Although office leasing opportunities are already very limited in Prague, the good news is that Colliers' survey has reported rather stable rental prices throughout the last year.
With no office buildings completed in Prague in Q4 last year, 2023 ended with a new construction volume of 98,400 sqm in 7 projects. Nevertheless, this was the highest result in the past three years. Also, no new construction began during the last quarter of last year, extending the period without office construction commencement to a full 18 months. Vacancy at the end of Q4 2023 was approximately 280,700 sqm, or 7.2%, across the capital. In Karlín, for example, only 9,700 m2 of existing Class A vacant space was available at the end of Q4 2023, i.e., just 2%.
The current size of Prague's modern office market is 3.91 million sqm of which 18% is classified in the highest AAA class. “Vacancy rates in Prague have long been among the lowest compared to other Central and Eastern European capitals, where they are currently in double digits. However, vacancy hangs over Prague like a double-edged sword in the form of lost opportunities. There is space available but still, the market may not have enough leasing opportunities to satisfy all potential incoming foreign investment or existing growth," comments Josef Stanko, Senior Analyst at Colliers.
For 2024, we currently expect 84,000 sqm of new office space, which is essentially all that was under active construction at the end of Q4 2023. Approximately 44% of this volume is already pre-leased and the remaining space is expected to be absorbed soon.
Although gross demand in 2023 fell by 3% year-on-year, it once again exceeded 500,000 sqm to reach 525,300 sqm. It was driven by particularly large renegotiations by corporate office tenants such as Microsoft, DHL IT, Avast and Amazon. Net realised demand, on the other hand, reached 238,900 sqm last year, representing only 45% of gross annual realised demand and a year-on-year decline of 18%. This is due to the increasing share of renegotiations, which have been on the rise since 2020 and reached their highest result to date last year.
In Q4 2023, the volume of gross take-up was 166,700 sqm with more than 230 transactions reported. The volume increased by 11% year-on-year. The share of net demand in the total volume was only 38% with a volume of 62,600 sqm and more than 120 transactions.
Serviced and flexible spaces are becoming an important part of the Prague office market. The closure of HubHub and the sale of BASE4Work, Penta Real Estate's flexible office concept, to Scott.Weber has brought about several changes in the operator market. First and foremost, Scott.Weber expanded during 2023. Local operator WorkLounge is also quite active, taking over one of the centres from HubHub (in the Na Příkopě 14 building), but also acquiring the City Point building in Prague 4. The newest player on the market is Zenwork, which took over HubHub's second centre in Palác Ara in Prague 1. The best private working spaces in the city centre can start at €370 per individual spot (workspace) per month, while the rest of the market ranges between €200 and €350, depending on the location of the specific centre, requirements, number of employees and so on.
At the end of 2023, the highest achievable rent in the city centre area was €27.50/sqm/month. In the so-called inner city, it ran up to €18.25/sqm/month and within the outer city area up to €16.00/sqm/month. These values have been mostly stable throughout the year; however, a slow but steady rise in rents is already evident across the market.
