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News Release

Prague

Advertising offices on the labour market


Prague, 22 October 2014 – Based on JLL’s close cooperation with its clients during commercial transactions over the past number of years, JLL has been monitoring the consequences that the shrinking labour pool is having on the office market in Prague, as a result of an ageing population.

Demographic data confirms the trend of an aging population and a narrowing choice of suitable job candidates. Taking into account the current low unemployment rate, which reached just 5.2% in September, and the gradual decreasing population over the next twenty years, it is obvious that this situation will affect practically all employers. The largest and most productive population group consisting people aged 30 – 40 years will decrease by almost 21% in the next ten years. In twenty years, the situation of 30 – 40 years-olds´ will be even more pressing, reaching less than 59% of today´s number or, in other words, almost 750,000 less potential employees.

Unfortunately, the low density of population in Prague is one of the most sparse when compared to other major Western European cities and does not help the situation. In comparison with Paris, the density of population per sqkm in Prague is almost nine times lower and with cities like Madrid or London, it is less than a half. Even the population densities of neighbouring capitals such as Vienna and Berlin are higher by almost a third.

“All of these factors are alarming from a future employers´ point of view. The solution is not only in the education policy, but also in a complex strategy of how to increase density in Prague and implementing a carefully planned and applied immigration policy of the city, e.g. by supporting construction of new flats. These solutions, however, cannot do without a clear and legible conception and strategy for Prague, as well as transparent rules.  It is obvious that this imaginary pool of future employees cannot be filled only from sources from within the Czech Republic,” says Eduard Forejt, Business Development Director at JLL.

As with every change in supply and demand, the forthcoming “shortage” of labour will impact employers. Taking into account the fact that labour costs account for the majority of operational costs, whereas office space is on average only 5 – 10%, it is clear that the office becomes another benefit when recruiting or retaining key employees. This trend will logically gain in force. “We are registering a growing emphasis on the location of offices and their ease of accessibility from tenants, which further confirms that employers are now increasingly concerned about the comfort of their employees. A demographic study of accessibility is a now part of every large requirement that we prepare on behalf of our clients,” says Eduard Forejt and continues: “With the supply of suitable working power becoming narrower, we expect that the importance of a good location and quality of working environment will prevail over the pure economics of the lease. With the change of employers´ priorities, we also expect changes on the office market, mainly in relation to required quality and interior set-up of office spaces.”

“The current emphasis on efficiency and flexibility will remain, however, tenants will be more sensitive to the correct interior set-up of the office space in relation to their employees´ comfort, but also the efficiency of internal processes. Until now, often overlooked factors such as architecture and quality of indoor climate or furnishings can become significantly more important for tenants, as well as the location,” says Petr Kareš, Head of Tenant Representation at JLL. “This means that we might also expect new buildings that reflect new trends and technologies to be more attractive and therefore easily absorbed by the market. We expect a decrease in interest of the secondary and tertiary market of older office space, unless the landlords invest adequately into design and technology upgrades. These expectations are based on our actual experience, as our clients relocating in their second or third lease periods, do so mostly because of condition and technical obsolescence which makes the premises unsatisfactory for their employees,” explains Eduard Forejt.

“As another proof of employees being a main focus point, we also see the fact that the majority of companies that decided to stay in their current premises, are not willing to go through the reconstruction or revitalization of the space whilst they are in full operation, as they are aware of the negative impact on their employees. After the period of cost reductions and increasing efficiency of office space, we expect a decade of increased concern, both about employees and the quality of office premises,” concludes Petr Kareš.