The demand among IT and professional service companies for new office space in Brno is skyrocketing. This is also one of the reasons why several projects with a total area in excess of 50,000 sq m will be completed in Brno in 2016. According to Cushman & Wakefield, this will represent the highest amount of office stock completed since 2007.
Brno / Prague, 6 January 2016 – A total of five new office buildings with an area of 51,550 square metres will be completed in Brno in 2016. This will be the highest increment since 2007 and Brno will also outpace Prague in terms of new supply for the first time ever. Developers’ activity is based on the growing take-up on the part of new tenants and the expansion of the existing ones. This is also why the vacancy rate decreased to a record low of some 16,5 % in the latter half of 2015.
Interestingly, the situation at the beginning of last year suggested that development would be rather weak in Brno in 2016.
“Nearly all prime projects in Brno are almost fully leased. Companies are thriving in the city and are not afraid of recruiting more employees and expanding their premises. Some office properties even have waiting lists for prospective occupiers and existing tenants’ possibilities for expansion are limited. At the same time, pre-leases for new projects work excellently,” says Mr Lukáš Netolický, a Cushman & Wakefield specialist for the Brno market. He adds that even projects that are still under construction are largely occupied already.
The take-up in Brno is driven primarily by companies in the IT and related industries. Figures also confirm that Brno is upholding its reputation as the “Czech Republic’s computer centre”. “According to Cushman & Wakefield statistics, ICT companies account for a dominant 58% of all concluded leases. Given the demand and the synergy where smaller companies, including start-ups, follow the big ones, this figure may increase in 2016,” says Mr Michal Soták, Head of Research, Cushman & Wakefield Czech Republic and Slovakia.
Office stock in Brno consisted of more than 483,000 square metres in the latter half of the last year, 80 percent of which was attributable to modern, class A buildings. The relatively high vacancy rate is the result of ongoing development during the period of economic slow-down.
The competition on the Brno market will toughen in 2016 with the arrival of five completed buildings. The Slatina project will grow to include one more building, the “O”, offering 15,200 sq m. The other projects to be completed include the Campus Science Park C (12,750 sq m), T Dorn (7,100 sq m), and the second office building as part of the Ponavka project (8,000 sq m, developed by CTP). The Smetanova 35 (8,500 sq m) office complex will be refurbished. We have noted that office space in each of the above buildings has been pre-leased to a greater or lesser degree.
“Despite the increasing supply and the start of development of new office properties, Brno will soon face the situation where the demand among large occupiers for premises in the city centre cannot be satisfied. On the other hand, this creates room for the gradual increase of rents in high quality projects in this part of the city,” Mr Netolicky concludes.