Last year, the DoDo company dealing with urban logistics dealt with a situation that says a lot about the state of the Prague office market. Her bosses were looking for new premises to move in for so long that they finally decided to have new offices built. In recent years, there has been a major office slowdown in the capital, which, however, will soon turn into above-average construction. And it will largely redraw the current business map of the city.
DoDo has grown by half to almost two hundred in the last year. So the company was looking for large spaces where it could continue to grow. But the offer in Prague was not good for either.
When she decided on Praga Office & Garden, where she built offices for her and subsequently leased Scott Weber, another problem arose for the Prague office market. The Covid pandemic prolonged construction, so DoDo even had to make it temporary for a while. “Despite the initial problem, we finally managed to find spaces that offer all our criteria,” breathed the head of DoDo Group Michal Menšík.
Great changes await Prague in the coming years
According to Menšík, the decisive factor for the company was where it moves. “We wanted to stay in Karlín. It is a very desirable location and finding a relevant space here is not easy, but we were lucky, “he describes.
Karlín is one of the important points on the office map of Prague. But there are changes in the air that Karlín will have to survive in front of the other districts. Colliers’ data speaks for itself, it is business to advise those who revolve around office and industrial premises. Colliers has data on what is happening in the office market in Prague, and especially what will happen in the coming years.
Makroslova says that in the next five years, 856 thousand square meters of offices are under construction or planned. Prague has nowhere to grow, its potential is far from being fulfilled. “In a recent survey, we found that, compared to comparable cities in Western Europe, Prague has existing office space per capita,” says Josef Stanko, an analyst at which the office market will recover this year. “The number of completed offices was below average in 2021, and we expect only a slight improvement in 2022 if developers meet all deadlines,” he adds.
But the years 2024 and 2025 will already mean the opening of new projects. Almost 200,000 square meters are added to Prague every year. The ten-year average is 130,000 meters. However, the estimates need to take into account a number of factors that may change. Developers are now struggling to make building materials more expensive, and permitting processes may not be as fast as they seem so far. Even so, it is certain that the set of development plans for the coming years will bring big changes.
Masaryk and the others
Behind the big numbers are absolutely specific projects that will change the face of Prague. The most important is, according to the size of Masaryk in the center of Prague (pictured), which, thanks to the architecture of the Zahy Hadid studio, aims to be a “prime” office building. “Other projects include large multi-sector projects in brownfields or long undeveloped areas – for example, in the vicinity of neglected metro stations or specifically Hagibor, where the developer has set itself the goal of creating a virtually new office location. It is definitely necessary to monitor the development on Rohan Island and around Smíchov Railway Station, “says Stanko. Let us remind you that the company of the developer Luďek Sekyra will build on both Rohan Island and Smíchov.
In the next five years, Smíchov will have the largest office construction. In addition to Prague 5, the fourth and eighth Prague city districts will then form the city’s imaginary business navel. Especially in Prague 8 between Palmovka and Florence, several interesting projects are being born, whether new or the reconstruction of existing premises. Prague 1 should then continue to keep expensive addresses. In terms of fields, Prague 1 is a popular place for law firms, financial institutions and consulting firms. From the Colliers data, it can also be read that IT companies in Prague 8 like it again.
However, completely new locations are also coming into play for the interest of companies. From the point of view of interest, they will find it more difficult, because the projects are growing on a green field, places are not yet significant on the business map and the desire to move will have to develop support for customers. Typically, it is Hagibor or Roztyly. “On the other hand, there was nothing in the places where City West, Waltrovka, Prosek Point or The Park in Chodov stand today twenty years ago, and today they are very successful projects,” adds Stanko.
Plans for 856 thousand meters of offices in the next five years and units of millions of square meters, Prague has the potential, but may change several factors. Just before construction materials rose and inflation escalated, the market seemed to be recovering from the morning of the covid pandemic. According to Colliers, it can be observed that developers are more cautious, especially in the construction of speculative projects, and banks make financing more conditional on leases.
“The current situation has made construction significantly more expensive for developers, thus increasing the need for rent. This is especially evident for projects that are currently under construction. However, it also affects reconstructions, interior installations and basically all entrances, ”describes Josef Stanko. Companies then demand shorter contracts, more flexible offices and slightly smaller spaces.
Some developers have even responded by redrawing their office projects as residential housing. An example is the Cimex of billionaire Petr Lukeš, who holds about 70,000 square meters.
“Somewhere we are just at the beginning of the reflection, elsewhere we are already preparing specific projects. It’s a very fresh thing that keeps us busy, so the exact number isn’t. But I think we’ll get to one-fifth or one-sixth of the total area. For new projects, such as the completion of our existing building on Kubánské náměstí in Prague, it will be a combination of apartments, offices and retail space, “said Cimex chief Miroslav Kosnar.
Keep up with the times
However, there is another trend that speaks to the office business. “Energy-efficient offices gain a plus body for employees, and overall, if the building where he works has less impact on the environment,” says Jana Mastíková, chief architect and studio partner, Loxia.
Colliers is also watching. Office buildings are becoming obsolete and sooner or later extensive renovations will be needed to retain tenants from a number of large companies. They in their annual reports show their own impact on the environment. “And replacing an old building with a new one can be something that companies simply get ordered from their headquarters,” Stanko said.
However, the construction of offices can also be affected by a simple calculation of developers, who gradually launch projects on the market so as not to endanger their price and overwhelm the market.
In 2019, the market reached a vacancy rate of almost four percent, which was the lowest in the monitored history. At the end of 2021, it was about eight percent, with the gradual rise in vacancy stopping. In absolute numbers, it is now less than 300,000 meters that are free. It may seem like a lot at first glance, but there are many smaller units scattered throughout the hundreds of buildings.
Although there are many variables in Prague’s office plans, it is certain that big changes will come. Adjustments caused by the covid or the increase in the price of materials against them will only be a short-term episode.