Prague's Office Market Reaches New Heights

The Prague office market is experiencing a dynamic period of growth, with the total volume of modern office space reaching an impressive 3.94 million m² by the end of Q2 2025. Quality remains a top priority, with 74% of this space being Class A buildings and a significant 19% boasting AAA-rated certification, ensuring top-tier facilities for businesses.

Surge in Construction Activity and New Developments

Construction activity in Prague's office sector saw a substantial boost, with almost 212,600 m² of office space currently under construction—a robust 23% increase quarter-on-quarter. While Q2 2025 saw the completion of two smaller projects (NR7 and VN62, totaling 6,600 m²), the quarter was marked by the commencement of four significant new developments.

These include the ambitious reconstruction of Danube House (19,900 m²), the new Rohan City A2 building for Banka Creditas (16,800 m²), Vydrovka (6,700 m²) in Prague 8, and the River Bridge Office Hub (2,700 m²) in Prague 5. These projects signify a strong commitment to expanding Prague's modern office inventory.

Historic Demand Drives Market Forward

Q2 2025 recorded one of the highest quarterly results in the Prague office market's history for demand. Gross realized demand soared to 164,800 m², representing an astounding 87% increase quarter-on-quarter. Net realized demand stood at 110,300 m², significantly influenced by owner-occupied transactions, which accounted for a substantial 62,000 m² (56%) of this figure.

Beyond owner-occupancy, renegotiations comprised 52% of remaining gross leases, indicating a strong desire for businesses to remain in well-located, quality spaces. New leases and expansions made up the remaining 47%, signaling continued business growth and relocation needs. Notable owner-occupied transactions include ČEZ (44,200 m²) at Smíchov City and Banka Creditas (16,800 m²) at Rohan City A2.

Decreasing Vacancy and Key Locations

The positive market dynamics led to a healthy net absorption of 23,800 m². Consequently, the overall vacancy rate saw a significant decrease, falling by 43 basis points quarter-on-quarter to 6.57%, and by an impressive 131 basis points annually to 6.6%. The total vacant office space in Prague now stands at 259,000 m².

For businesses evaluating locations, Prague 4 and 5 currently offer the most vacant areas, potentially providing more options. Conversely, Prague 2 and 8 demonstrate remarkably low vacancy rates, at 2.0% and 3.9% respectively, reflecting their high demand and desirability.

Stable Rents with Upward Pressure in Key Areas

Prime rents in Prague's city center remained stable at 29.00–30.00 €/m²/month, affirming its premium status. In the inner city, prime rents saw a slight increase to 19.50–20.50 €/m²/month, while outer parts of Prague also experienced a rise, reaching 15.50–16.50 €/m²/month. It's important for prospective tenants to note that rising construction costs are increasingly influencing fit-out contributions and other landlord incentives, a trend reflecting the broader market conditions.

Outlook: A Robust Future for Prague Offices

Simon Orr, Head of Office Sector at CBRE, provides an optimistic perspective, stating, “The boom in owner-occupied properties and the first signs of speculative development suggest a positive medium to long-term outlook for Prague offices.” He highlights that rental growth in most peripheral areas and significant price increases for premium properties are narrowing the gap between existing and new project rents, indicating a maturing market.

Orr also notes that “Tenants are also gradually getting used to higher price levels, similar to more developed markets.” While contract renegotiations are expected to dominate in the short term, especially for larger tenants awaiting their lease cycle, the underlying market fundamentals point towards continued strength and opportunity.

Source: crestcom.cz