Prague office and retail property market: a primer

A flat is bought by a person who intends to live in it. An office or a shop is bought by an investor who intends to let it, or leased by a business that intends to earn from it. The audience is different, the lease is different, and so is the language. Anyone who has read a commercial property report and wondered what "take-up" or "prime yield" means will find the answers here.

This primer explains how Prague's office and retail markets are described, where the main submarkets sit, and how to read the numbers that brokers and researchers publish. It quotes no rents, vacancy rates or yields, because they change quarterly and differ by publisher. For the investor's side, see investing in commercial property in Czechia.

The vocabulary

Stock. The total floor area of existing buildings counted by a researcher. Researchers set minimum building sizes and quality thresholds, so two reports can disagree about the stock.

Vacancy rate. Vacant space as a share of stock. A hypothetical example: if the stock is 200,000 square metres and 10,000 are vacant, vacancy is 5% (10,000 ÷ 200,000). Whether space under offer or space that is available but still occupied counts as vacant is a matter of definition.

Take-up. The floor area let to tenants in a period. It measures demand, though renewals and expansions may be counted or excluded.

Prime rent. The highest rent achieved for the best space in the best location, usually quoted per square metre per month. It is a ceiling, not an average.

Prime yield. The annual net rent of a top-quality building as a share of its price. A lower yield means investors pay more per unit of income. Yields are discussed in the investor's guide linked above.

Net effective rent. The headline rent adjusted for incentives. A hypothetical example: a tenant signs a five-year lease at a headline rent of 100 units per square metre per month, with six months rent-free. The tenant pays for 54 of 60 months, so the effective rent is 100 × 54 ÷ 60 = 90 units. The headline figure overstates the income.

Grade A and Grade B. Quality classes for offices, defined differently by different firms. Features such as location, building age, layout, services and environmental certification (for example LEED or BREEAM) feed into them.

Where offices are

Offices in Prague are not spread evenly. They cluster in areas that are well served by transport, and the list of recognisable clusters has been stable for years: the historic and inner centre, the business district around Pankrác and Budějovická in Prague 4, Karlín in Prague 8, Smíchov in Prague 5, Holešovice in Prague 7 and Vysočany in Prague 9. Researchers divide the city into zones and report rents and vacancy for each.

The distinctions have practical effects. The centre has fine buildings and the highest rents, but heritage rules limit alteration, parking is scarce, and floor plans are older. Out-of-centre business districts offer larger modern floorplates, better parking and often lower rents. The Old Town lies inside the Prague Heritage Reserve, where binding opinions on works are issued by the heritage department of Prague City Hall; see heritage protection and building restrictions.

Demand follows employment in services, finance, IT and professional firms, and it is shaped by how often staff come in. Remote and hybrid working has changed how much space each employee needs, and many tenants now lease less space per head, or choose higher-quality space in better-located buildings. Supply is shaped by the pace of building, the city's spatial plan and the availability of land; see the Prague spatial plan and the structure of the construction industry.

How retail works

Retail space is leased on a different logic from offices. A shop's value depends on footfall, and footfall depends on location, transport, the mix of neighbours and, in a tourist city, on visitors.

High-street retail. Prime streets in the city centre, such as Wenceslas Square, Na Příkopě and Pařížská, command the highest rents. Tenants there include international brands that treat a shop as marketing as much as sales, so rents can be high relative to turnover.

Shopping centres. Larger centres, mostly outside the centre, rely on anchor tenants such as supermarkets and cinemas to draw customers, and they have a tenant mix managed by the landlord.

Retail parks and neighbourhood retail. Retail parks along major roads serve car-borne shoppers. Neighbourhood shops serve local needs and depend on residential density.

Online shopping has reduced the need for some physical retail and raised the importance of experience and convenience. A landlord with a well-located, well-managed centre is in a different position from one with an old, poorly-located unit. Where a retail unit is on the ground floor of a residential building, the owners' association (the SVJ) may have rules on use; see owners' meetings and voting.

How leases work

Leases of business premises are governed by the Civil Code (§ 2302 onwards) and are largely a matter of contract. They are more flexible than residential leases, and the tenant has fewer statutory protections. Important features include:

• Indexation. Many leases index the rent to consumer price inflation each year, so that rent rises with prices.
• Currency. Rents in prime offices are often quoted in euros while the tenant's income is in crowns, which creates exchange-rate exposure. Check the lease for the currency of payment and the conversion rate (this is a common practice, not a rule).
• Term and break options. The length of the lease and the right to leave early affect both tenant and landlord.
• Service charge. The costs of running the building, passed on to tenants, are agreed in the lease and need checking, as with residential service charges.
• Fit-out and reinstatement. Who pays to fit out the space, and whether the tenant must restore it at the end.

For the contract basics, see commercial contracts under the Civil Code, and for a business that needs only an address, co-working and registered-office rules.

Reading the reports

Brokers and consultancies publish quarterly research. The numbers are useful and also depend on definitions. Our guide to reading a Czech real estate market report applies to commercial research too, with an extra set of checks:

1. Which buildings are in the stock, and what minimum size?
2. How is vacancy defined, and does it include sublet space?
3. Is take-up gross or net of renewals?
4. Is the rent a headline or an effective figure, and in which currency?
5. Which zones are being compared?

A comparison of two researchers' vacancy rates without checking these is unlikely to be meaningful. For the supply pipeline, the Statistical Office publishes building permit and completion data, and property developers in Prague (in Czech) lists some of the firms active in the city.

Tax and legal points

Commercial property is owned either by individuals or, more often, by companies. Property acquisition tax was abolished in 2020. Annual property tax applies to buildings and land, at higher rates for business use than for housing; see Czech property tax calculation. A company's transfers of real estate have their own VAT and tax features, covered in real estate tax and transfer rules for companies.

Frequently asked questions

Is the Prague office market the same as the residential market?

No. Offices and shops depend on employment, tourism and business conditions, not on household demand and mortgages, and they have separate data, leases and investors.

What is a prime yield?

The annual net rent of a top-quality building as a share of its price. A lower yield means a higher price for a given income.

Why do two reports show different vacancy rates?

They count different stock, treat sublet or reserved space differently, and use different zones. Check the definitions in each report.

Can a foreigner buy or lease commercial property in Czechia?

Foreigners can buy real estate in Czechia without restriction, and businesses of any nationality can lease premises. Source-of-funds checks and tax rules apply.

This is a general explainer, not legal, tax or mortgage advice.