Speculative development in office segments recovers

Speculative development is returning to the Prague office market following two years of minimal new supply, says King Sturge in a new report. With some 105,000 sq.m. of modern office space due for completion this year, six out of 12 new buildings are speculative - a positive sign reflecting confidence in market recovery, the realtor says. Demand is coning from the pharmaceuticals, IT, finance and professional services sectors. By end-1Q11, Prague office space totalled 2.71m sq.m., 30% modern A - class offices and 70% B-class, mainly refurbishments. Developers are now prepared to bet on the quality of schemes and on market recovery. Prime headline rents in central Prague at €21 sq.m. per month are nearly equal to Vienna at €22, though below Warsaw at €26. 

Prague’s vacancy rate of 13% is in line with rates across CE capitals, apart from Warsaw at only 7% . In the second Czech city of Brno, the office market is still relatively young, but active marketing of the city as a cheaper quality alternative to Prague has encouraged transfer of some international business there, with the number of students at its technical universities attracting IT companies and service centres. With 35,000 sq.m. of new office space under construction including enlargement of successful office parks, further projects are prepared but awaiting pre-lease. Prime office headline rent is at €10-13, and the vacancy rate at 11.2%. The Moravian-Silesian region metropolis of Ostrava offers about 100,000 sq.m. of modern space but with development hard hit by the economic crisis, the vacancy rate is at 22% and there is no speculative development. Prime office rent is about €10-12.

Author: Miroslav Jílek

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