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Budapest office market expected to rise

Deals

Source: Cushman & Wakefield Research Department

Rents on the Budapest office market are expected to rise, with the continued recovery being driven by sound economic, demand and supply fundamentals, Cushman & Wakefield said late yesterday.

(Photo: Cushman & Wakefield Research Department)

Citing Oxford Economics, Cushman & Wakefield says that last year Hungary had the strongest growing economy in Europe, and this “increasingly favorable macroeconomic” environment contributed to increasing occupier activity. Cushman & Wakefield expects to remain relatively robust in the remainder of 2015.


Supported by an outstanding, historical record take up, 12% up on last year’s H1 leasing volume, net absorption currently stands at 40% higher than a year ago, C&W said, adding that as demand continues to outstrip supply, letting activity will erode further the current overhang of space, increasing absorption further in H2 2015.


“The Budapest office market continued its rally in the first half of 2015: Take-up levels reached 280,000 square meters of which Q2 alone has seen 213,500 square meters. This is the highest quarterly figure on record, whilst the high activity was supported by a few significant deals, such as T-Com’s pre-lease of 55,000 square meters. The outlook for the remainder of the year remains positive, and as demand continues to outstrip supply, the vacancy rate in Budapest will continue to fall further resulting in tenant incentives to continue to shorten for the best space. We expect this will increase the possibility of positive rental growth in the very short term in the most preferred submarkets of large occupiers, and will pave the way for speculative construction,” Orsolya Hegedűs, Associate, Head of Research at Cushman & Wakefield Budapest, said in commenting on the activity of the Budapest office market.


“The real estate fundamentals are clearly in Budapest’s favor. The limited supply over the past five years means we have a shortage of high quality buildings, yet record levels of demand from discerning tenants who recognize that working environment is key to the recruitment and retention of high quality staff. Rents will rise and yields will compress – it will take a couple of years before supply is in a position to respond – so we are clearly at an optimum point in the cycle to invest,” Mike Edwards, Head of Capital Markets, Valuation & Advisory said.

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