Report: Budapest’s modern office stock grows, vacancy rate declines

Office Market

As a result of two completed schemes – the refurbishment of Erzsébet Irodaház A and the delivery of owner-occupied Bosch HQʼs second phase –  a total of 27,800 sqm have been added to Budapestʼs modern office stock, which now amounts to 2,615,600 sqm speculative and 662,300 sqm owner-occupied office space, the Budapest Research Forum’s report of its Q3 office market analysis reveals today.

The office vacancy rate continued to decline bottoming out at 13.5% at the end of the third quarter, to reach the lowest figure on record in the last seven years: Year-on-year decline represented a remarkable 3.4 pps, while quarter-on-quarter changes amounted to -0.7 pps, the report says.

On a submarket level, the lowest vacancy rate was again measured in South Buda at only 7.9%; while the highest figure was registered in the Periphery submarket at 29.6%, the report says, adding that demand in the third quarter reached 99,600 sqm of transacted office space, which is in line with the 5-year average of Q3 lettings, albeit approximately half of the all-time record volume registered in the previous quarter.

Renewals and new deals moved the market in the third quarter as the volume of net take-up, total leasing activity excluding renewals, matched a share of 46% within the total leasing activity, which is significantly lower than the  level registered in the previous quarter, the report says. This is due to the fact that only one small pre-lease agreement was registered in this quarter BRF says, adding that renewals accounted for 54%; new deals for 31% of the total leasing activity, while expansions accounted for 15%. No owner-occupied transactions were registered.

The largest new deal was recorded in Central Udvar A office building, that accommodated UNICEF in 6,200 sqm, while SAP made the largest renewal in Graphisoft Park for 10,000 sqm. Altogether 37 transactions above 1,000 sqm were concluded, including 19 renewals, 13 new deals, three expansions and two pre-leases, the report reveals.

Some 180 leasing transactions with an average deal size of 553 sqm were registered by the Budapest Research Forum in the third quarter, out of which only four deals exceeded 5,000 sqm of GLA. The quarter’s largest transactions were lease renewals, the report says, with 13,400 sqm being signed in the Millennium Towers and 7,300 sqm being signed in the Office Garden. The largest expansion took place in the Millennium Towers on 3,400 sqm. The most active submarkets were South Buda, Central Pest and the Váci Corridor which amounted to 72% of total leasing activity in Budapest, the report said.

Net absorption totaled 47,600 sqm and approximately 60% of this volume was registered in the Non-Central Pest submarket alone, backed by the handover of two fully occupied office buildings. 

BRF comprises of: CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary.

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