The Czech Republic Regional market increasingly attractive

Prices range between one-third to one-half lower compared to Prague. According to the market research, net realized demand in Brno grew by 43 pct year-on-year, while in Ostrava it grew by 127 pct. Even greater interest in office real estate in regional cities could come from a better supply of serviced offices, which are of particular interest to established companies on the market in connection with the development of hybrid work and the introduction of hub & spoke or flex & core work models.

Moderate growth, higher vacancy rates

Brno represents the second largest office market in the country after Prague. Thanks to its location, motorway connections, lower prices and stable and reasonable construction of new office space, it has a very good chance of attracting new tenants or brands looking to expand further in the Czech Republic.

The good news is that businesses still have somewhere to go. Over the long term, the local vacancy rate has been slowly but steadily increasing and currently stands at 12.8 pct, i.e., app. 88,300 sqm. This long-term growth is largely due to the moderate, but steady, development of the local modern office market, where new space is not being absorbed so quickly.
Josef Stanko, senior analyst at Colliers

Total new construction in 2023 equalled app. 26,100 sqm, which is only slightly below the five-year average. The largest completed project in 2023 was the extension to Centrum Šumavská building. The steel addition added three floors to the original building built in 1915 and expanded office space by app. 13,000 sqm. There are currently 55,200 sqm under construction across five projects. 2024, however, will be less generous for new office space as only two of the current projects are scheduled for completion. On the other hand, 2025 should be an optimistic year in terms of new construction, as several larger projects are planned.

In Ostrava, the market for modern offices has been very stable for several years. Last year's completion of the Organica building, which with its 19,800 sqm of offices is one of the four largest office projects in the city, has significantly shaken the local market. The Colliers report shows that at the end of Q4 2023, total office space of 239,300 sqm was available with the vacancy rate rising to 17.1 pct. This was mainly due to the movement of large tenants to Organica.

Office markets in other regional cities such as Olomouc, Ústí nad Labem, Hradec Králové and Plzeň remain without significant new activity. The modern office market here typically ranges between 30,000-100,000 sqm.

The number of companies looking for quieter locations or expanding into these regions is steadily growing. They are attracted by both the lower cost of office space and easier access to human resources. Unfortunately, companies here often encounter problems with the availability of suitable office space. Sadly, it looks like the situation will not improve in the near future.
Josef Stanko

Increasing demand, lower prices

Demand for office space in Brno is growing, mainly due to the current boom in IT and business service centres. Net uptake rose 43 pct year-on-year (65,500 sqm), reflecting higher demand in the Brno office market. The latter’s offering has typically ranged between 40,000 and 60,000 sqm over the past seven years. Significant transactions include renegotiations by Honeywell, Notino, Oracle and Atlas Copco.

In Ostrava, the office market is smaller than in Brno and Prague. It has a limited number of transactions. In 2023, gross uptake reached app. 23,300 sqm, with a 51 pct share of renegotiations. Significant transactions include renegotiations by Moneta Money Bank and Siemens.

Rents in Brno are not growing that fast yet. At the end of Q4 2023, prime rents in modern office spaces stood at app. EUR 16.50 sqm/month. In Ostrava it is even less. In our opinion, prime rents range between EUR 14.00 and EUR 14.50.
Josef Stanko

Limited competition in the flexible office market

The serviced office market offers great potential in regional cities. It is slowly developing in Brno and Ostrava, where such services have so far been represented mainly by the Clubco brand operated by CTP. In other regional cities, small local operators work mainly with very limited space, which often does not suit international companies’ demand. These are larger businesses that would like to expand and offer their employees in the regions the possibility of using serviced offices.