Levels of development in the region are much below pre-Covid

FM newsroom – CEE, office market. According to iO Partners, the capital cities of Central European countries – Prague, Bratislava, Budapest, and Bucharest – could encounter an office shortage due to delayed construction caused by an uncertain economic outlook combined with high costs and slowing in the next two years.


Take-up and vacancy

Data by iO Partners shows that year-on-year, there was a decrease in gross take-up in Prague (by 34%) and Bratislava (by 23%), whereas it rose in Budapest (by 34%) and Bucharest (by 95%) – Property Forum reports. At the same time, all four markets featuring modern office real estate experienced a year-on-year increase in vacancy rates. Prague showed the lowest vacancy rate (7.4%), while Bucharest had the highest percentage of unoccupied offices at 14.5%. The vacancy rate in Bratislava and Budapest surpassed 13% in Q3 2023.


Insufficient availability in Prague and Bratislava

The agency points out that in Prague and Bratislava in 2025, there is an anticipation of insufficient availability of new office space, with the Prague office market witnessing no new office development launch in the last 15 months.


In Bratislava, the saturated office market is another factor that is influencing the development pipeline. Based on the latest figures there is no new office building to be delivered in 2024 and for 2025 currently, there is to date only 10,000 sqm under construction.  In the years 2026 and 2027, the supply will begin to approach the 10-year average, which is at 60,000 sqm.


Meanwhile in Bucharest and Budapest

In Bucharest low net take-up, subleases due to hybrid work adjustments and high vacancy rates are the main factors constraining new construction. In Budapest, around 280,000 sqm of new offices are under development with more than half slated for delivery in 2024.


CEE-based capital cities run the risk of office shortages

“CEE office markets are currently facing a problem of slowing net demand which is stemming from higher rental and fit-out costs, adjustments to hybrid work and overall economic uncertainty. Another challenge is postponing new construction. Even though the CEE markets have registered an increase in office rents over the last years, the high cost of finance and construction, combined with rising yields deteriorated the economic side of the project to the extent that it is not feasible to commence the construction of new offices. In Prague, Bratislava, Bucharest or Warsaw, the current levels of development are very much below pre-Covid years” – Blanka Vačkova, Head of Research, Czech Republic at iO Partners


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