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ExCEEding Borders: Office Markets & The Business Services Sector in CEE-15

exCEEding Borders_Sep 21

In our latest report ExCEEding Borders: Office Markets & The Business Services Sector in CEE-15 in the ExCEEding Borders series, we review the situation in 15 key office markets in the CEE region: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Montenegro, Poland, Romania, Slovakia, Slovenia and Ukraine.

In the report, we highlight changes in key market indicators such as total office stock, take-up and leasing conditions, vacancy levels, space under construction, including a brief commentary and short-term outlook.
 
The individual office market data from each country is also enriched with concise commentaries and images of modern office projects from across the region.

Furthermore, and perhaps more importantly, we provide a high level, but fascinating look at the tremendously successful CEE business services sector.

For many countries in the region, business services have become not only one of the leading sources of FDI and one of the biggest employment sectors (now estimated to employ well in excess of 1 million people in the markets covered in this report) but also one of the leading office occupier sub-sectors in the region.

Market update

Total leasing activity in Prague has been stable over the last several quarters, but we have observed changes in shares of the different deal types. During 2020, renegotiations seemed to be the top priority for offices as they took over 50% of the market share. In H1 2021 we registered more new leases in existing vacant premises.

Trends and forecast

Due to the low volume of offices under construction in Prague for years 2021 and 2022, we expect a general stabilisation of the marketThe increase of the vacancy rate has eased and is expected to start slowly decreasing in late H2 2021 or early H1 2022.

COVID-19 update

Subleasing will remain a topic for some upcoming quarters, but we expect it will slowly subside and will be mostly used as a short-term solution. Many companies are currently at the point to decide which work model they will implement. As companies are slowly coming back to the office, attendance is still not fully visible, as summer vacation months also arrived. Hybrid working is definitely a model that many companies are considering in the Czech Republic, as employees have successfully withstood the crash course in working from home.

The Czech Republic is a proven leader in the GBS sector in CEE with over 310 centres and rapidly approaching 120,000 people employed in them throughout the country. The Czech business services sector rose by 15% year-on year during 2020.

The country is considered a stable, resilient, and low risk country and is also well positioned geographically. Czech business service centres offer a very wide range of business services to their own businesses and clients, but there is also a strong representation from centres delivering IT services and software development, finance & accounting and HR functions.

The Czech GBS sector services almost two thirds of the globe with a main focus on the local market, the rest of CEE and western Europe. Amongst the biggest investors are top global companies like Avast, Accenture, Oracle, Honeywell and Tieto to name a few.

Most centres are present in the larger cities of Prague, Brno and Ostrava which naturally attract the attention from investors. However, slightly smaller regional cities are emerging too from the shadows, usually thanks to local universities and availability of workforce due to lower living costs.

We hope you find this an interesting read and look forward to answering any additional questions you may have.

 


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Kevin Turpin

Regional Director of Capital Markets | CEE

Prague

Kevin joined Colliers in October 2019 as the Regional Director for Research in CEE and has been working in the Commercial Real Estate industry in the field of property market research and consultancy for over 15 years. The research and consultancy team consists of 16 research analysts, covering numerous markets across the CEE region. Kevin’s role is responsible for the delivery of market research and insights to both Colliers clients and its business lines. Kevin and team research and advise on all market sectors with a key focus on Offices, Retail, Industrial & Logistics and Investment. Kevin's previous roles have been in the HR consultancy, Information Technology and Public sectors, where he has gained valuable international experience working with people, technology, business and finance.

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