Work from home phenomenon leading to lower office rents

Photo: K2 Space via Foter.com / CC BY

Many people in the Czech Republic have become accustomed to working from home due to the coronavirus situation. With many offices empty, some companies have become subletting space – and offering lower rents and other incentives, Hospodářské noviny reported.

The business daily offered the example of UniCreditBank, which has a lease until 2033 on an office building with a capacity of 7,000 in Prague’s Michle district.

However due to the Covid pandemic many of the bank’s staff are currently teleworking (what the Czechs call “home office”), with only around one-tenth sitting at their regular desks.

In response UniCredit Bank has decided to sublet some of its space. Bosses have seen that a large percentage of their employees can work from home without difficulty and plan on letting them continue even when the pandemic subsides, Hospodářské noviny said.

Such over-capacity is mainly being felt by office building owners in the major Czech cities of Prague, Brno and Ostrava.

Among other firms currently offering part of their office space to renters are Amazon and Avast in Prague. The bank Komerční banka closed 64 small branches last August and is currently planning to rent out some of its offices on Wenceslas Square.

Photo: Pixabay/janeb13

The head of the office rentals division at property consultants Cushman & Wakefield, Radka Novak, told Hospodářské noviny that more effective use of office space was a major theme among companies these days.

Ms. Novak said firms were reducing their capacity by 10 to 20 percent. In the case of large corporations the figure rises to 40 percent.

The association Prague Research Forum told the business daily that there had been a marked rise in unoccupied offices in the Czech capital.

While in 2019 5.5 percent of space went unused, last year the figure rose to 7 percent; taking into account the referred to sublets the figure was 9 percent.

Total unused office space is equivalent to seven times the capacity of Prague’s highest building, the City Tower skyscraper, Hospodářské noviny said.

Consultants say that the level of vacancy is putting pressure on landlords, who are now trying to lure new tenants by incentives such as rental holidays and the provision of some furnishings.

In some cases rents have also been reduced. Karel Pelán, director of the IWG group for the Czech Republic and Slovakia, which operates the Regus and Spaces co-working centers, told Hospodářsé noviny that today the main issue is not ensuring profitability – it’s about keeping an office building functional.

Developers are also feeling the pinch, with some new construction projects put on ice, the newspaper said.

This mainly concerns speculative projects, where the developers do not have a client lined up in advance.