During the third quarter, new construction began for three new office projects and one reconstruction: the first phase of Smíchov City Na Knížecí (SM1) in the long-awaited Smíchov City project in Prague 5, Florenc Gate in Prague 8, Košířská brána in Prague 5 and the reconstruction of the Olbrachtova project 5 in Prague 4. Approximately 26,200 m2 of modern office space is currently under construction with planned completion by the end of 2020 and another 128,600 m2 with planned completion in 2021 and 2022.
Class A buildings make up the majority of the offer of modern offices (71%), while the share of the highest quality premises with an AAA rating in the total volume of office space reaches less than 18%.
The total supply of unoccupied subleases in the third quarter of 2020 reached 47,200 m2, which is an increase of 9,700 m2 compared to the previous quarter.
Realized demand
The total gross realized demand (including renewed contracts - so-called renegotiations - and subleases) reached 86,200 m2 in the third quarter of 2020, which represents a quarter-on-quarter increase of 9% and a year-on-year increase of 7%.
The largest gross realized demand in Q3 was recorded in the city districts of Prague 4 (45%), followed by Prague 8 (21%) and Prague 5 (11%). The most active companies were companies operating in financial services (33%), followed by companies from the IT sector (18%) and companies operating in professional services (7%).
The share of renegotiations in the total realized demand reached 62.4%, while the total volume of newly leased premises, including pre-leases and expansions, represented 30.7% of the total gross realized demand. The total share of subleases was 6.9%.
Significant rentals
The largest transaction in the third quarter was the extension of UniCredit Bank's lease (22,900 m2) in the BB Centrum Philadelphia project in Prague 4, followed by the extension of Bluelink International's lease (3,200 m2) in the Florentinum project in Prague 1, and the new lease of Verizon Czech ( 3,200 m2) in the Life Building C project in Prague 4 and the extension of the lease of Good Data (2,500 m2) in the Danube House project in Prague 8.
Share of unoccupied area
The share of unoccupied office space in the total supply in the third quarter reached 7.2%, which is an increase of 1.1 percentage points compared to the results for the second quarter of 2020. The total volume of vacant offices reached 267,300 m2. The largest volume of available offices was in Prague 5 with 59,300 m2, which represents an vacancy rate of 9.1%, followed by Prague 4 with 58,500 m2 and an vacancy rate of 6.1%. The lowest number of vacant offices was in Prague 2 with 5,100 m2 (vacancy rate 3.7%) and in Prague 3 with 6,700 m2 (5.5%).
Rent
Although the vacancy rate has increased in the last two quarters and overall activity has slowed, the highest rents achieved in the third quarter remained stable, ranging from € 22.50 to € 23.00 per m2 per month in the city center, € 15.50–17.00 EUR per m2 per month in the inner and EUR 13.50-15.00 per m2 per month in the outer parts of the city.
Reclassification of office space
The Prague Research Forum and its members - CBRE, Colliers International, Cushman & Wakefield, JLL and Knight Frank - reclassified in 2020 all properties that are currently included in the total area of Prague's modern offices so that the evaluated criteria better reflect modern trends in real estate and development.
The minimum requirements for inclusion in the overall area of modern Class A or Class B offices have remained unchanged and include:
Completion or reconstruction after 1990
The size of the leasable area is at least 1,000 m2
Available units are advertised accordingly
The following main categories with a brief description are included in the quality assessment of the property:
Technical specifications - how well the property is built and equipped.
Smart technologies - the efficiency of the building, what smart technologies they use and what above-standard building equipment do they offer
Location - accessibility, services and civic amenities near the property
Service and security - how the building is safe and managed
Parking - parking conditions with different requirements for buildings in the city center, in the inner city and in the outer city
Age of the building - completion of the building or last reconstruction
Subjective evaluation - subjective evaluation of members of the Prague Research Forum.
Each of the criteria has subcategories that allow for scoring, leading to a final property score. The maximum values for each category are as follows:
As a result of the reclassification, 47% of properties are included in Class A, with only 8% achieving the best points and obtaining an AAA rating. The remaining 53% of properties are rated as Class B.
About Prague Research Forum
The Prague Research Forum is a voluntary, non-binding organization established for the purpose of better cooperation in the market research of offices in Prague.
PRF members are CBRE, Colliers International, Cushman & Wakefield, JLL and Knight Frank, which share basic information about the Prague office market in order to provide the most complete, accurate and transparent data on its development.
RICS supports the activities of the Prague Research Forum.
Source / photo: Cushman & Wakefield / Illustrative photo (www.pexels.com)
