According to DTZ company, modern office space supply in Prague increased by 144k sqm last year to the total 1.83m sqm. This year supply should increase by another 160k sqm and is expected to continue forward by over 250k sqm in 2007. Besides increase in the supply, demand is also rising. There have been 188k sqm rented last year, 43% more than year before. Demand was driven by international companies as well as domestic ones mainly from finance, IT and service segment requiring quality modern office space. Since 2004, vacancy rate is constantly falling and reached 12.5%. However office rents haven’t changed significantly over past three years. Office rents in Prague centre remained at about EUR 17 to 19 per sqm/month, while EUR 14.6 to 15 per sqm/month in other city parts. We see excess of office demand over supply as positive for Orco shares and reiterate our Buy recommendation.