The office market in Brno saw a decline in all respects last year

Brno – The Brno office market recorded a decline last year. The number of completed construction or renovation projects was one-third lower, the size of leased space decreased, and demand dropped by more than 60 percent. One reason is the coronavirus pandemic and the associated work from home. However, this year should change that. According to Cushman & Wakefield, the largest number of new office projects is being prepared in Brno since tracking began.

The stagnation of the office market was also reflected in the uncertainty associated with the coronavirus pandemic, when many companies were waiting for decisions from often foreign management of shared service centers, which dominate the tenant structure in Brno. Prolonged approval processes are also to blame.

This year, there will be fewer completed constructions, but the company expects a record number of projects in the preparation phase. "By 2023, the Brno office market is expected to grow by 13 percent of the current volume. This amount may ultimately be even higher, as some projects planned for 2024 could start construction earlier depending on demand. It has already been shown in the past crisis that fortune favors the prepared. Those who built even during the crisis were at an advantage during the economic recovery," said Lukáš Netolický, an expert on the Brno office market from Cushman & Wakefield.

Among the planned projects expected to be completed between 2021 and 2023 are, for example, 16,500 m² in Vlněná, 15,000 m² in Titanium, and 12,500 m² in Nová Zbrojovka.

At the end of 2020, there were 78,600 m² of modern office space available in Brno, increasing the vacancy rate to 11.9 percent. This year, analysts expect a decrease to about ten percent. In the future, it will depend on whether demand increases above the long-term average. If not, vacancy rates could rise above 13 percent by 2024, theoretically reaching 17 percent with higher construction.

Year-on-year demand in 2020 decreased by 62 percent. "Companies are considering how to optimize the use and size of their offices in light of the expansion of home office, but the previously announced trend that offices will no longer be needed is definitely not confirmed. After a year of widespread work from home, it is confirmed that such a model exclusively is not desirable. Due to performance decline, management does not support it, and employees themselves also miss adequate contact with colleagues. However, a certain portion of work will likely shift to home office, and companies will offer flexible solutions combining work from home with work in the office," said Netolický.

He added that moving to new spaces will be acceptable for companies only on the condition that operating costs do not increase, and the costs for furnishing will always have to be borne by the landlord. Given the still uncertain economic situation, extensive expansions of companies or the entry of new companies into the Brno market cannot be expected this year either. According to Netolický, the impact of the pandemic has reduced rent from the original 16 euros to 15 euros per month per square meter. This year, further decline is expected, as experts believe the original amount was inflated.