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Prague Research Forum Announces the Office Market Figures for Q3 2014

The Prague Research Forum is pleased to announce the office market figures for the third quarter of 2014. The members of the Prague Research Forum – CBRE, Colliers International, Cushman & Wakefield, DTZ, JLL – share non-sensitive information with the aim of providing clients with consistent, accurate and transparent data about the Prague office market.

Office Supply/Stock 

Total modern office stock in Prague remained stable in the third quarter of 2014 and totalled 2.96 million square meters. A-class properties represent approximately 67% of the modern stock; B-class properties represent the remaining 33%. Top quality AAA class offices reached 264,800 sq m with a share of 9% on total office stock. 

After strong second quarter of 2014, no new office buildings were completed in Q3 2014. Around 103,600 sq m of office space is under construction with planned completion by 2014 year end. Thus a total 180,700 sq m should be completed in Prague this year, the highest level since the record year 2008. Major projects with expected delivery in Q4 2014 include BB Centrum Delta (32,500 sq m) in Prague 4, ArtGen (22,900 sq m) in Prague 7 or The Blox (16,300 sq m) in Prague 6. 

In the course of Q3 2014, no new office buildings started construction. 

Office Take-up 

Gross take-up (including renegotiations) in the third quarter amounted to 93,100 sq m, which represents an increase of 53% compared to the previous quarter and 77% year on year. 

The highest volume of gross take-up was recorded in Prague 4 (40%), Prague 8 (16%) and Prague 1 (14%). 

Insurance companies were most actively leasing or renegotiating office space (35% of gross take-up) followed by professional services (15%) and manufacturing companies (15%). 

The total share of renegotiations of gross take-up increased from 43% in Q2 2014 to 55% in Q3 2014. 

Significant Office Leasing Transactions 

The most significant transactions of the third quarter of 2014 were the renegotiation of Česká pojišťovna (32,200 sq m) in two buildings in Prague 4, the renegotiation of ExxonMobil (8,600 sq m) in Atrium Flora in Prague 3, and the new lease of NRC Česká republika (3,700 sq m) at River Garden II in Prague 8.

Office Vacancy 

The vacancy rate decreased to 14.0% by 0.6 percentage points in Q3 2014. Total vacant space amounted to 416,100 sq m. The highest vacancy rates were recorded in Prague 7 (26.6%), Prague 9 (24.4%) and Prague 2 (23.9%). Conversely, the lowest vacancy rates were recorded in Prague 4 (6.3%), Prague 10 (7.3%) and Prague 3 (11.9%). 

Rents   

Prime headline rents in all three submarkets remained stable in Q3 2014. Prime headline rents in the city centre vary between 18.50 – 19.50 €/ sq m/ month, in the inner city between 15.00 and 17.50 €/ sq m/ month and in the outer city between 13.00 and 14.50 €/ sq m/ month. 

Appendix

Definitions

Stock: Total completed office space (occupied and vacant), newly built since 1990 or refurbished, A and B class offices, owner occupied and for lease and public authorities’ buildings. Buildings with leasable area lower than 1,000 sq m are excluded.

New supply: Completed newly built or refurbished buildings that obtained a use permit in the given period.

Minimum requirements for inclusion into modern office stock of A, B class quality:

ü  The building was built or refurbished after 1990

ü  Available units are being advertised in appropriate way

ü  The GLA of the building reaches over 1,000 sq m 

Major evaluation criteria for A and B class office properties include: 

ü   Date of completion/refurbishment

ü   Size and quality of the reception area

ü   Internal height in the working areas

ü   Raised floors

ü   Suspended ceilings

ü   Flexible layout of office areas

ü   Air-conditioning

ü   Parking

ü   Contiguous floor plates

ü   Sustainability of the office building 

Other criteria include architectural awards, openable windows, reserve power supply, external shading, modern lifts and 24/7 accessibility and security. 

Take-up: A gross figure representing the total floor space known to have been let or pre-let, sold or pre-sold to tenants or owner-occupiers over a specified period of time. It does not include space that is under offer. A property is taken up when the contract is signed. Total take-up includes renegotiations, lease extension and subleases, net take-up excludes these.

Vacancy rate: Ratio of physically vacant space in completed buildings on the total stock.

Prime rent: Achieved rents that relate to new prime, high specification units in prime locations. 

Sublease: Space offered for lease by a tenant who is contractually obliged to occupy the premises for longer period than what they need..

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