Sober growth, higher vacancy rate

Brno is the second largest office market in the country after Prague. Thanks to its location, highway connection, lower prices and stable and adequate construction of new office space, it has a very good chance of attracting new tenants or brands that want to expand further in the Czech Republic. "The good news is that they still have room. In the long term, the vacancy rate here is slowly but steadily increasing and currently stands at 12.8%, which represents approximately 88,300 m²,” explains Josef Stanko, senior analyst at Colliers, adding that this long-term growth is largely a way by the moderate but constant development of the local modern office market, which is not absorbed so quickly.

The total volume of new construction in 2023 was approximately 26,100 m², which is only slightly below the five-year average. The biggest completion in 2023 was the extension of the Centrum Šumavská building. The steel addition added three floors to the original building built in 1915 and expanded the office space by approximately 13,000 m². Currently, 55,200 m² are under construction within 5 projects. But the year 2024 will be less generous for new office spaces, as only 2 of them are planned to be completed. On the contrary, the year 2025 should be optimistic from the point of view of new construction, as several larger projects are planned.

In Ostrava, the market for modern offices has been very stable for several years. Last year's completion of the Organica building, which with its office size of 19,800 m² is one of the four largest administrative projects in Ostrava, significantly stirred up the local market. At the end of Q4 2023, we recorded a total office space of 239,300 m², with the vacancy rate rising to 17.1%, mainly due to the movement of large tenants to Organika.

Office markets in other regional cities, such as Olomouc, Ústí nad Labem, Hradec Králové and Pilsen, remain without significant new activity. The modern office market here is usually between 30,000 - 100,000 m². "The number of companies looking for quieter locations or expanding into these regions, however, is constantly growing. They are attracted both by the lower costs of renting office space and easier access to human resources. Unfortunately, companies here often encounter a problem with the availability of suitable office space, and it looks like the situation will not improve in the near future," comments Josef Stanko.

Growing demand, lower price

The demand for office space in Brno is growing mainly due to the current boom in IT centers and business services. The net realized demand increased by 43% year-on-year (65,500 m²), which reflects the higher demand on the Brno office market, in the last seven years it usually ranged from 40,000 to 60,000 m². Significant transactions include, for example, the renegotiations of Honeywell, Notino, Oracle and Atlas Copco.

In Ostrava, the office space market is smaller than in Brno and Prague, with a limited number of transactions. In 2023, the gross realized demand reached approximately 23,300 m², with the share of renegotiations being 51%. Significant transactions include the renegotiation of Moneta Money Bank and Siemens.

"Rent in Brno is not growing so fast yet. At the end of the 4th quarter of 2023, the rent for the best office space, the so-called prime, in modern offices was around EUR 16.50 m²/month. In Ostrava it is even less, in our opinion, the prime rent ranges from EUR 14.00 to EUR 14.50," says Josef Stanko.

Limited competition in the flexible office market

The serviced office market has great potential in regional cities. It is slowly developing in Brno and Ostrava, where recently it is mainly represented by the Clubco brand operated by CTP. In other regional cities, mainly small local operators operate, often in very limited space, the capacity of which does not correspond to the demand of international companies that would like to expand and offer their employees in the regions the opportunity to use serviced offices.