Czech Republic New office construction accompanied by complications

Only one single office building was completed in Prague in Q3. It was a refurbishment called Riveroff Office House, located near the Port7 project in Prague 7, close to an important public transport hub.

The renovation of the original property started in 2019, but due to the fact that the project had changed owners several times, it dragged on for several years. As the building will be used primarily for the needs of the current owners, this completion had virtually no impact on the local market vacancy rate.
Josef Stanko, director of market research at Colliers

In total, developers completed 69,500 sqm of new offices as part of seven projects in Prague in the past three quarters of this year. By the end of the year only about 3,500 sqm will be added. Colliers experts expect the market to grow by only 23,400 sqm in 2025. This will represent one of the weakest results in the market's history.

Fortunately for the market, its growth potential is promising. We are registering several projects in the pipeline in every established Prague office location. Ongoing difficulties with financing, planning, permitting and pre-leasing may dramatically affect developers' plans. However, some developers are confident and should soon start construction of their new projects on a speculative basis.
Josef Stanko

The total size of the Prague office market at the end of Q3 2024 was approx. the same as in the previous quarter, i.e., 3.95 mln sqm. Year-on-year growth was approx. a mere 1 pct. Due to weak construction, the market is also focusing on upgrading some older properties: either on an ongoing basis or by temporarily withdrawing them from the market.

The vacancy rate increased by 74 basis points year-on-year to 8.1 pct, but only temporarily, according to Colliers experts. Due to the market’s relatively small size, some specific cases (such as completion of vacant projects or the reorganisation of a large tenant) may have a short-term impact on vacancy.

During Q3, the latter situation, i.e., the reorganisation of a large tenant, occurred. Therefore, we expect vacancy to start decreasing due to the current level of activity on the market, the limited new supply coming onto the market and optimistic reports from some landlords with vacant space. A total of approximately 318,200 sqm is currently available.
Josef Stanko

According to Colliers' statistics, gross uptake in Q3 2024 was 132,600 sqm, with 64 pct of this coming from renegotiations and subleases. Net demand then reached 48,200 sqm.

This year's figures show that the market can generate demand for approx. 200,000 sqm of new office space.

We know from the market that a number of companies are currently looking for new space, but because they have not found suitable space, they are staying in their existing premises for the time being and postponing potential moves for a few years to get more options. The market is currently unable to satisfy all the requirements of large tenants, especially in terms of the combination of location and time.
Josef Stanko

Rents on the Prague office market have been increasing slightly over the last three quarters. At the end of Q3 2024, the so-called "prime" rent in the city centre reached approx. EUR 29.00 per sqm per month. In sought-after locations in the wider centre (e.g., Karlín, Brumlovka, Smíchov), it reached EUR 19.50 per sqm per month and in outlying locations (e.g., Nové Butovice, Hagibor, Chodov) it remained at approx. EUR 16.50 per sqm per month.

Prices for new projects are rising the fastest. This growth is mainly, but not only, due to technological innovations, which are often implemented in new projects. This of course costs money. However, due to the growing focus on ESG, demand for such spaces is growing despite the higher price.
Josef Stanko