According to Savills’ research, the demand figures for premium office space in the first half of 2023 have started to vary significantly across Europe: compared to the five-year average, Luxembourg saw a 137% increase, Oslo a 22% increase and Prague a 13% increase, while Lisbon, Dublin and Budapest saw declines of 62%, 42% and 21%. However, demand is facing a shortage of modern office buildings, especially in well-served locations. Moreover, no developer has started construction of an office building in Prague for more than 12 months. In addition, most of the projects that started with the construction earlier (e.g. Masaryčka) are already significantly occupied. On the contrary, the positive news for those interested in new offices is that up to 195,700 sq m of new office space could be built in Prague by the end of 2025, of which 143,600 sq m is already under construction.
“The vacancy rate in Prague has dropped further to 7.3%. If we look at the individual districts in more detail, especially the centre and the adjacent areas are really suffering from a lack of quality space. We therefore recommend the companies that plan to relocate into new modern and efficient buildings to also consider the offer of planned projects as their construction may start soon. They can thus get preferential conditions and the best place in the project,” says Pavel Novák, Head of Office Agency at Savills.
So called ‘new locations’ with dynamic development, high level services and good infrastructure may also be the opportunity for companies. The majority of such developments are located directly on the metro. Such an offer can be expected within Prague 4, Prague 5 in the area of Smíchov to Radlice, or in Prague 8 to 10. Prague 2, 3 and 6, as primarily residential locations, remain on the periphery of interest for developers of office buildings.
Barbora Jansová, ESG Consultant & Project Manager at Savills comments the situation from the perspective of ESG strategy: “Companies are moving of out of the centre for several reasons. One is that in the era of online meetings, companies no longer need to have centrally located offices easily accessible for visits. Instead, they choose more pleasant locations surrounded by greenery and with great facilities,” and continues “In addition to a suitable location, the attractiveness of the properties can be increased by focusing on sustainability and tenant health, for example in the form of various building certifications – the most widespread in our market being BREEAM, LEED or WELL.”
For example, a company that has 100 employees and needs approximately 1,500 sq m of office space should start looking for new offices two and a half years in advance. This is an optimal time, as new projects take almost two years to build and it can take up to nine months to prepare suitable fit-out interiors for tenants, if the necessary preparation and permitting processes are taken into account.
Source: Savills Czech Republic
