Most companies based in Prague prefer to stay in their existing premises and renew their lease contracts. At the same time, companies are downsizing their occupied office space. An exception is the information technology sector, which is expanding, while financial firms have started to move into smaller or flexible spaces. Net demand, i.e. demand without renewed contracts, has still not reached the values before the start of the covid pandemic. This is due to the onset of the hybrid working trend, where employees only come to the office on certain days of the week, but also to the lack of new space in the capital.
According to data from Cushman & Wakefield, companies that have expanded their premises have expanded by about 10 to 30 percent on average over the last two years. Most companies expanding their premises are also simultaneously changing their concept and allocating more space for meeting rooms or places to relax. Start-ups, but often also large corporations, which were not used to this in the Czech Republic before, sometimes choose flexible offices in case of expansion.
However, office expansions still account for approximately five percent of total demand. According to Pavel Novák of Savills, contract renewals and lease extensions in existing space accounted for 60 per cent of the total volume of transactions in the fourth quarter of last year, which amounted to 166,700 sqm. According to Savills, the share of so-called renegotiations in the number of transactions in 2023 increased by almost half year-on-year.
Large established companies as well as start-ups are looking for new larger spaces. “Drivers of demand for office space are now technology firms, which are often expanding, and also firms providing professional business services to businesses. These sectors are an exception to the current trend of shrinking space,” said Radka Novak of Cushman & Wakefield.
Technology firms are most interested in office space, accounting for 27 percent of all transactions over the past two years. “An example is SCS Software, which is moving into the Roztyly Plaza project, creating one of the largest game studios in Europe with almost 10,000 sqm of offices,” said Novak of Savills. In addition to technology companies, he said there is also significant interest from the pharmaceutical sector, which accounts for 10 percent of transactions.
Both of these sectors, for example, have outpaced the finance segment, which is otherwise traditionally strong in Prague. According to Jana Vlková of Colliers, UniCredit Bank reduced its office space by around 30 percent, which was able to optimise the use of its Prague headquarters by introducing flexible working for its employees. On the other hand, IT companies such as InBev and Shoptet are growing rapidly.
According to Colliers’ analysis, no new office construction has started for more than 18 months in a row. The vacancy rate in the last quarter of last year was approximately 7.2 per cent in the whole capital. Next year, new supply will be very low, according to Cushman & Wakefield’s Novak. Unless construction is delayed, only one new building will be added to the office market, the 9,300-square-metre PernerKa. Significant office space might not even come on line in 2026 and a recovery might not occur until 2027.
Source: CTK
