Q4/2023: CZECH ECONOMY WILL SLIGHTLY GROW IN 2024 

The Czech economy stood on the brink of recession in 2023. Gross domestic product is expected to have contracted by 0.6% for the full year 2023, with a projected growth of 1.2% for 2024. Inflation is anticipated to decline significantly this year and stay below 3% for most of the year. However, there is a risk of falling below the target due to the persistent weakness in both domestic and foreign demand.

Conditions in the Czech industry remain fragile, with all sectors except automotive showing a downward trend. Given the decline in new orders and the prevailing weak manufacturing sentiment, the Czech industry is likely to face challenges in the first half of 2024.

Despite sluggish economic growth, the unemployment rate has stayed low throughout 2023, as employers are hesitant to lay off workers. Moody’s Analytics foresees a slight increase in the unemployment rate during the first half of 2024.

OFFICE:

The annual supply in the Prague office market reached 98,400 sq m in 2023, marking a 31% increase compared to 2022, although it still fell below the 5-year average. There were no new construction projects initiated throughout 2023. Despite the current low level of developer activity, with only 84,000 sq m under construction at the end of 2023, developers plan to add up to half a million sq m to the market by 2030. In 2023, there was a 3% year-on-year decrease in gross take-up, and net take-up saw a 17% drop compared to the previous year. By the end of 2023, approximately 280,700 sq m of office space remained vacant, resulting in a vacancy rate of 7.2%. Prime headline office rents in the city centre held steady at EUR 28.50/sq m/month. Prime rents experienced growth, particularly in the inner part of Prague, notably in popular locations such as Prague 8 and Prague 5. At the same time, we are witnessing an increasing disparity in rents between newly completed office buildings and older ones in less attractive locations. This gap is expected to widen in the upcoming periods.

Source: https://www.cushmanwakefield.com/en/czech-republic/insights/czech-republic-marketbeat