PRAGUE-A Prague office market recovery is expected at the end of 2010 but until then a moderate slowdown of demand is likely, taking into consideration a certain time-lag behind economic growth, CB Richard Ellis predicts.

The changing structure of demand, with a high proportion of renegotiations and subleases while space optimisation and cost-savings by companies result in some vacated office space, has meant that demand has lagged behind completions in the past year and a half. Insufficient occupier activity together with expected office space coming to the market, much of which is vacant, will result in city-wide vacancy rate increasing slightly throughout 2010. The turning point should be reached at the beginning of 2011 when the vacancy rate is expected to start moving downward.

Present market conditions strongly favor tenants, who benefit from high level of incentives from the side of landlords. However, CBRE believes that as more robust growth in demand returns, landlords will start to decrease incentives and upward pressure may return to rents.