Research
Prague Office market report • 2006 Contents Prague map
2-3
Market breakdown
4
Market data
5
Avenir Business Park, Prague 5
Executive summary •
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Leasing Despite a decrease in available space across the market during the past 18 months, the vacancy rate remains relatively high at circa 11%. While strong economic growth should underpin occupier confidence, any further erosion of surplus supply will be dependant on the absorption not only of existing supply, but also of new stock entering the market. Investment Prague remains attractive to international investors, despite a substantial tightening in yields over the last decade and the broadening of investors’ geographical horizons. Prime yields now stand at circa 5.75%, both in the city centre and in the emerging office nodes. Prague and the wider Central and Eastern European markets are the focus for a growing number of institutional investors’ contributing to a considerable weight of money seeking investment opportunities.
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Prague office market report • 2006
Knight Frank
Prague region
Prague 8
Prague 9
Prague 7
Prague 6
Pragu Prague 1
Prague 3
Prague 2 Prague 10
Prague 15
Prague 5
Prague 4
Prague 13
Prague 11
Prague 12
“Total stock in the market now exceeds 1.9 million sq m, more than two and a half times the level a decade ago.”
www.knightfrank.com
Prague office market report • 2006
Knight Frank
Central M Krizikova
M Malostranska Námésti Republiky
Prague 1 M Staromëstska º Mustek M
Národni M Trida M Museum
M
M Karlovo Námésti Andel
M Florenc
M M Hlavni Nadrazi Jiriho Z Podébrad M
M
M I.P. Pavlova
Námésti Míru
Prague 2
Prague 4 ^
3
M Vysehrad
ue 14
M Prazského Povstani M Pankrac
5
E6
Prague 4
M ^
Budejovická
M Kacerov
E50
^
M Roztyly
E50 Chodov M
Prague 5 Radlicka
M Jinonice M Nové Butovice M
^
M Zlicín M Stodulky
M
Hurka Luka
M
Prague 13
M Luziny
Prague 5
Knight Frank
Prague office market report • 2006
Central
Prague General Market Comment
Still attracting the highest rents in
The brisk expansion of Prague and the Czech Republic as a business location is reflected in the rapid
Prague at c. €216 per sq m per
increase in the volume of high quality office stock since the early 1990s. The historic nature of the city
annum, the historic city centre of
centre restricts development activity to small scale projects and refurbishments forcing any major new
Prague remains an attractive location
developments to the south and west of central Prague. Total stock in the market now exceeds 1.9 million
for smaller occupiers including
sq m, more than two and a half times the level a decade ago.
consultancy firms and smaller professional organisations.
4
The delivery of speculatively built space, particularly in the southern and western districts of Prague 4 and Prague 5, is hampering the absorption of excess availability and is suppressing rental growth in these markets. Domestic demand is limited and expansion from occupiers already present in the market is tentative with lease renewals becoming more common than expansion. The majority of genuine absorption is being generated by international companies entering the Czech market, predominately acquiring space in the high quality modern developments in Southern and Western Prague.
Most Notable Leasing Transactions Concluded in 2006
Prague South
(Prague 4)
Tenant
Sq m
Prague City Hall
23,100 5,006
Scheme
Location
Quarter
Jungmannova 29
Prague 1
Q1
Chodovec Building 1
Prague 4
Q2
The most substantial development of
Agrofert
new office stock since the mid 1990s
Océ
1,734
Chodovec Building 1
Prague 4
Q2
has been in Prague 4, to the south
AutoCont
4,377
Podébradská 55
Prague 9
Q1
of the city centre. A location of choice
Astra Zeneca
2,024
Smichov Gate
Prague 5
Q2
for large foreign tenants, including
ABN Amro
1,600
Jungmannova Plaza
Prague 1
Q1
many of the major banking and
Source: Knight Frank
finance occupiers.
Major Investment Transactions 2005/2006
(Prague 5)
Stretching westward from Andel, principally within the Prague 5 district, new office developments have attracted a diverse group of office occupiers. The tenant base is a mixture of IT&T, pharmaceutical and financial occupiers, including some back office functions. The delivery of a number of sizeable developments within a short time period has contributed to an excess of space and rental values have come under downward pressure.
Property
Seller
Buyer
October 2005
BB Centrum Beta Building, Prague 4
PasserInvest
ING Real Estate
October 2005
Hall Office Park, Prague 7
8.50%
Illuminus Group
M&A
October 2005
Andél Park, Prague 5
–
7%
Karimpol
Immoeast
November 2005
Avenir Business Park, Prague 5
60
7%
Immorent
Sachsenfonds
March 2006
Trianon Office, Development, Prague 4
47 Approx
7.25% Approx
Hochtief
DIFA
March 2006
Budejovická Alej, Prague 4
37 Approx
5.75%
Skanska
ING Real Estate
April 2006
Hadovka Office Park, Prague 6
70
6.10%
DIFA
Heitman – HCEPP
May 2006
The Park (Buildings 1-7), Prague 4
216+