More than 70 thousand square meters of new office space are currently developed in central Prague. Nearly 95,000 square meters of additional space still remain on paper, while developers are in various stages of preparation for commencing their construction. In Western capitals, companies are beginning to return to city centres. Experts from Cushman & Wakefield expect that this trend will come to Prague as well, and that an offer of state of the art offices will attract business back to the centre.
“Massive construction of offices in locations outside the city attracted businesses over the past decade by offering them low rents. After years of operation, however, they discovered that lower rents alone cannot compensate for the benefits of the city centre. A company, which wants to keep its best employees, must give them the possibility of a social life. Bringing people together is absolutely necessary, for example, for traders”, says Ms Radka Novak, Head of the Office Agency Team at Cushman & Wakefield.
“In the West, we can see a clear trend of tenants returning to city centres or to major office building agglomerations, so that they can be close to their clients. Electronic communication has not reduced the want for personal meetings in the business world, rather the opposite”, says Mr Michal Soták, Head of Research at Cushman & Wakefield.
Over the past ten years, construction of office spaces in the centre of Prague has been very low; the annual increment averaged only around 10,000 sq. m. of new office spaces. All in all, there are today some 200,000 square meters of A-class office space. At the completion of the projects now under construction, its volume will be boosted by one third.
“The development of the Prague market over the last 10 years clearly shows that new office development projects are capable of inducing demand. Price is naturally one of the critical factors for office rental rates. Completion of such a large number of offices in a few years will exert pressure on the reduction of rents. They are already at their lowest in the past twenty years”, says Mr Michal Soták.
The attractions for a central location also include a good address. A role is played by the utmost ease of accessibility by public transport as well. New buildings will be equipped with the latest technologies, which is particularly attractive for tenants from multinational corporations.
The planned office development boom in central Prague can be compared, for example, to the development of the Prague city quarter of Smíchov. The local boom commenced in 2004 and almost 80 thousand square meters of new space were developed over the term of three years.