Over H1 2024, the office stock in the CEE region grew by 213,000 sqm, with the largest increase recorded in Budapest (78,300 sqm). The majority of the markets still experience subdued construction activity as vacancy rates remain higher than 10%. The development pipeline is largely dependent on pre-lease agreements, with a limited number of speculative starts. The only exception is Prague, where the under-construction volumes nearly doubled as compared to the end of 2023. The overall vacancy rate in the CEE capitals recorded a minimal increase over H1 2024 and stood at 11.6%, against 11.5% in Q4 2023. Muted construction activity will push the overall vacancy rate downwards in the mid-term. A decrease in availability will be more prominent in the prime market segment as occupiers follow „fly to quality” trend. JLL experts, in cooperation with iO Partners, present an analysis of the trends observed in the office market in Poland against the background of countries in the CEE region.
- In Warsaw, during H1 2024, gross demand amounted to a total of 316,400 sqm which is on par with the corresponding period in 2023. Renewals accounted for 51% of the total take-up. In H1, developers delivered over 60,000 sqm in Warsaw. 2024 will be another year with a subdued new supply estimated at around 100,000 sqm.
- In Bratislava, in H1 2024, leasing transactions totalled 105,700 sqm with the five-year average being at the level of 95,400 sqm per half-year. The most active submarket is the CBD offering extensive services for employees and generally good accessibility.
- In Budapest, gross take-up reached 238,200 sqm, representing a 22% increase y-o-y. Net take-up amounted to 128,400 sqm. Lease renewals represented 46% of the total leasing activity followed by new leases with 34%.
- In Bucharest, gross demand in H1 2024 totaled approximately 156,400 sqm, 5% below H1 2023. Net demand also registered an 8% decrease during the same period, to 78,100 sqm. Renewals and renegotiations accounted for 50% of total transaction volume in H1 2024, marking a marginal 1.5% increase from 48.5% in H1 2023.
- In H1, the Prague office market registered strong demand for offices totalling 327,300 sqm. Net take-up amounted to 183,000 sqm, showing a y-o-y increase of 33%. This was caused by a large owner occupation deal with one of the Czech Republic‘s largest banks.
“During H2 2024, office demand is expected to record a gradual recovery on the back of improving economic conditions. Occupiers are willing to pay the premium for the best quality, well-located and sustainable spaces; however, many of them are still in the transition process to hybrid working. As a result, lease renewals continue to make up a considerable share of the total market activity. New supply levels will remain subdued over the next two years. Muted development pipeline will translate into a further growth in prime rental rates across all markets. Older assets will face increasing pressure for price reductions to attract new tenants or maintain occupancy levels,” says Mateusz Polkowski, Head of Research & Consultancy, JLL
“The current market conditions in the CEE office sector reflect a cautious yet strategic approach by developers and occupiers alike. With vacancy rates remaining above 10% and new supply being limited, we anticipate a gradual tightening of the market. This will likely lead to an increase in prime rental rates, particularly in well-located, high-quality spaces. However, the overall market recovery will be tempered by ongoing economic uncertainties and the evolving dynamics of hybrid working models”, comments Charles Boudet, CEO at iO Partners.
