The construction of office spaces in Prague has increased, but the interest in them is declining.

Prague - The construction of office buildings continues to rise in Prague, but the demand for them is declining. By mid-year, the area of Prague's offices increased by 6.2 percent to 2.1 million square meters. Interest was newly in 70,200 square meters, which is 56 percent less than last year. The most sought-after area was Prague 5, while planned projects will concentrate in Prague 4 and 6, as stated in a survey released by the real estate consultancy company DTZ at today's press conference.
    As demand for commercial real estate, which includes warehouses and retail spaces in addition to offices, decreases, so does their yield. By mid-year, the highest initial yield from these real estates hovered around six percent, which represents a decline of almost half compared to 2002.
    The most profitable investments are in industrial and logistics warehouses, where the yields are 6.5 percent. Following them are retail investments at 5.5 percent. The least advantageous are investments in office buildings, which are a quarter of a percent lower.
    Due to the declining yields from commercial properties, investors are shifting their investments to the residential market, where sales still significantly outweigh rentals.
    Another consequence of the declining profitability of investments in offices, retail, and warehouses is the exit of foreign investors from the Central and Eastern European market. "Investors feel that trading in real estate is no longer as easy in this region as it used to be, when any investment here would be profitable," said DTZ's investment head George Lewis.
    He added that investors from Great Britain, the USA, Austria, and Germany are the most active in our market, preferring investments in retail with multifunctional projects. According to Lewis, their rental prices are expected to increase in the future due to rising demand and the improving quality and standards of shopping centers.
    Currently, the average rent for these spaces in Prague is 19.5 euros per square meter (546 CZK), while outside the capital, the average price is 18.5 euros (518 CZK) per square meter. Rental prices for office buildings are slightly lower, averaging around 18 euros (504 CZK) per square meter in central Prague, while in Brno and Ostrava, it is 12 euros (336 CZK). The lowest office rent is in Plzeň, where renting an office building costs about 10 euros (280 CZK).
    According to Lewis, the reason for the low price of Plzeň's rent is that it entered the market the latest and is still developing. "The real estate market in Plzeň and Ostrava will continue to expand. However, this does not apply to Liberec, whose potential is being overrated," Lewis concluded.