Prague Office market report 2006

Research Prague Office market report • 2006 Contents Prague map 2-3 Market breakdown 4 Market data 5 Avenir Business Park, Prague 5 Executive ...
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Research

Prague Office market report • 2006 Contents Prague map

2-3

Market breakdown

4

Market data

5

Avenir Business Park, Prague 5

Executive summary •







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.

2

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+