BRFʼs office market report notes lowest ever vacancy rate

Industrial

The Budapest Research Forum (BRF) has released its office market summary for Q3 2018, revealing that four new office buildings were delivered, totaling 110,970 square meters, raising the current total modern office stock to 3,587,290 sqm, with the vacancy rate decreasing to a record rate of 6.4% during the quarter.

BRF comprises several real estate services firms: CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL, and Robertson Hungary, according to a press release sent to the Budapest Business Journal.

The largest of the four new office buildings delivered in the quarter was Magyar Telekomʼs HQ developed by Wing, comprising 58,800 sqm. Skanskaʼs 36,000 sqm Mill Park development was also completed in Q3, alongside the 11,340 sqm Advance Tower I by Futureal, and the 4,830 sqm EcoDome, developed by Redwood Real Estate Holding.

The total modern office stock of almost 3.6 million sqm contains 643,710 sqm of owner-occupied space, alongside 2,943,580 sqm of category "A" and "B" speculative office space. The stock of owner-occupied buildings was reduced by three buildings during the quarter, amounting to 26,850 sqm, while two properties, together 6,110 sqm, were added.

The office vacancy rate declined to 6.4%, representing a 1.2 percentage point reduction quarter-on-quarter, the lowest rate ever recorded on the Budapest office market. At submarket level, the lowest vacancy rate was measured in Non-Central Pest (3.9%), similarly to Q2, with the Periphery still possessing a very high vacancy rate of 30.4%.

In Q3, total demand fell to 111,430 sqm, representing a 32% decrease year-on-year. New leases made up 48.6% of the total leasing activity, with renewals amounting to 20%. Pre-leases accounted for 16.3%, with expansions contributing 10.4% to the total. Owner-occupier agreements made up the remaining 4.7%.

Looking at submarkets, the Váci Corridor provided the strongest occupational activity in the period, attracting nearly one-third of the total demand, with the CBD (17%) and South Buda (16%) submarkets completing the top three.

BRFʼs research states that a total of 145 lease agreements were signed in the quarter, with the average deal size standing at 768 sqm. The forum registered 24 transactions occupying more than 1,000 sqm. Of these, 13 were new transactions, and four were renewals, with four pre-leases, two owner-occupier agreements, and one expansion.

The largest deal of Q3 2018 was a 14,890 sqm new contract in the CBD, followed by a 10,600 sqm transaction on the Váci Corridor. The periodʼs largest renewal (6,000 sqm) was signed in the Maros BC office building, with the periodʼs largest expansion seeing a tenant secure 5,870 sqm in the White House building.

Net absorption, corrected for the change in owner-occupied stock, rose to 142,210 sqm, the highest figure so far in 2018.

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