Increasing Rates of Office Vacancy in Budapest

Office Market

Companies hoping to relocate their businesses are trapped in a rigid office market, according to an analysis of H1 office market data by Newmark VLK Hungary Kft.

“Many quarters have passed in the Budapest office market, with constantly increasing vacancy, which is at 12.6% in the middle of summer. It seems high but this is still not alarming yet, there was a similar and even much higher rate in the previous recession cycles,” comments Valter Kalaus, managing partner of Newmark VLK Hungary, on the increasing rate of office vacancy in Hungary.

“It is much more of a problem that this indicator does not faithfully reflect how much vacant office space tenants are looking for and how much of it is on the market. Observers can draw wrong conclusions, preventing them from making a well-founded decision regarding their office leases,” Kalaus continues.

According to the press release shared with Budapest Business Journal, companies often tend to move when they expand or shrink significantly, the latter becoming more frequent. If not for either of those reasons, they will move because they want to work in a more modern, better office building with different designs. According to Newmark VLK Hungary, this can be implemented for only a year, as in 12 months very few new buildings will be available.

Motives for Relocation

The latest vacancy figures[MOU1]  show that companies are increasingly willing to move to centrally located offices even if they are in relatively modern buildings in the suburbs. There are more services available in the inner districts and the commute is also faster and easier, and according to the press release “the motivation to relocate is also encouraged by the fact that companies have to pay more attention to the employees’ needs.”

Landlords also have to pay attention to the favorability of the location of their property and its quality, as they will suffer more in the short term if these factors aren’t up to standard. Relocations among lease transactions may further decrease because these tenants will not easily find an attractive space worth moving to, Newmark notes.

Many smaller companies are simply pushed out by the stronger competitors, meanwhile vacant office areas will be available upon the departure of a large tenant.

The areas that "emerge" in a large headquarters building due to the tenant company restructuring and trying to sublet the unnecessary spaces, can be classified in the same category. There will also be cases when the same tenant simply will give back the unwanted area, but this may have significant, not necessarily pleasant consequences for him.

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