Office vacancy drops in Prague

A record low amount of new office space introduced in 2016

The office vacancy rate in Prague reached 10.6 percent at the end of the fourth quarter of 2016, down 1.1 percentage points compared to the previous quarter, according to figures from Prague Research Forum (PRF).

The highest vacancy rates were recorded in Prague 7 with 15.7 percent, Prague 9 with 13.9 percent and Prague 10 with 13.4 percent. The lowest vacancy rates were in Prague 8 with 8.5 percent, Prague 3 with 9.1 percent and Prague 4 with 9.3 percent. Total vacant space declined to 338,600 square meters.

At the end of 2016, prime headline rents in the city center moved around €19.50 per square meter per month. Prime headline rents in the inner city slightly decreased to €14.50 to €15.50 per square meter per month and remained at €13.00 to €14.50 per square meter per month in the outer city.

At the end of Q4 2016, the total modern office stock in Prague stood at 3,208,400 sqm. The share of A class office space reached 69 percent. Top quality projects, such as AAA class properties, accounted for 17 percent of the total office stock.

In Q4 2016, only one new office project was delivered to the Prague market. South Point, located in the inner city area of Prague 4, offers 7,500 sqm of new office space. In all of 2016, a total of 33,400 sqm of office space was completed, which was the least amount of new space ever recorded on the Prague office market for a full year.

In Q4 2016, two new projects started construction. The first was ČSOB HQ II, with some 30,000 sqm, in Prague 5. It will be fully occupied by ČSOB and its subsidiaries. The other is a speculative project called AFI Vokovice in Prague 6 with 12,100 sqm of office space.

New supply should increase again in 2017 with a projected 171,000 sqm of added office space Currently in Prague around 330,300 sqm of office space is under construction with scheduled completion dates between 2017 and 2018.

Gross take-up, including renegotiations and subleases, in Q4 2016 amounted to 96,800 sqm, which was a decrease of 12.8 percent compared to the previous quarter and a year-on-year decrease of 40.4 percent. The highest volume of gross take-up according to PRF was recorded in Prague 5 with 30 percent, Prague 4 with 28 percent and Prague 1 with 11 percent.

In the last quarter of 2016 the largest share of gross take-up was by companies from the IT sector at 25 percent, followed by companies from the manufacturing sector at 10 percent and professional services at 10 percent. The total share of renegotiations from the gross take-up increased from 20 percent in Q3 2016 to 29 percent in Q4 2016.

The most significant of the nonconfidential transactions in the last three months of 2016 were the renegotiation of IT firm for 13,400 sqm in Palác Křižík I and Palác Křižík II in Prague 5, followed by the expansion of IT firm MSD by 4,500 sqm in the Five building in Prague 5. They will occupy approximately 85 percent of the building. Another large deal was the new take-up by Chinese technology firm Huawei of 2,800 sqm in Greenline Kačerov in Prague 4.

The members of the Prague Research Forum are real estate firms CBRE, Colliers International, Cushman & Wakefield, JLL and Knight Frank. They share nonsensitive information with the aim of providing clients with consistent, accurate and transparent data about the Prague office market. The Royal Institution of Chartered Surveyors (RICS) supports activities of the Prague Research Forum.

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