Survey: interest in offices in Brno and Ostrava is decreasing, it takes longer to occupy space

30 March 2023

The office market in Brno and Ostrava is struggling with growing vacancy, while in Brno new space is expected to continue to increase in the coming years, in Ostrava the growth of new space has stopped. The survey was conducted by the consultancy Colliers.

Significantly lower rental prices are not helping to maintain occupancy outside the capital. While at the end of last year the highest achievable rent in office space in Prague was EUR 27, or CZK 635 per square meter, in Brno it was EUR 16.50, or CZK 388, and in Ostrava EUR 14.50, or CZK 341.

According to Colliers, the current vacancy rate for modern office space in Brno is 13.4 per cent, roughly double that of Prague, while in Ostrava it is 7.1 per cent. Meanwhile, no new construction has been added to the Ostrava market since 2019, and the annual volume of transactions on the market has fallen by half year-on-year. In contrast, Brno currently has another 69,600 sqm of office buildings under construction, with only 6.5 percent of space in these projects provisionally leased.

“For this market, it will be crucial to find the right pricing policy and a way to attract more tenants in the current period of reducing space, costs and operating expenses. Especially if new space is delivered without pre-secured tenants, the time needed to find a tenant could be much longer than it is now,” said Josef Stanko of Colliers.

An earlier analysis by Cushman&Wakefield also predicts a likely increase in vacancy rates for the Brno office market. According to this analysis, the declining number of university students and insufficient promotion of the city abroad play a role. Another reason is the transition of companies to the so-called hybrid working mode, where employees go to the office only a few days a week and work from home the other days.

According to a survey by Colliers, the market for office space is now more vibrant in smaller regional cities. “This is because a growing number of companies are looking for space in the regions for their employees who are not interested in moving to the big cities, but don’t want to operate from a home office. Across the Czech Republic we identify a number of office properties, both old and new, suitable for such use. However, the question is whether current owners will pioneer new trends that support flexible workspace,” Stanko added.

By far the largest project under construction in Brno is the construction of a new district on the former Zbrojovka site, covering an area of 22 hectares. The new Zbrojovka is being built in six phases spread over 15 years by CPI Property Group, which is currently reassessing the focus of individual buildings under the influence of changes in the office market. “We are aware that the market is changing and we are changing our strategy. Many of the buildings will be mixed-use instead of pure office space as planned. So there will be retail space on the ground floor, offices above and rental housing on the upper floors. The interest in rental flats in Brno will increase in the next few years,” Miroslav Pekník, director of Nová Zbrojovka.

Source: Colliers and CTK

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