per sqm per month. In sought-after locations in the wider centre (e.g., Karlín, Brumlovka, Smíchov), it reached €19.50 per sqm per month and in outlying locations (e.g., Nové Butovice, Hagibor, Chodov) it remained at approximately €16.50 per sqm per month. "Prices for new projects are rising the fastest. This growth is mainly, but not only, due to technological innovations, which are often implemented in new projects. This of course costs money. However, due to the growing focus on ESG, demand for such spaces is growing despite the higher price," concludes Josef Stanko.
