Bio blitz

As the Czech office market struggles to regain its footing after the economic crisis, a few industries in particular are taking advantage of favorable leasing conditions and a competitive local labor force to relocate within, or to, the Czech Republic. Medical tech, biotech and pharmaceutical companies were involved in approximately 18 commercial real estate transactions in the past 20 months, according to property adviser DTZ's Václav Bouček, and when government support for the sector is factored in, the trend looks set to continue.

"Office vacancy is not that high, especially if you're looking for a lot of space, but landlords and owners are offering more incentives like rent-free periods to attract tenants," said Bouček.  

Most of the deals seen during the 20-month period involved relocations or renegotiations, with medical, bio and pharma companies discovering they could get better deals on nicer space. Medtronic, Novartis, Genzyme, Bristol-Myers Squibb, ConvaTec, Biogen Idec, Merck, and PPD are just a handful of the companies in the sector that recently took up new office space or renegotiated their leases.

One of the most significant transactions in terms of size was the move by pharmaceutical company Novartis to 3,200 sqm in Prague's newly completed Gemini buildings from their previous office in Prague 3, achieving an annual rent savings of about 40 percent.

But cheap rent is not the only reason medical companies continue to be avid consumers of Czech office space. Along with the other top occupiers - back-office operations for banks, IT companies and insurance providers - medical companies see the added value of an educated, low-cost Czech labor force and strong support for the industry from local governments and higher-education institutions.

"The Czech Republic was always an appealing place for the biotech industry because of the high level of development of biomedical research in academic institutions," said Jana Markovičová, spokeswoman for Genzyme, a biotech company that moved to new office space in Prague's Amazon Court development late last year. "Recently, this [commitment] has been confirmed by ambitious plans for the development of biotech clusters in Brno and Vestec."

The Brno "cluster," which is administered by the Central European Institute of Technology (CEITEC), is made up of cooperating biotech firms and research institutions and is supported by the EU Regional Development Fund, as well as the Regional Development Agency of South Moravia. CEITEC facilitates everything from mergers and acquisitions to networking and knowledge sharing among member firms and academic institutions.

Cluster member BioVendor, a producer and distributor of medical equipment and medical research products, has been in their current Brno offices since 2005, and spokesman Valimír Kolář says government support for the industry is key to the region's appeal.

"Here in South Moravia, the government says biotech is a priority, that they want to support it, and they do," said Kolář. "The current number of companies is quite low, but the industry is growing now quite visibly every year."

In an effort to bring high-skilled jobs to their own communities, other regional governments are getting in on the act as well.

"The CEITEC cluster in Brno is not the only biotech cluster in the Czech Republic," said Alexandra Rudyšarová, CEO of CzechInvest, an agency tasked by the Industry and Trade Ministry with attracting foreign direct investment to the country. "Bohemian CzechBio, Olomouc's MedChemBio and Nanomedic in Dolní Dobrouč are all gaining much importance."

The clusters consist not only of large multinational players, but also small Czech medical companies who have found strength in numbers. All cluster members are hoping to capitalize on the combination of attractive office leasing conditions, government support and a cheaper labor market.

"Another advantage is the ever-increasing infrastructure - not just roads or airways, but most importantly research facilities and their equipment," said Rudyšarová.

Though the clusters are located outside of Prague, many of the recent transactions took place in the capital city. Bristol-Myers Squibb and CovaTec moved to Prague 1, taking up a combined area of nearly 1,000 sqm. Biogen Idec moved to a new office complex in Pankrác, and Merck decided to sell the building it owns in Jažlovice in order to lease roughly 1,900 sqm in the Kavčí Hory Office Park project in Prague 4. Medical technology company Medtronic is preparing to lease a larger space in the Oregon House office project in Prague 5, Zličín.

In addition to office space take up, CzechInvest views the manufacture of generic drugs as probably the most dynamic part of the sector's operations in the country, since there are no original manufacturers in the Czech Republic. "Another important sector is contract research, mostly in pre-clinic phases," Rudyšarová said.

Emily Thompson can be reached at
ethompson@praguepost.com