The only completed project in Q4 is 100Yards, which is not a new build but a renovation of historic offices with a large high-street retail element. Representing only 3,300 m², it had very little impact on the overall market volume.

In total, new office development in Prague in 2024 reached 72,800 m² across eight projects. This is slightly below average, with the average over the past 4 years being around 75,000 m² per year. “Unfortunately, the next two years will be even less generous for new development. Of the total 164,300 m² of office space under construction at the end of Q4 2024, only 24,600 m² is expected to be completed in 2025. Moreover, the entire remaining volume of 139,700 m² is under construction until 2027. Nothing was actively under construction for 2026 at the end of the year,” calculates Josef Stanko, Head of Market Research at Colliers. 

Vacancy remains low

Although the vacancy rate increased slightly year-on-year, by approximately 0.2 percentage points to 7.3%, compared to the previous quarter, a decrease of 0.7 percentage points was recorded in Q4, which represents the most significant decrease since 2023. “We expect a further decrease, as the completed buildings are mostly pre-leased. The current vacancy represents 290,700 m² of immediately available space. Especially in very attractive hubs such as Karlín, Brumlovka or Palmovka, which have a vacancy rate below 4%, there is a significant reduction in rental options,” explains Josef Stanko.

The total volume of modern office space at the end of Q4 2024 was 3.96 million square meters. Compared to Central and Eastern Europe, it lags behind Warsaw with 6.3 million m² and Budapest with 4.5 million m². The average market growth over the past 10 years was 2.7% per year.

Subletting continues to play an important role in addressing demand. However, supply has decreased significantly since the pandemic and currently represents approximately 29,900 m², which is approximately 0.75% of the additional “grey” supply of vacant space. It is important to mention that the average unit area is 750 m², so these offers can only satisfy a small spectrum of demand.

Flex in Prague continues to grow

Flexible serviced offices continue to do well in Prague. From the activity in Q4 2024, we noted that Scott.Weber, a leading Czech operator, will open two more centers, both over 4,000 m² in size. One in the soon-to-be-completed NR7 building in the center of Prague and the other is part of the Idea Office building in Smíchov. However, their second old Smíchov center will soon be closed.

“The occupancy rate is unknown because the operators do not disclose it. However, a number of demands that we have worked with are willing to consider flexible work centers as a solution to their needs and some will decide to do so,” explains Josef Stanko, adding that flexible work space leases have reached a total of 68,200 m² of net demand over the past 5 years. This is 5% of the total five-year net volume of realized demand and generally half of the Prague flexible office space market.

Did the construction affect demand?

Lower development activity and low vacancy rates in popular locations have again supported tenants’ reasons for staying in their existing offices. Renegotiations have been highly represented since 2023, accounting for 51% of the total gross demand of 643,500 m². Looking at individual transactions, 15 of the 20 largest were renegotiations.

In Q4 2024, net demand reached 92,500 m², bringing the total volume in 2024 to 315,900 m², a 33% increase compared to 2023. “However, the net demand included the occupancy of the building in Smíchov City by the owner itself, Česká Spořitelna, which added 75,000 m². If we leave this transaction aside for a moment, the net volume of 2024 would be only 1% higher than the previous year. It can therefore be said that the market was similarly strong as in 2023, with similar complications and dynamics across the city,” explains Josef Stanko.

In terms of individual sectors, financial companies accounted for 37% of net demand in 2024, followed by public/non-profit organizations with 11% and technology companies with 10%. In terms of location, 30% of net demand in 2024 fell to Smíchov, followed by the city center with 23% and Holešovice with 10%. However, both comparisons are strongly influenced by the aforementioned transaction.

Are offices more expensive than we are used to?

The highest achievable rent in the city center has moved slightly to EUR 29.50 per m² per month. The highest achievable rents in the wider city centre and outskirts of Prague remained stable compared to the previous quarter at EUR 19.50 and EUR 16.50 respectively. Of the capital cities of Central and Eastern Europe, Prague is the most expensive, comparable only to Warsaw, where rents also hover around EUR 29.00 per m².

A little optimism in order

In 2025, we will be closely watching how many of the 14 planned office projects (or 205,000 m²) will be launched this year. If so, some of them