Gross take-up in Brno’s office market spiked 82% y-o-y in 2023 to 143,600 sqm, outstripping the long-term average by 86%. Nearly half (48%) of the total came from renegotiations, while 32% was the result of new occupations. Going against the overall downsizing pattern, 12% of the space were expansion decisions. Lukáš Netolicky (Cushman & Wakefield) says the sudden flood of demand is the result of occupancy decisions made by large corporations already present in the market and by a long-term pattern of start-up creation.
“In 2023, a similar situation to 2019 occurred, with several large players renegotiating their leases at the same time, taking advantage of a relatively difficult market situation for landlords as the market is heavily weighted towards tenants,” said Netolicky. “Nevertheless, the acquisition of new office space is still challenging, especially due to the investment costs associated with construction.” Developers are now delaying projects or putting them on hold, but 26,100 sqm of new supply came on-line in 2023 and another 19,500 sqm is expected this year. Vacancy fell from 14.6% in H1 2023 to 12.8% in the second half of the year, but Netolicky says vacancy is likely to rise in the short-term. He notes that the vacancy rate of buildings older than 10 years jumped 35% year-on-year. Despite the likelihood of higher vacancy, prime rent remains steady at €16.
“While the market condition with increasing vacancy would have typically led to a rent decline, the current market situation doesn’t leave any space for developers and owners to reduce their rental income further,” he says. Two completions along the same street were responsible for nearly all of Brno’s new office space in 2023: Šumavska Tower A, an 11,600 sqm building by Integra stavby that was 53% pre-leased; and Infond’s 13,000 sqm Šumavska II, which was 23% pre-leased.
