Key findings

• 32% of the new office space planned for this year was completed in the first quarter, leaving 53,400 sqm to be completed in 2022
• Over 180,000 sqm still under construction, more projects to be launched soon
• Office space offered for sublease in the first quarter fell by 24% quarter-on-quarter
• Gross realised demand was the highest since the pandemic, up 44% year-on-year
• Net absorption was again positive in the first quarter, reaching 1,500 sqm
• The vacancy rate increased by 60 basis points to 8.4%
• Prime headline rent grew again to €24.00–24.50 per sq m per month

Office stock and new supply

The total size of modern office space in Prague at the end of the first quarter of 2022 was 3.75 million sqm. Only one building was completed in the first quarter, namely Kaprain's Harfa Business Center B (25,200 sqm). A further 53,400 sqm is scheduled to be completed in nine other projects by the end of 2022. Even if the deadlines are met, new office completions will be below average. A further 144,000 sqm is planned for 2023, assuming completion within current deadlines.

In the first quarter, refurbishment started on three office projects in Prague 1. In all cases, these are complete renovations of historically valuable buildings. Mint Investment has started the reconstruction of Palác Schiller (1,800 sqm), Crestyl has started the refurbishment of Náměstí Republiky 7, or NR7, (3,400 sqm) and Lasalle IM has started the refurbishment of a complex of three buildings on Na Příkopě street known as 100Yards (3,500 sqm). As of the end of March 2022, 182,600 sqm of office space was under construction, with most of it in Prague 1 (25%), Prague 5 (24%) and Prague 8 (21%).

The majority of the modern office supply (73%) consists of A-class buildings, with the highest quality AAA-rated space accounting for more than 17% of the total office stock.

The total supply of vacant sublease space reached 59,800 sqm in the first quarter, 24% less than in the previous quarter.

Office take-up

Total gross take-up (including renewals - renegotiations - and subleases) reached 135,600 sqm in the first quarter of 2022, a quarter-on-quarter increase of 28% and a year-on-year increase of 44%, which is also the highest recorded since the fourth quarter of 2019.

The highest gross take-up in the first quarter was recorded in Prague 8 (28%), followed by Prague 5 (25%) and Prague 4 (18%). The highest demand for offices was realized by IT companies (27%), manufacturing companies (13%) and consulting/professional services (10%).

New leases of existing space and expansions accounted for 44% of total gross take-up, while pre-letting of new offices under construction was 12%. A further 42% was accounted for by renewals of existing contracts (renegotiations). The remaining 2% is accounted for by subleases of already leased space.

Major office leasing transactions

The largest transaction in the first quarter of 2022 was the renegotiation of Seznam.cz's lease in Palác Křižík in Prague 5 (14,800 sqm). This was followed by a pre-lease during construction in the Red Court building in Prague 8, which will become the headquarters of Czechoslovak Group (7,100 sqm) and the renegotiation of the lease of pharmaceutical company MSD Czech Republic in the Riverview building (6,800 sqm).

Office vacancy and net absorption

Net absorption reflects the change in occupied office space on the market over a given period. Compared to the previous quarter, the occupied office space increased by 1,500 sqm. In the year-on-year comparison, absorption was also positive and Prague added 20,500 sqm of occupied office space compared to the first quarter of last year.

The office vacancy rate increased from 7.8% at the end of 2021 to 8.4% in Q1 2022. The total vacant office space at the end of the quarter reached 315,300 sqm. The highest vacancies were in Prague 4 (76,100 sqm) and Prague 5 (46,300 sqm). On the other hand, the least vacant space was in Prague 7 (9,500 sqm) and Prague 10 (8,900 sqm). The highest vacancy rates were in Prague 3 (26.6%) and Prague 9 (21.8%), the lowest in Prague 7 (3.9%) and Prague 10 (6.1%).

Rents

The prime rent in the first quarter of 2022 increased again and is in the range of €24.00-24.50 per sqm per month in the city centre, €16.00-18.00 per sqm per month in the inner and €13.50-15.00 per sqm per month in the outer parts of the city.

In addition to rents, rising construction prices are still reflected in offers of allowances for office build-outs or other incentives.

The members of the Prague Research Forum – CBRE, Colliers, Cushman & Wakefield, JLL, Knight Frank, supported with the associated member Savills – share non-sensitive information intending to provide consistent, accurate and transparent data about the Prague office market. RICS supports the activities of the Prague Research Forum.