Praha is experiencing record demand for office rentals

Prague - Prague is experiencing high demand from tenants for office spaces this year. The volume of new leases in the first half of the year amounted to approximately 159,000 square meters, representing a year-on-year increase of 75 percent, and if the trend continues, this year will become a record for office rentals. Rents for the best spaces remain at last year's levels. They are comparable to those in Budapest, but six times lower compared to London, representatives of Jones Lang LaSalle stated today at a meeting with journalists.
    The demand from retailers for retail spaces also remains strong in the capital, while the volume of newly leased industrial spaces was relatively low over the past six months, according to the company.
    In the first half of this year, about 85,000 square meters of new offices were completed in Prague, and the total area of modern spaces now represents approximately 1.9 million square meters. An additional 85,000 square meters is expected to be completed by the end of the year. Despite the significant increase in supply, the average vacancy rate has decreased to 11 percent from 13.5 percent in mid-last year due to high demand. Telecommunications companies, such as Telefónica O2, and government and city organizations like the Prague City Hall are the largest contributors to this year’s office leases.
    Rents for the best spaces in the city center are around 19 euros (approximately 540 crowns) per square meter per month, which is similar to Budapest, Berlin, or Warsaw. In the most expensive London, offices cost 113 euros per square meter per month.
    Prague is also attracting interest from retailers looking to enter the local market, and according to Jones Lang LaSalle, the best shopping centers are experiencing demand exceeding capacity by more than 30 percent. There are 22 modern shopping centers in the metropolis, with an area exceeding 600,000 square meters. Three are under construction and will add another 85,000 square meters.
    Leasing 100 square meters of the best spaces in the centers costs retailers 50 euros (1,425 crowns) per square meter per month, which is the same as in the previous two years. The most lucrative shopping streets, such as Na Příkopě and the adjacent lower part of Wenceslas Square, will be more expensive - from 115 to 130 euros per square meter.
    The total volume of industrial and storage spaces in the Prague area represents about 1.05 million square meters, and another 200,000 square meters should be completed by the end of the year, with a significant portion being expansions of parks. New leases in the first half of the year accounted for 74,000 square meters, while the total for last year was 142,000 square meters.
    Rents for industrial properties in the first half of this year have slightly decreased, according to JLL, and range from 4.7 to 5.1 euros (134 to 145 crowns) per square meter per month. The reason is the number of new projects entering the market that have aggressive pricing policies, experts believe. The current rental level is comparable to that in Warsaw. However, modern warehouses are more expensive in Prague than in Berlin or Paris.
    Investment in real estate is on the rise in the country, with the market last year recording transactions worth approximately 1.5 billion euros, which is multiples higher than in 2002. Yield rates have stabilized after two years of decline, with investments in office spaces representing approximately 5.75 percent, retail centers six to 6.5 percent, and industrial properties seven to 7.5 percent.