The Prague office market proved its stability with a total modern office stock surpassing 3.85 million sqm by the end of Q2 2023. Despite no new office buildings being completed this quarter, ongoing construction projects are poised to add approximately 66,800 sqm of office space across seven projects by year-end. In tandem, the market is embracing the evolving demand for flexible workspace solutions, with four new flexible office centres inaugurated during this quarter, iO Partners reports.
The office stock in Prague reached 3.85 million sqm at the end of the second quarter of this year. In the first 6 months of 2023, only 38,000 sqm of new office space was added to the market. Almost 144,000 sqm of office space was under construction in Q2 2023, with a significant portion of these developments concentrated in Prague 1 and Prague 10.
The vacancy rate for office spaces saw a slight dip, settling at 7.3% in the second quarter, highlighting the market's resilience and adaptability. Presently, there is approximately 280,000 sqm of vacant office space available across Prague. Compared to other office markets within CEE, this is the lowest vacancy rate in the region.
Q2 2023 saw a surge in leasing transactions, totalling 148,800 sqm. This marked a significant 23% year-on-year increase, illustrating the market's resilience and ability to adapt to changing dynamics. Recent lease negotiations have significantly impacted Prague's office market. The largest transaction of the quarter was the renegotiation by DHL Information Services within The Park building in Prague 4, spanning 18,000 sqm, at the same time, Microsoft extended the lease agreement for 16,100 sqm in the Delta Building in Brumlovka, which is also located in Prague 4. The heightened rental activity had a positive ripple effect, as office occupancy increased by a substantial 13,600 sqm quarter-on-quarter. This underlines the growing demand for office spaces and signifies the dynamic nature of the market.
Prague's office market is embracing the modern trend of flexible office spaces. As of June 2023, Prague boasts a total volume of 116,700 sqm of flexible office space spread across 83 centres. Moreover, the proportion of flexible space within the comprehensive modern office portfolio has ascended to 3.0%, a clear testament to the growing appeal and adoption of versatile work environments.
“Our recent Workplace Experience Survey among 2,085 office users in the Czech Republic showed that the hybrid working model is now seen as the new post-covid normal, as the majority of companies now offer 2-3 days of a home office. This affects the use of the workplace and employers are now faced with the task of modifying their offices. They now need to allow the shift from the traditional use of the workplace for mainly day-to-day individual tasks to a more flexible way of working combining shared desks and an increased number of places to collaborate or hold hybrid meetings”, adds Josefína Rybářová, Director of Tenant Representation in the Office Leasing Department at iO Partners Czechia.
