News Article Czech Republic JLL lease office Prague report
by Ákos Budai | Office

Prague's office market has witnessed several records this year: the lowest annual office supply in history and one of the highest demand volumes. By the end of 2016, Prague´s office market will have 3,245,000 sqm of modern offices. At the same time, the Czech capital recorded the lowest annual office supply in history with only 33,600 sqm in 6 projects, On the contrary, over 180,000 sqm of new office space will be delivered to the Prague market next year. 

„Such a low supply of modern offices in a booming economy is the result of an unpredictable approval process of new schemes in Prague. Endless debates around the metropolitan plan and the overall uncertainty in the building permit process only highlights the unpleasant status quo." says Eduard Forejt, Business Development Director at JLL. At the same time, there is strong demand for quality offices in Prague. In the first three quarters of 2016, gross demand reached 316,000 sqm which means one of the best results in the last ten years. Prague 5 (28 % market share), Prague 4 (21 % market share) and Prague 1 (15 % market share in the overall take-up) were the most sought-after city districts.

High demand and limited new office supply during 2016 have resulted in a decline of the vacancy rate by 2.9 percentage points (the vacancy rate at the end of 2015 was 14.5% and in Q3 2016 was 11.7%). Therefore, JLL has recorded a modest increase in prime office rents: Prague city centre (€19.0 – 20.0/sqm/month), inner city (€14.5-16.0/sqm/month) and outer city (€13.0 -14.5 /sqm/month).  

„There are a number of new projects coming to the Prague market next year, which will temporarily increase the vacancy rate in the quarterly statistics. Given the booming economy, we expect new office space to be absorbed by the ongoing strong demand within 12 – 18 months of the completion of the scheme. The increased rental levels of the top office schemes, in the prestigious locations of Prague 4, Prague 5 and Prague 1 will persevere." concludes Eduard Forejt.