Petr Zalsky, Head of Office Agency and Josef Stanko, Research Analyst, Colliers Czech Republic, answer four trending questions about subleases on the Czech office market, lease-buyouts, as well as tenant compensations by landlords.
How many square meters of space offered on the office market for sublease were actually subleased?
If we have about 77,000 m2 of office space for sublease on the market, then yes, this is space that is available, but we cannot expect it to decrease by tens of thousands of meters quarterly. Especially today, when many companies are in a state where they are not ready to make decisions for the coming years. It is still true that in the vast majority of cases, a company with about 20 people or more will not enter into a commitment to new premises earlier than 6 to 9 months before the end of their current lease term. I expect that we will be able to properly assess the activity in the sublease market in the first quarter of 2021.
What is affecting the number of subleased areas?Above all, the demand for this type of space.
Also the comparison of financial and other parameters with other variants, such asclassic rental relationshipsand serviced offices.
Is there a “buyout” of companies from lease agreementson the market? If so, how common is it and how many m2 has it already touched?
We haven’t come across a situation where a company that has x remaining years until the end of its lease period, and on the basis of today's situation wants to re-evaluate its attitude towards office space, and wants to give it up completely... However, we are dealing with cases where we represent companies that want to give up, for example, 30% of their space, or due to other influences than covid, they are moving elsewhere, and won’t be using the current space. In these cases, an agreement with the landlord is the first thing in the process. If it is unsuccessful and the costs of contract termination is comparable with the cost of future liabilities of companies, then, if it is allowed by the arrangement of premises, the company would follow the path of subleasing the space, or of leaving the lease to a third party.
How big is the tenants' compensation to the owners in case of redemption?
In cases where the landlord does not know when and by whom the space will be subsequently occupied, the amount of compensation does not differ significantly from the amount of the tenant's liabilities for the future agreed period. We are talking about rent, service fees and often the obligation to put the space in a certain condition. And in these cases, the tenant prefers to offer the space for sublease. In situations where it is only a reduction of space, the landlord is trying to find a solution and is able to take part of the risk in exchange, for example, for extending the rental period for the remaining part of the space.