The second half of 2020 saw a significant drop in office supply with only 40,900 sq m of new space delivered to the market, a decline of 63% compared to the first half of the year and 67% down y-o-y, according to latest Savills research.
The annual cumulated new supply in 2020 included 13 office buildings totalling 151,000 sq m, demonstrating a 26% decrease in new supply year-on-year. The highest volume of new space was delivered to Prague 8 (37,700 sq m), followed by Prague 4 (35,500 sq m). Total office stock in Prague grew to 3.75 million sq m, with Prague 4 still being the largest office submarket (966,500 sq m), followed by Prague 8 (650,800 sq m) and the Prague 5 district (579,300 sq m).
Total leasing activity in Prague in H2 2020 reached 184,900 sq m, being 25% above the gross take-up levels registered in the first half of 2020. However, in a year-on-year comparison, a decline of 19% was recorded. The activity in H2 2020 was mainly driven by companies from the IT sector and professional services.
Due to the considerably weaker demand seen throughout the whole year, the cumulative annual leasing activity added up to only 333,000 sq m, indicating a 25% decrease y-o-y (442,500 sq m was transacted in 2019). Net demand continued weakening and in the second half of 2020 amounted to 69,900 sq m, indicating a 49% year-on-year decline. The total annual net take-up in 2020 reached 167,200 sq m which was 38% below the 2019 results.
From the beginning of 2020, when the share of unoccupied office space in Prague stood at 5.4%, the vacancy rate rose to 7.0% at the end of the year, being up by 150 bps from the end of 2019. This corresponded to 262,000 sq m of immediately available space.
Pavel Novák, head of office agency, Savills CZ&SK, says: “ The highest volume of existing vacant stock was again, for the 13th quarter in a row, registered in Prague 5 and Prague 4, while the most significant change in vacancy rate in the last 12 months showed Prague 9, going up from 2.6% at the end of 2019 to 11.4% at the end of 2020. On the other hand, the highest occupancy levels continued to be seen in the Prague 2 district. Even though the overall activity on the market slowed down and vacancy rate went up, prime headline rents remained unaffected by the situation.“