Declining number of university graduates, insufficient incentives and market transformation after the pandemic of covid will probably lead to increasing vacancy of office space in Brno. In an analysis of the current situation, according to Cushman & Wakefield.
“In the first decade of the new millennium, Brno was one of the top markets in the research and development and high-tech sectors in Central Europe. Thanks to the large number of students and graduates of Brno universities, the local workforce was an attraction for large international companies, which located their shared service centres and production, research and development teams here. Now the situation is changing – the number of students has declined, Brno’s promotion abroad and its business approach are insufficient and new companies prefer to go to Polish regional cities,” said Lukáš Netolický, Head of Regional Markets in the Czech Republic.
Construction of new office space in Brno continues, with 33,000 sqm of space added to the market last year, an increase of 84 per cent year-on-year. Another 35,000 sqm is under construction, of which 26,100 should be completed this year.
“In Brno, we can expect vacancy rates to rise to 16 per cent for the next few years, as there will not be enough people interested in new space. At the same time, construction is being carried out in high quality, and the projects meet the increasing demands of companies on the working environment. This, coupled with high construction costs, is increasing the pressure on rental prices – originally expected to rise from the current EUR 16.5 to EUR 20 per square metre. Due to declining absorption and rising vacancy rates, €20 now seems unrealistic. The highest rent achieved will probably remain below EUR 18, even in the next few years,” Netolický added.
The lower demand for new space has also been caused by a shift to a so-called hybrid working regime, where employees spend only part of the working week in offices and the other part working from home. “By working away from the office, companies can reduce the number of permanent jobs and at the same time change the use of office space to better meet the current needs of employees. Ultimately, such a change does not always mean a reduction, but often also an increase in leased space. Of the tenants that are currently redeveloping their space, about 40 percent are downsizing, and some companies are consolidating multiple offices into fewer buildings for efficiency. But another 30 percent of companies are staying in the same space even with the changes in layout, and another 30 percent are expanding,” Netolický added.
Source: Cushman & Wakefield and CTK