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News Release

Prague

Occupier conditions in the Czech Republic improve due to the crisis

The country remains attractive to Banking, Finance, Insurance and Technology companies, particularly for BPO and SSC activities


Prague, 17th March 2010- Jones Lang LaSalle’s latest report “Onshore, Nearshore, Offshore: Unsure? A 2010 Czech Perspective” was launched at MIPIM today. The report provides an overview of the aspects of relocating a business to the Czech Republic and investigates four principle drivers - labour, business environment, real estate and infrastructure that ultimately influence location choice.
 
2010 findings reveal that the conditions for setting up business in the Czech Republic are currently some of the best the market has seen in the past years, from a labour as well as a real estate perspective. Since the crisis, the balance in negotiation is in favour of the businesses, both in their roles as employers and as occupiers.

According to the report, the crisis contributed to the reversal of the market from employee driven to an employer driven one. In addition to an increased unemployment rate and rising employee loyalty, the crisis also had an impact on wage adjustments. Labour costs in the Czech Republic remain lower than in Western Europe and the economic crisis has only further helped to rationalize wages in certain sectors, including those of IT specialists.

In addition to this, the Prague real estate market is set to be favourable towards tenants in 2010, as at the end of 2009 the total stock in Prague stood at ca. 2.7 million m2 with a vacancy rate of 11.80%. The market will become more balanced in 2011, due to the anticipated lower vacancy or choice levels. In 2012, Jones Lang LaSalle predicts that conditions are to remain relatively balanced between landlord and tenant market conditions, as the balance between supply and demand also becomes more aligned. See chart below:
 
According to Kevin Turpin, Head of Research for Jones Lang LaSalle CEE, “Businesses are increasingly finding that shoring strategies are critical for improving their bottom lines. With continued development in the country, combined with clear advantages around cost, labour and risk, we believe this trend is set to continue. Demand for office space in the Czech Republic has been led by the Banking, Finance and Insurance sector, plus the manufacturing and IT sectors. In 2009, pharmaceutical companies also showed significant activity. Part of this demand has been from shoring activities, as well as new entrants to the Czech market or consolidations of existing companies in single modern office accommodation.
 
Over the next couple of years we expect to see more demand coming from companies who are seeking cost savings through outsourcing or shoring various processes of their businesses.”