Lowest Budapest Office Vacancy yet Recorded
The overall Budapest office vacancy rate has fallen to 6.4%, the lowest yet recorded in a market where vacancy was once in the 20s. This compares to, for example, 10% in the Warsaw market but 6% in Prague.
Mill Park in Budapest by Skanska.
The lowest vacancy has been recorded in the Non-central Pest sub-market at 4%, whereas the periphery still records vacancy rate of more than 30%. This reflects the current trend for office development in central or suburban locations at recognized transport intersections with easy access to urban amenities and population centers as demanded by tenants and office staff.
Some developers previously attempted to develop on an American model for office development in out-of-city locations where employees were expected to commute by car, but that is proving increasingly unpopular now.
Four new office buildings were delivered on the Budapest market in the third quarter of the year, totaling 111,000 sqm according to the Budapest Research Forum (BRF), made up from CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary.
Total modern office stock now stands at around 3.58 million sqm, with 2.94 million sqm of this consisting of class “A” and “B” speculative space, according to the consultancy group. From this, 644,000 sqm is owner-occupied. This compares to total office stock of 5.42 million sqm in Warsaw and 3.44 sqm in Prague, according to Cushman & Wakefield.
The largest Budapest completion was the 58,000 sqm Magyar Telekom HQ by Wing in District IX, now regarded as a developing out-of-center business area. In another large delivery, Skanska completed the 35,000 sqm Mill Park. The 11,000 sqm Advance Tower 1 in Váci út was completed by Futureal. A further completion was the 4,800 sqm EcoDome office center by Redwood Real Estate in central Buda.
As the Budapest office market was one of the first to be established in Central Europe and the quality and specification of office stock has dramatically advanced in reaction to demand in the last 20 years or so, consultants have argued that there is a significant amount of earlier generation stock that should be removed from the stock figures. Thus, the officially recorded owner-occupied stock has been reduced by 27,000 sqm in three buildings. Total demand in the third quarter reached 111,000 sqm, representing a 32% year-on-year increase. Significantly for market demand, new leases accounted for 48% of this figure.
The strongest occupational activity was recorded in the Váci Corridor, which attracted 33% of total demand. This was followed by the Central Business District with 17% and South Buda with 16%. The largest new deal was for 15,000 sqm in the Váci Corridor.
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