Interest in office space down as new building construction slows markedly
Fewer new offices have been built in the Czech Republic in 2021 than in the previous five years, iDnes.cz reported. The continuing Covid pandemic and uncertainty regarding the future are causing developers and potential buyers to wait, the news site said.
While over 270,000 square metres of new office space entered the market in the country’s biggest cities in 2019, this year the figure will not reach 90,000, iDnes.cz said, citing consultants Cushman & Wakefield.
Interest in new offices in Prague and Brno already declined significantly last year, when the switch to work from home showed many companies that they did not need to rent as much space, the news site said.
Experts believe that this factor, combined with a shortage of construction workers, has also impacted developers, who are re-evaluating some planned office projects.
Josefína Rybářová of real estate consulting company JLL told iDnes.cz that construction projects had been suspended even before the pandemic due, to rising construction costs. The present low level of new construction is the result of the brakes having been put on for two years, she said.
On the Czech Republic’s largest market, Prague, less than 70,000 square metres of new office space will be created in 2021, while the long-term average is about 150,000 per year.
According to estimates, the number of new offices in Brno this year should be half that seen last year and approximately two thirds less than in 2019.
The head of Cushman & Wakefield’s leasing team, Radka Novak, told iDnes.cz that there will not be many more new projects in 2022 than there were this year.
Optimism is gradually returning and several relatively large projects have already begun to be built; however, their completion is not expected until 2023, she told the news site.
Leoš Anderle, CEO of developer Sekyra Group, told iDnes.cz that it was necessary to take into account that the construction of such structures cannot take place overnight. If work starts on an office this year, it may be completed in two years, he said.
Banks are also cautious about providing loans to build office projects and developers are waiting for a time when they will be able to use pre-agreed rental deals as a source of financing, Martin Stričko of JLL told the news site.
There is currently more free office space in Prague since at any time since 2017, Cushman & Wakefield said.