Office Supply Expected to Fall Despite Landmark Developments

Office Market

Office demand in the Budapest office market has continued to boom, with vacancy falling despite the highest new supply recorded for 2018 since the economic downturn. Take-up reached 535,000 sqm for the year, representing a 13% year-on-year increase in activity according to Cushman & Wakefield.

Green Court by Codic .

Total supply in the Budapest office market has now reached 3.6 million sqm after six new schemes were delivered in the last quarter of 2018, according to the Budapest Research Forum (CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary). The market data provider puts the overall vacancy rate at 7.3% as of the end of last year.  

“This high level of demand has not gone unnoticed by developers, as the city now has circa 482,000 sqm of office space under construction, of which almost 50% is already pre-committed,” said CBRE. “As a result of the strong demand in the market, the average vacancy rate in Budapest has eroded to an all-time low of 7.3%, with further reductions expected over 2019.”

The strongest occupational activity was recorded in the two current development hotspots with the Váci Corridor attracting 38% of total demand, followed by north Buda at 15%. The largest transaction in the quarter was a 19,000 sqm pre-lease at Agora Tower by HB Reavis with Raiffeisen Bank, and a 6,000 sqm lease at GTC’s White House.

In the latest Budapest office development, the Brussels-based developer Codic International has commenced construction of the 21,000 sqm Green Court office complex, part of a mixed-use development.

The complex is located on Dózsa György út, described as the new focus point of the inner Váci Corridor by Codic. The project includes the Green Court Residence, two residential buildings with 275 apartments due to be handed over by the end of the year, with the office component scheduled to be complete by the end of 2020 according to Colliers International, co-exclusive leasing agents with JLL for the office project.

Green Court is aiming for BREEAM “Excellent” certification and the complex includes a 3,300 sqm interior garden, restaurant and café and parking for 300 vehicles and more than 100 bicycles.

Ideal Solution

“The 21,000 sqm office building is an ideal solution for one or two companies seeking a headquarters building due to the double lobby design and the flexible floor plates of over 2,400 sqm,” comments Christophe Boving, head of development for Hungary at Codic.

The 36,000 sqm Agora Tower, the first building scheduled to be finished at Agora Budapest will be completed this year, with the complex planned to provide 136,000 sqm of office, retail and service space developed on a phased basis.

In another large, phased office development, Belgium’s Atenor is developing the speculative Váci Greens office project that will consist of 130,000 sqm of space in six buildings upon completion.

In parallel with development of the final phases of the project, the developer has undertaken construction of the 85,000 sqm Arena Business Campus in District VIII (also speculative and phased). Such further large-scale projects reflect the current confidence in the Budapest office market.

Both Nikolett Püschl, development and leasing manager at Atenor Hungary, and Jan Hübner, country CEO at HB Reavis Hungary, expressed confidence in their long-term projects – despite any potential market downturn – at the recent Europaproperty CRE forum at the Hotel Marriott Budapest.

All major office developers, including Attila Kovács, managing partner of Horizon Development, agreed that suitable office development sites in Budapest are becoming more difficult to source.

New supply for this year is expected to be 126,000 sqm in comparison to the 230,000 sqm of space delivered in 2018.

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