"Demand for flexible offices in Prague reached record values in the 1st quarter of 2023, when it grew by 23% year-on-year. At the same time, the total volume of coworking spaces also increased last year. At the end of the year, it reached over 116,500 m2, which represents about 3% of all modern offices in the metropolis," comments Lenka Ferguson, specialist in flexible offices and coworking spaces at CBRE.
Historically, the demand for serviced offices has always been driven by companies in the technology sector. However, in the last sixteen months, which is also the average length of new contracts, there has been a significant return of large corporations providing professional services in HR and customer support for consumer products, as well as pharmaceutical firms and media and marketing companies.
Like elsewhere in the world, new work habits related to the covid-19 pandemic, be it remote work, job sharing or a hybrid work model, have been driving the growing interest. However, there are also a number of local factors that make Central and Eastern Europe, including Prague, attractive for tenants and potential operators of coworking spaces. The main one is geopolitical and macroeconomic stability. Others include a qualified workforce, which, however, is reasonably priced compared to Western Europe or the USA, as well as a high proportion of certified buildings on the office market.
"Prague has one of the highest shares of certified office buildings on the old continent. They occupy 48% of the modern office market, while the European average is around 22%. The main reason is that the construction of commercial real estate, including offices, started here relatively recently. At the same time, competition is quite strong on the domestic market, so property owners are willing to additionally certify existing buildings as well," explains Martin Vejražka, head of the sustainability department at CBRE.
Flexible offices are attractive
Flexible offices attract a wide range of companies: start-ups, small businesses, but also multinational companies that expand into new markets, expand their activities in the region or establish development and training centers here. There are also companies that use flexible offices for specific teams or outsource part of their activities.
"Currently, we are registering an increased number of international companies entering the market of Central and Eastern Europe, including Prague. Instead of renting standard offices, they choose coworking spaces as their background. They are flexible in the length of the lease, offer high quality equipment and services, and at the same time are available practically immediately. In addition, they are located in modern administrative buildings meeting ESG criteria, which is crucial for many Western companies these days," explains Lenka Ferguson.
CBRE predicts that demand from operators will continue to grow in the coming months, but it will be hindered by two main obstacles in the domestic market: the limited construction of new office buildings in the metropolis and the politics of many office property owners. International coworking operators are used to a different approach and conditions from abroad. In London, for example, it is not at all possible to consider running an office building without an appropriate proportion of flexible offices run by a specialist operator.
"However, this is still not the custom in Central and Eastern Europe. It happens that when the owner decides to include flexible and coworking spaces in the project, he starts to operate them himself, without previous knowledge and experience in this specific field," says Ferguson.
Occupancy is increasing
From 2018 to the present, the most space was leased to operators in the city center (28,800 m2), the Pankráce-Budějovická area (23,400 m2) and in Karlín (18,800 m2). The occupancy of flexible offices and coworking spaces in the country is around 75%. In desirable Prague locations, such as Karlín or the city center, even from 85 to 100%, which are results above the European average.
The highest rents are achieved by operators on Národní trida and Na Příkopě Street, followed by Karlín. The monthly fee for a workplace in a separate office is 400 euros on average. Serviced offices in locations further from the center, which, however, still offer a high standard of equipment and services, start from 330 to 350 euros.
Providers of flexible offices in the CEE region actively adapt to the changing needs of companies and offer tailor-made solutions. "They focus on interesting design, collaborative rooms, and meeting rooms equipped with state-of-the-art audiovisual and communication technology. In addition, they organize various social and educational events for members, such as joint breakfasts, exercises and the like," concludes Lenka Ferguson.
