The share of foreign and Czech companies based in Prague offices is leveling off. Although almost three-quarters of the offices are currently occupied by foreign companies, new spaces are more in demand by domestic companies. In many cases, established foreign companies prefer to stay in established locations and renegotiate existing lease agreements. Insufficient construction of new space may also be one of the reasons preventing further entry of foreign companies into the Czech market. Therefore, companies often look for locations for their centres in other European cities.
“Overall, it can be said that the wave of massive arrivals of new companies to the Czech Republic ended about eight years ago. These were mainly large corporations that set up shared service centres here. They continue to operate successfully in the vast majority of cases and are often adding more services, with the associated expansion. However, this is often handled within the existing space,” said Radka Novak, head of the office leasing team at Cushman & Wakefield.
According to Jana Vlková from Colliers, 25 years ago many international companies entered the Czech market and large leases were based mainly on this demand. In recent years, however, this gap has been closing and the ratio of domestic and foreign companies has been catching up. Cushman & Wakefield data shows that 72 per cent of office space above 3,000 sqm is filled by international companies and 28 per cent by Czech companies. Nine of the ten largest tenants are multinationals.
Last year, the largest transaction in Prague was the renegotiation of Microsoft’s lease at Brumlovka. But one of the largest new leases was secured by Czech e-commerce services provider Shoptet. According to data from real estate consultancy Prague Research Forum, one of the most significant transactions is the renewal of the existing lease of Avast Software in Prague 4.
New office construction has not started in the capital for 18 months in a row. According to Petr Palička, CEO of Penta Real Estate, the lack of modern offices on the market is one of the reasons that hinders the arrival of large foreign companies to the capital.
Even so, according to Pavel Novák, head of the office department at Savills, Prague is still attractive for foreign investors. This is confirmed, for example, by the decision of an unnamed global company that eventually preferred the Czech capital to Warsaw, he said. The metropolis still needs to do more to improve the conditions for construction and development to maintain its attractiveness, the expert believes.
The Czech Republic had the opportunity to lure large foreign companies to the domestic market, for example, after Brexit. In 2017, the Ministry of Industry and Trade was tasked with identifying companies that might be interested in moving their headquarters to the Czech Republic. But data from consultancy firm Bisnode in 2019 showed that five per cent fewer British firms were doing business in the Czech Republic than in the previous year. Most UK companies moved to the Netherlands.
Source: CTK
