“While office rental costs are on the rise globally, in most European countries, including the Czech Republic, the opposite trend is being observed. Because of the extensive development in Prague, rent has dropped over the past two years which understandably translates into the overall occupancy costs” says Head of Office Agency at the Prague office of Cushman & Wakefield, Radka Novak, adding: ‘We’re not alone in Central Europe. A similar situation can be seen in Warsaw, for instance, where the market is even more saturated than here”.
Rent costs in London’s West End have risen by almost five percent over the past year. However they still remain 13 percent behind the 2007 peak. Supply is really limited which means further growth is expected. Over the past two years, a low level of development has been characteristic in other European office locations.
By contrast, in Prague the portion of vacant spaces is on the rise. “The right location, an appropriate rent strategy and interior quality leads to project success despite the highly competitive market environment. Pressure for rent has not affected projects such as Quadrio or Blox which are unique in their locations,” says Radka Novak. “Despite the higher ratio of free spaces, the offer for large occupiers is relatively limited. If they are interested in a prime building in a popular location, they usually need to plan significantly in advance,” Novak adds.
The growth in vacancy is caused by the fast pace of supply and slow growth in terms of demand for offices causes the growth in vacancy. It is expected that the volume of supply will gradually drop to the level of 120 thousand sq m annually according to Michal Soták, Head of Research, Cushman & Wakefield.
“We expect that nominal rent may drop slightly further still this year. Aside from newly completed buildings, so-called secondarily released buildings are now entering the playing field, capable of offering quality spaces at highly attractive rates. This means landlords also need to fight for occupiers by offering enormous incentives like excused rent or contributions to fittings,” Radka Novak reveals.