Prague, 8th February 2016 – Four new facilities and one refurbishment project with an aggregate floor area of 32,600 sq m: Such is the current estimate for Prague and this year based on developers’ plans. The average annual increment of new office space has been 146,000 sq m throughout the last ten years. According to Cushman & Wakefield, this is just a brief glitch and the office market will experience a major upswing in 2017.
The vacancy rate in modern office buildings has been decreasing for several consecutive months. It was 17% in mid-2015. It currently stands at 14.6% and will continue to decrease. “This is an unexpectedly positive figure considering that a substantial amount of projects with a total capacity of almost 190,000 sq m was completed in 2015,” comments Ms Radka Novak, Head of the Office Agency Team at Cushman & Wakefield, and adds: “Once again, this confirms the notion that supply generates demand, which, combined with the positive economic growth, has resulted in a major increase in the transactions completed in 2015. For example, our company alone participated in transactions involving more than 100,000 sq m, which is a record-breaking result for us.” Take-up in new buildings is very good and if there is no new supply, the vacancy rate in older buildings will decrease as well.
Cushman & Wakefield expect that the buildings that developers plan to complete this year will not be short of prospective tenants either. In particular, the projects are Phase III of the Futurama Business Park in Prague 8 (9,150 sq m), Park Radlice in Prague 5 (6,450 sq m), Classic 7 Phase III in Prague 7 (5,550 sq m), South Point in Prague 4 (7,450 sq m) and the refurbishment of the Harrach Palace in Prague 1 (4,000 sq m). Most new buildings can be expected to be leased at the time of completion.
As a result, Cushman & Wakefield believe that the demand for modern office space may exceed the supply in certain locations in 2016. In addition, the most sought-after areas of Prague, specifically in the first, fourth and fifth municipal districts could experience a slight increase in rents or at least a reduction in the offers intended for tenants this year.
Outlook for 2017
Prague 4 has the biggest number of projects in progress (in excess of 40,000 sq m), followed by Prague 5 (20,000 sq m) and Prague 1 (almost 20,000 sq m). The biggest properties include City Deco with 13,200 sq m and Five! in Prague’s Smichov quarter with an area of 14,200 sq m.
According to Cushman & Wakefield, several developers will launch their projects this year. There are plans for the commencement of quite large projects such as Phase II of the former Walter plant redevelopment – Mechanika in Prague 5, Visionary in Prague 7, Main Point Pankrac in Prague 4 and Butterfly in Prague 8. If the projects are actually commenced, a major increase in supply can be expected at the turn of 2017 and 2018.
“Many companies are preparing to enlarge their offices. The companies that have been successful hail primarily from the consulting and IT industries, and generally from the information and telecommunication technology as well as the human resources, finance and insurance segments,” Ms Novak concludes.