Stock and Supply Prague Office Market – Q3 2014

Prague Office Market – Q3 2014
Stock and Supply
Overall Statistics
Following a strong second quarter, with completions exceeding
2,963,823 m2
Total office stock in Prague at the end of Q3 2014
73,000 m2, no new office buildings were completed within the
Prague office market in Q3 2014.
0 m2 / 77,121 m2
New supply completed in Q3 2014 / Q1-Q3 2014
Currently, there is almost 290,000 m2 of office space under
147,284 m2
Forecasted new supply to be completed in 2014
construction. Out of this number, approximately 70,300 m2 is
scheduled for completion during Q4. Altogether, approximately
147,000 m2 of office space should be completed in 2014,
representing a ca. 88% increase in comparison to last year’s volume
and will be the strongest result since 2009. The majority of new
office space in 2014 will be delivered to Prague 1 (26% of the 2014
estimated supply in five projects), followed by Prague 8 (25% in four
289,366 m2
Office projects under construction as of Q3 2014
92,434 m2 (55.7 % of renegotiations)
Gross office take-up in Q3 2014
221,198 m2 (43.5 % of renegotiations)
Total gross office take-up Q1-Q3 2014
projects) and Prague 5 (23% in three projects).
14.04 %
Average vacancy rate as of Q3 2014
During Q3, no new office schemes commenced construction.
13.3 % / 16.2 %
New built / Refurbished vacancy rate as of Q3 2014
Preparatory works have begun on City Deco which was purchased
by S+B Gruppe in H1 2014.
15.7 %
Forecasted vacancy rate for year-end 2014
Source: JLL, September 2014
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Pulse • Prague Office Market • Q3 2014
At the end of Q3 2014, the modern office stock in the capital city
recorded an increase in the share of renegotiations as
totalled 2,963,823 m2. The largest office districts remain to be
approximately 55.7% of all transactions were renewals of contracts.
Prague 4 (26.6% of the total stock), Prague 1 (16.5%) and Prague 5
(15.4%).
The highest level of leasing activity in Q3 2014 was recorded in
Prague 4 with 41% of all closed transactions, followed by Prague 8
New market structure based on volume of m2
5%
with over 16% and Prague 1 with almost 14%. Between Q1 – Q3
9%
2014, as can be seen on the pie chart below, the situation was
10%
slightly different with Prague 4, Prague 8 and Prague 5 being the
most active districts. These three districts have altogether recorded
almost 70% of all take-up transactions in Prague.
18%
Take-up in Q1 – Q3 2014
32%
1%
4%
13%
3%
21%
26%
AAA
AA
A
BBB
BB
B
3%
3%
Source: JLL, PRF, September 2014
The share of A class projects stood at 67%, with the remaining 33%
31%
being refurbishments. Top quality projects on the market, i.e. AAA
15%
class buildings, reached approximately 9% of the total stock
calculated in square meters and 3% based on the number of
buildings.
Prague 1
Prague 2
Prague 3
Prague 4
Prague 5
Prague 6
Prague 7
Prague 8
Prague 9
Prague 10
Source: JLL, PRF, September 2014
Planned schemes for Q4 2014
Completion
Size (m2)
The majority of leases in Q3 2014 were signed by insurance
Property
District
Jungmannova 15
Prague 1 – CC
Q4 2014
6,781
K71
Prague 8 – IC
Q4 2014
1,773
The Blox
Prague 6 – IC
Q4 2014
16,286
Quadrio
Prague 1 – CC
Q4 2014
16,206
ArtGen
Prague 7 – IC
Q4 2014
22,040
Property
Riverview
Prague 5 - IC
Q4 2014
6,178
Česká
Česká
Pojišťovna build. Pojišťovna
24,100
Renegotiation/
renewal
Unibail Rodamco
Office
Prague 4 - OC
Q4 2014
1,026
Atrium Flora
ExxonMobil
8,649
Renegotiation/
renewal
Pankrác II Česká
Pojišťovna HQ
Česká
Pojišťovna
8,100
Renegotiation/
renewal
Demand
River Garden II
NCR ČR
3,745
New occupation
In Q3 2014, we have recorded very strong demand. Despite the
Florentinum
Manpower
Group
2,025
New occupation
generally weaker third quarter results, Q3 gross take-up reached
Source: JLL, PRF, October 2014
CC = City Centre, IC = Inner City, OC = Outer City
Source: JLL, PRF, September 2014
companies (34.9% of all transactions, but again strongly influenced
by ČP deal), followed by manufacturing companies (14.6%) and
professional services (14.5%).
Top 5 Transactions of Q3 2014
Occupier
Size (m2)
Type of deal
92,445 m2 which represents q-o-q and y-o-y increases of 54% and
76% respectively. Such a result has been possible largely thanks to
Net take-up in Q3 2014 amounted to 40,973 m2. This represents a
the large renegotiations of Česká Pojišťovna in CPI’s premises in
q-o-q increase of ca. 14.5%. In Q3, new leases were strongest in
Pankrác which exceeded 32,000 m2. In Q3, we have therefore
Prague 8 (31.5% of net take-up in Prague) and Prague 1 (30.5%).
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Pulse • Prague Office Market • Q3 2014
Vacancy
Rental levels
As predicted, the vacancy rate has decreased. Thanks to no new
Due to strong competition, the perception of the highest achievable
speculative completions in Q3 2014, the market absorbed some
rents in Prague registered a mild drop over the last 12 months.
vacant space and the vacancy rate in Prague declined by 58 basis
During Q3 2014, prime headline rents in the city centre remained
points to its current 14.04%. A bigger hike of vacancy is expected in
stable in the range of €18.5 – 19.5 m2/month. Inner city rents were
the three upcoming quarters with the completion of more, mainly
at €15.0 – 16.0 m2/month in Pankrác (Prague 4) and at €15.0 – 17.0
speculative, projects on the market.
m2/month in Smíchov (Prague 5) and Karlín – Florenc (Prague 8).
Rents in the Outer City remained at €13.0 – 14.5 m²/month. All of
By the end of 2014, the vacancy rate might approach the level of
these numbers refer to prime levels achieved in a limited number of
16%. The vacancy rate is also likely to increase in H1 2015 with
prime properties. In general there are ca. 1-3 properties in each
potential stabilization starting in H2 2015. As net-take up is driven
submarket which achieve these levels as they are usually brand
mainly by relocations of existing tenants within the current stock into
new, above standard quality and/or very well located.
modern premises, vacancy will increase mainly in lower quality
buildings. Over the past two years, the vacancy rate of B class stock
Second hand products stand at approximately €1.5 below the afore
has increased by ca. 3.8 percentage points, despite almost all new
mentioned ranges. The ability to request incentives differs from
completions being A class schemes.
property to property, depending on both the situation in the submarket and the length of the vacant period within the property itself.
In Q3, the lowest vacancy rate remained in the biggest office district
of Prague 4 (6.3%), followed by Prague 10 (7.3%) and Prague 3
(11.9%). Conversely, the largest share of available space remained
in Prague 7 (26.6%) and Prague 9 (24.4%). Compared to the
previous quarter, we have recorded an increase in available space
in six of the Prague districts. The largest vacancy rate decline has
been recorded in Prague 6 where the vacancy rate decreased by
2.8 percentage points. A significant amount of office space has also
been absorbed in Prague 1, mainly due to several large new leases
signed on Florentinum and Myslbek.
Net Absorption *
* (Net absorption/demand is the difference between the square meters of companies
that moved-in and expanded and companies that moved-out or decreased their
rented space in the same period of time.)
In Q3, the Prague office market absorbed 17,149 m2 of office space.
After a negative result from the first quarter, net absorption returned
to positive figures. Between Q1 – Q3 2014, absorption reached ca.
35,000 m2. We expect net absorption to remain positive and to
reach ca. 45,000 – 55,000 m2 in 2014.
Prague Office Market
120 000
24%
22%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
100 000
80 000
60 000
40 000
20 000
0
-20 000
-40 000
Quarterly supply
Vacancy rate - average
Vacancy rate - underperforming market
Net absorption - average
Vacancy rate - outperforming market
Source: JLL, September 2014
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Contacts
RESEARCH:
Ondřej Novotný
Jana Krajčíková
Associate Director
Head of Research
Research Analyst
JLL
Czech Republic
+420 724 829 648
ondrej.novotny@eu.jll.com
JLL
Czech Republic
+420 602 697 845
jana.krajcikova@eu.jll.com
OFFICE LEASING:
Eduard Forejt
Petr Kareš
Jan Mechl
National Director
Head of Office Leasing
National Director
Head of Tenant Representation
Associate Director
Head of Office Agency
JLL
Czech Republic
+420 724 503 764
eduard.forejt@eu.jll.com
JLL
Czech Republic
+420 602 303 115
petr.kares@eu.jll.com
JLL
Czech Republic
+420 724 007 899
jan.mechl@eu.jll.com
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