Budapest Office Stock 4 mln sqm and Growing

Office Market

The largest Q1 delivery was GTC’s 29,000 sqm Pillar building in the Váci Corridor, fully preleased to ExxonMobil.

Total modern office stock in Budapest surpassed four million sqm in the first quarter of 2022 according to the Budapest Research Forum (the BRF, consisting of CBRE, Cushman & Wakefield, JLL, Colliers International, Eston International and Robertson Hungary). The overall vacancy rate has increased to around 9%.

Three new office buildings and one owner-occupied project were delivered, totaling 78,000 sqm. The largest delivery was GTC’s 29,000 sqm Pillar building in the Váci Corridor. This has been fully preleased to ExxonMobil, arguably the largest such deal in the Budapest office market when it was agreed.

Also in Váci út, Codic completed the 20,000 sqm BREEAM “Excellent”rated Green Court Office, part of a wider mixed-use complex. In South Buda, the latest phase of the Office Garden project was completed by GRT Group. In the other completion, the refurbishment of Buda Palota (the former Postal Palace and Magyar Posta HQ near Széll Kálmán tér) was completed, delivering 8,000 sqm of space in District XII. These are projects were scheduled for completion in 2021 and have all slipped into this year.

Increasing Demand

Office vacancy for Budapest rose to almost 10% according to the BRF. The lowest vacancy was registered in North Buda at 5.6% and the highest remained in the periphery with around 32%. Net absorption increased to 44,000 sqm. Further, total demand for the quarter reached 80,000 sqm, a small year-on-year increase.

Lease renewals represented the largest share of total leasing activity at 47%, while preleases in new developments reached 10%, reflecting the current caution on the demand side. With regard to locations, the strongest occupational activity was recorded in South Buda,   of total demand, followed by the Váci Corridor at 17%, reflecting the fact that tenants have a preference for locations within an urban city environment close to transport links and amenities.

“The first quarter office market transactions continued to reflect the lingering uncertainties affecting the office market, yet it is reassuring that since the beginning of the pandemic, the first quarter has recorded the strongest first quarter leasing activity,” commented the BRF on the figures.  

As much as 48% of the 2022 pipeline is already prelet, according to Cushman & Wakefield. This consists of around 300,000 sqm of Space.

 

In comparison to Budapest, Prague, a similar sized city in a similar-sized country to Hungary, has a total stock of 3.75 million sqm of quality office space as of the end of Q1 2022. Only one building, the 25,000 sqm Harfa Business Center B, was completed here in the first quarter according to the Prague Research Forum (CBRE, Colliers, Cushman & Wakefield, JLL, and Knight Frank, supported with by associated member Savills). The Prague office market has 180,000 sqm under construction with further projects due to be launched soon. A further 54,000 sqm in nine projects is due to complete by the end of the year as deliveries are well below the annual average for city. Vacancy in the city has increased to 8.4%.

This article was first published in the Budapest Business Journal print issue of May 6, 2022.

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