There was a slowing of leasing activity in the second half of the year, with take-up reaching 96,000 sq m, 31 per cent down on the first six months. The largest deal of the year was Vodafone’s pre-leasing of 16,000 sq m at City West.
Approximately 99,600 sq m of new office space was delivered to the market in 2012, with 37 per cent of this coming in the fast-developing Karlín district. A similar level of new supply is due to be completed in 2013, with an unusually large amount of this space being in Prague 1, where development activity is usually restricted by the historic nature of the city centre. The huge Florentinum project, due for completion by the year-end, will deliver 49,000 sq m of new office space on the edge of the city centre and is expected to have a significant impact on the central Prague office market.
Reflecting the steady market conditions, the Prague office vacancy rate ended 2012 at 11.9 per cent, almost unchanged from twelve months earlier. Prime rents were also stable over the course of 2012, at €20-21 per sq m per month.
Investment volumes in 2012 were considerably below 2011 levels, with €605 million being invested in Czech commercial property, over 70 per cent down on the previous year. However, investment volumes in 2011 were boosted by several very large portfolio transactions and the number of deals completed in 2012 was similar to the previous year. Whereas retail property took the greatest share of investment activity in 2011, Prague offices were the main focus of investor demand in 2012, accounting for over 50 per cent of the total investment in Czech commercial property.
Matthew Colbourne, associate, international research, Knight Frank London, commented “Overall, 2012 was a steady, rather than spectacular, year for Prague’s office occupier market. Healthy demand for high quality office space helped to keep prime headline rents stable throughout the year, but asking rents have been reduced at some buildings with long-term vacancies and significant incentives remain available from landlords.”
Stewart Thomson, head of investment and RICS valuation, Knight Frank Prague, said “The fall in investment volumes in 2012 belies the fact that the actual number of deals done was very similar to 2011, and investor demand remained consistent with the previous year. There continues to be strong demand for prime office assets in Prague, from both international and local investors, particularly Czech private buyers. However, a lack of available prime product has restricted recent transactional activity.”
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