The Prague Research Forum – CBRE, Colliers, Cushman & Wakefield, iO Partners, Knight Frank and Savills – has shared an updated Prague office market insight. Figures and data for Q4 2023 have confirmed a cautious approach both from developers and tenants.
The total size of modern office stock in Prague reached 3,9 million sqm at the end of Q4 2023, while no new office building was completed. Total completions in 2023 reached 98,400 sqm in seven projects, up 31% year-on-year, but down 23% on the 10-year average. Most of the modern office supply (74%) consists of Class A buildings, with the highest quality AAA-rated space accounting for more than 18% of the total office stock. No new office building construction has been initiated in the city since Q2 2022. Currently, there is 84,000 sqm of office space under construction and all 84,000 sqm is scheduled for delivery in 2024.
Total gross take-up (including renegotiations and subleases) reached 166,700 sqm in the fourth quarter, almost double the previous quarter and 10% up year-on-year. However, Q4 gross take-up was driven by renegotiations, which accounted for 60%, followed by new leases of existing space and expansions accounted for 32% of the total gross take-up. Pre-leases of new offices under construction had a 6% share. The remaining less than 2% were represented by subleases of already leased space.
The highest gross take-up in the fourth quarter was recorded in Prague 4 (33%), followed by Prague 5 (22%) and Prague 8 (15%). Technology companies were the main driver of demand (33% share of gross take-up), followed by Pharmaceutical/Medical companies (17% share). Full-year figures show that gross take-up slightly decreased by 3% y-o-y to 521,600 sqm. In 2023, net take-up stood at 236,100 sqm, it was 18% lower compared to the previous year and 12% below the 10-year average.
The largest transactions in the last quarter of 2023 were the renegotiations of Avast Software in Enterprise Office Center (12,200 sqm) in Prague 4 and two renegotiations by MSD Czech Republic in Five (11,300 sqm) and Riverview (6,200 sqm), both located in Prague 5.
Net absorption reflects the change in occupied office space on the market over a given period. The occupied office space increased by 11,200 sqm compared to the previous quarter, annual absorption reached 127,000 sqm. The office vacancy rate in Q4 2023 decreased by 16 bps q-o-q to 7.2%. The total vacant office space reached 280,700 sqm at the end of the year. Prime headline rents slightly increased and in the fourth quarter of 2023 stood at around €27.00-27.50 per sqm per month in the city centre, €17.75-18.50 per sqm per month in the inner city and €15.00-16.00 per sqm per month in the outer parts of Prague.
Simon Orr, Director at A&T-Offices, completes data with an additional viewpoint: “Due to a slowdown in new leasing activity, we see upward pressure on incentives in certain locations. Price and location are still the driving factors for tenants, with sustainability increasingly part of the corporate agenda. Construction activity should start to recover this year; however, developers will remain cautious in this era of high construction costs.”
