A map of the Budapest submarkets. (Illustration by BRF.)
BRF says that there were two office buildings delivered to the Budapest office market in Q3 2019: Hungária Center (6,920 sqm, in the Non-Central Pest submarket) and the second phase of Advance Tower (7,630 sqm, on the popular Váci Corridor).
Modern office stock currently adds up to 3,668,735 sqm, consisting of 3,064,165 sqm category “A” and “B” speculative office space as well as 604,570 sqm owner occupied space.
In Q3 2019, the office vacancy rate decreased to a record low 5.9%, representing a 0.4 pp reduction compared to Q2. The lowest vacancy rate was measured in the North Buda submarket (2.9%), while the Periphery still suffers from a 34% vacancy rate.
There is a notable contrast between between Buda and Pest; the vacancy rate has slightly increased in every submarket on the Pest side, while it has slightly decreased in every submarket on the Buda side of the Danube.
Net absorption in Q3 amounted to 28,095 sqm. Total demand in the quarter reached 191,235 sqm, representing a 41% growth year-on-year. Renewals accounted for 63% of the total leasing activity, followed by the new leases with 19.8%, while pre-leases represented a 10.4% share. Expansions accounted for 6.7%.
BRF recorded the strongest occupational activity in the Pest Central submarket, attracting 32% of the total demand. It was followed by Váci Corridor and the South Buda submarkets, with a share of 28% and 17% of total demand, respectively.
Increased average
The forum says that a total of 141 lease agreements were signed in the quarter. The average deal size was 1,356 sqm, exceeding the first quarter’s average by 41%. BRF registered 14 transactions larger than 3,000 sqm, made up of just one new lease agreement, three pre-leases in ongoing developments and 10 lease renewals.
Two of the four largest transactions were signed in the Central Pest submarket, one on the Váci Corridor and one in South Buda. The largest transactions of the quarter were renewal agreements, amounting to 63,900 sqm. In spite of previous trends, the proportion of renewals grew.
The largest new deal was concluded in South Buda submarket, with Thyssenkrupp’s development center moving to the South Buda Business Park, occupying 16,000 sqm of office space.
The largest pre-lease agreement was concluded in Gizella Loft office building for 6,000 sqm, while the largest expansion was signed in Center Point office building for 2,230 sqm.
BRF is comprised of CBRE, Colliers International, Cushman & Wakefield, ESTON International, JLL and Robertson Hungary. The forum publishes reports on the Budapest office market on a quarterly basis.
