310,000 sq. m of office space under construction.
Exclusive study reflects the development of the real estate market over the last 15 years.
CBRE, a global leader in commercial real estate services, has published a study describing the development of the Office, Industrial and Retail markets over the past 15 years; the period over which the company has been active on the Czech market.
The office market - the crisis is over, 310,000 sq. m in new construction
The volume of office space on the Czech market is growing rapidly. The strongest year was 2008 with 320,000 sq. m of office space added to the market. Construction was limited over the following years as a result of the global economic crisis. The average rate of construction after the crisis decreased by 45% when compared to the pre-crisis average. This year and next (2015) will again stimulate the market. "It is based on real data. We know that new office projects are already under construction with almost 350,000 sq. m of newly established and newly refurbished modern office space coming to the market" comments Richard Curran, Managing Director of CBRE. "This year we expect to see the completion of the following projects: Vision Park Karlin, Na Příkopě 14, Jindrisska 16, River Gardens II, City West C1 + C2, Rybná 9, 15 Jungmann, Friday, Quadrio, ArtGen, Riverview, The Blox and Aero House. In 2015 we expect BB Centre Delta, B3 Pankrác, Metronom, Meteor Centre Office Park, Aviatic, Crystal Prague, Green Line, Corso Court, Nová Palmovka and Enterprise," adds Curran.
The strongest long term interest is for office space in Pankrác and Budějovické and thanks to new construction there is greatly enhanced interest in the city centre of Prague. Other popular office locations are Karlin, Smíchov - Andel and Butovice - Stodůlky. In these areas, we see a high proportion of Class A office space. The vacancy rate of office space has continually fluctuated over the past 15 years. The historical low was in 2007 when it dropped below 6%. Currently the vacancy rate stands above 13%. In 2015, we expect to the vacancy rate to rise to around 15%, a similar level to that seen in 2002 and 2004. Increased vacancy rates affect the achievable rents and create a ‘tenants’ market’. Historically, the highest rents were in 2008 (before the crisis) at EUR 23/ sq. m/ month. During the following years the prime rent remained stable at EUR 21/ sq. m/ month until 2012. Since then and through 2013 we saw a decrease in rents to EUR 19 – 20/ sq. m/ month. We expect to see this decline continue in the short term,
Industrial market – growth is led by regions, prime rents are lower in and around Prague than in regions
The industrial market reached its peak in 2007, after significant new supply, nearly half of which was delivered in the Greater Prague submarket. This trend dramatically changed after 2010 and new construction has moved to the regions. While in 2007 and 2008 pre-leasesaccounted for approximately 60% of total take up, from 2010 we have seen the share of pre-leases consistently being above 90%. The construction boom in 2007 and 2008 was reflected in 2009 having the highest vacancy in our recorded history at approximately 18%.This was followed by a sharp decline in new construction and saw the vacancy rate drop to the current levels of 7.5%. During the massive construction of 2007 and 2008 we also saw the highest take up levels. After a drop in demand during 2009 the structure of take up changed over the past years with a the majority of activity being renegotiations or pre-leases. Greater Prague currently has the largest concentration of industrial premises with almost 1.8 million sq. m being located around the capital. The next prominent areas are the Plzen and South Moravian regions. Since 2011 the prime rents in Prague have been lower than the prime rents achievable in the regions. In Greater Prague rents of EUR 4.25/ sq. m/ month are achievable whilst the EUR 4.25 is achievable in the regions.
"It is expected that the development of new sites all over the country will continue and we will also witness the moving production from Western Europe," says Filip Kozak, Head of Industrial Agency at CBRE.
Retail market - in 2015, the total volume is expect to reach 2.5 million square meters
During the global economic crisis from 2008 onwards the volume of newly built retail space decreased significantly. Levels of new construction reached their historic minimum but this has been followed by a recovery in the market. “In 2014, two new shopping centres have opened so far: Gallery Teplice and Pivovar Decin. And, several new shopping centres are currently under construction with completion expected before the end of the year such as Quadrio in Prague, Business Center Frýdek - Místek, Géčko Ostrava and Lužiny Business Center in Prague"says Klára Bejblová, Senior Researcher at CBRE and adds that the growth in the retail real estate market certainly does not stop there "In 2015 Královo Pole in Brno and Nová Palmovka will open and there are also plans for Central Kladno and Aupark in Hradec Králové. The total amount of retail space continues to grow and in 2015 may reach of 2,500,000 sq. m"
The most saturated area (after Prague) are the Liberec Region, followed by Plzen and the Olomouc Region. The lowest levels of saturation is in the Vysočina region with only one shopping centre. The highest rents are in the centre of Prague on Na Prikope street(EUR/170 sq m/month) and in premium shopping centres (EUR 85 /sq m/month).