With decreasing vacancy rate, the pressure on rental increase continued
The Prague office market grew by 38,200 square meters in the third quarter of 2018, thanks to completed projects Palmovka Open Park, AFI Vokovice amd the new headquarters of Eurovia. This data is based on the latest study by the Prague Research Forum (PRF). The members of the PRF are CBRE, Colliers International, Cushman & Wakefield, JLL, Knight Frank Thanks to this collaboration, we can provide consistent, accurate and transparent data about the Prague office market.
A volume of 38,200 sq m of modern office space was delivered to the Prague market in the third quarter of 2018, bringing the total modern office stock to 3.45 million square meters. New completions include four properties in three developments: Palmovka Open Park in Prague 8 with two buildings totalling 23,000 sq m of office space, AFI Vokovice in Prague 6 with 12,200 sq m of office space and the new headquarters of Eurovia in Prague 4 with 3,000 sq m.
Development of four new office buildings commenced during Q3 2018: new constructions of DOCK IN FOUR in Prague 8 (20,400 sq m) and Churchill II in Prague 2 (11,200 sq m) and refurbishments of Bubenská 1 in Prague 7 (20,000 sq m) and Centrum Vinice in Prague 10 (14,300 sq m). There is currently about 340,600 sq m of modern office space under construction, of which 64,700 sq m expected to be completed by the end of 2018. The remaining space has planned completion in 2019 and 2020.
A-class office stock has about 72% share in the total office supply, whereas the top-quality AAA-class properties accounted for 20%.
Gross take-up (including renegotiations and subleases) in the third quarter of 2018 amounted to 128,700 sq m, representing a 11% decrease on previous quarter. The total gross take-up year to date reached 358,200 sq m, down 2% year on year.
The highest demand in Q3 was recorded in the city districts of Prague 8 (26.4%), Prague 4 (22.5%) and Prague 1 (16.5%). The most active companies were from the IT sector (17.6%), followed by professional services sector (12.5%) and finance sector (11.1%).
The share of renegotiated leases in the third quarter of 2018 reached 35%. Net demand (new leases, expansions and pre-leases) accounted for about 65% of the total take-up. Net demand accounted for about 66% of total take-up in the period of Q1-Q3 2018.
The major transactions of the third quarter of 2018 were the renegotiation of ADP Employers Services (8,000 sq m) in River Garden I, followed by new lease of WeWork in Drn (5,800 sq m).
The share of vacant office space decreased to 6.1%, down 60 basis points in comparison with the revised results of Q2 2018. The vacant space totalled 211,600 sq m. The largest availability was in Prague 5 with 57,800 sq m, representing the vacancy rate of 9.6% in the district, followed by Prague 4 with 49,100 sq m and the vacancy rate of 5.3%. The lowest amount of vacant space was in Prague 2 with 3,200 sq m (vacancy rate of 2.5%) and in Prague 10 with 4,200 sq m (3.0%).
With decreasing vacancy rate, the pressure on rental increase continued. Prime headline rents in the city centre stood between €21.00 and €22.00/sq m/month in the city centre in the end of Q3 2018. The Inner city prime rents ranged from €15.00 to €16.50/sq m/month and the outer city from €13.50 to €15.00/sq m/month.