The total gross leasing activity in Q3 2021 increased by 23% year-on-year
Prague Research Forum Announces Office Market Figures for Q3 2021
- In Q3 2021, new leases in existing premises dominated the market.
- The vacancy rate further slightly increased to 8.0%.
- Share of immediately available space for sublease decreased by 21% q-o-q.
- Net absorption was negative and reached -9,100 sq m in Q3.
- The annual supply in 2021 is expected to be the lowest since 2016.
- Three office buildings commenced construction during Q3 2021.
- The prime rent stays between 22.00 and 22.50 EUR/sq m/month.
Office Stock and New Supply
There were no major completions in the third quarter of 2021, and Prague’s office stock thus remained at 3.73 million sq m.However, in the last three months of the year, we expect the completion of about 12,900 sq m of modern office space in three projects. Overall, 172,800 sq m of office space were under construction by the end of September, with delivery scheduled mainly for 2022 and 2023. Three buildings commenced construction in Q3: Legatica (8,300 sq m) and Metalica (18,000 sq m) in Nová Waltrovka development in Prague 5 and Red Court (7,100 sq m) in the vicinity of Rustonka in Prague 8.
A-class office stock has a ca. 73% share of the total office supply, whereas the top-quality AAA-class properties accounted for over 17%.
The total volume of space immediately available to sublease in Q3 2021 accounted for 48,700 sq m, representing a q-o-q decrease by 16,300 sq m. Several factors led to the reduction of sublease space: some of the office space was sub-let, some companies withdrew their premises from the market, and part of the areas ended their lease contracts and became standard vacant space.
Gross take-up (including renegotiations and subleases) in the third quarter of 2021 amounted to 103,700 sq m, which represents a 17% increase compared to the previous quarter and a 23% y-o-y increase.
The highest demand in Q3 2021 was recorded in the city districts of Prague 5 (22%), followed by Prague 8 (18%) and Prague 9 (14%). The most active companies were from the finance sector (16%), followed by the IT (14%) and the manufacturing (12%) sectors.
The share of renegotiated leases in the third quarter of 2021 reached 38%. Net demand (new leases, expansions and pre-leases) accounted for 58% of the total gross take-up, and the share of subleases accounted for the remaining 4%.
Major Office Leasing Transactions
The most significant transactions of the third quarter of 2021 were the renegotiation of Nationale Nederlanden (6,000 sq m) in Zlatý Anděl in Prague 5, followed by the renegotiation of a space for Aeskulab (3,500 sq m) in Hadovka Office Park in Prague 6. The largest new deal was closed by Zásilkovna (3,300 sq m) in Balabenka Office Building in Prague 9.
As of Q2 2021, Prague Research Forum includes net absorption figures amongst the key office market indicators. Net Absorption represents the change in the occupied stock within a market during the survey period. In Q3 2021, net absorption was negative with -9,100 sq m.
With limited new office supply and negative net absorption, the vacancy rate increased slightly by 20 bps to the level of 8.0%. The vacant space totalled 298,400 sq m as of Q3 2021. The most extensive availability was in Prague 4 with 74,000 sq m, representing a vacancy rate of 7.7%, followed by Prague 5 with 59,400 sq m and a vacancy rate of 9.4%. The lowest amount of vacant space was recorded in Prague 2 with 4,900 sq m (a vacancy rate of 3.8%) and in Prague 10 with 9,300 sq m (6.3%).
Despite the rising vacancy rate, prime headline rents remained stable and stood between €22.00 and €22.50/sq m/month in the city centre at the end of Q3 2021. Inner-city prime rents ranged from €15.50 to €17.00/sq m/month and €13.50 to €15.00/sq m/month in the outer-city.