Q3 on the CEE office market

Experts of global real estate services firm Cushman & Wakefield have summarised Q3 2020 on the office market in Central and Eastern Europe.

Poland: The lockdown period and the uncertainty of the economic impact of the coronavirus pandemic pushed some office tenants to temporarily withhold their decisions regarding lease negotiations. As a result, gross take-up in Warsaw showed a 35% decrease in the first three quarters of 2020 compared to the same period in 2019, which was a record-breaking year in terms of demand. Given the current situation and subdued occupier activity, we expect a limited number of new projects coming onto the market, which is likely to result in a supply gap in 2022-2023.

Czech Republic: Prague’s office market recorded the lowest quarterly net demand in the last decade together with the growth of the sublease inventory. On the other hand, the vacancy rate kept relatively low, with a high volume of lease renegotiations and a substantial new supply.

Hungary: Q3 demand levels in the Budapest office market were restrained compared to the same period in previous years. As new supply was continuously delivered to the market, the vacancy rate increased but remained one of the lowest in the region. Whilst the pipeline for the 2020-2022 period rose compared to the amount seen in the last ten years, WFH’s impact on office demand and design remains to be seen. It is worth noting, however, that large-scale transactions are proceeding and tenants are finalising deals.

Romania: Despite a substantial development pipeline, Bucharest’s prime office rents remained stable. After a weak second quarter, demand levels slightly improved during the next three months as many companies decided to renew or renegotiate their existing contracts. Large occupiers put a number of sublease options on the market. In addition, we recorded expansion opportunities in case a return to the office required extra space due to social distancing measures.

Slovakia: The total office stock is expected to increase by 61,000 sq m by the end of the year, which is likely to push the overall vacancy rate up. Total leasing activity (gross take-up) in Bratislava remained in line with the 2019 level. However, due to the coronavirus crisis, the third quarter saw a significantly lower share of new leases and expansions.