Office market still going strong in Q3, says CBRE


According to CBREʼs third-quarter real estate market report, the commercial market shows no signs of slowing down, despite the recent weaker numbers of the residential property market.

CBRE says that although the Hungarian Government Security Plus (MÁP Plusz) bond scheme offers an attractive alternative to real estate investments for domestic capital, the Hungarian buyer side remains strong in the market of institutional real estate, with interest from foreign investors growing perceptibly.

In the third quarter of 2019, sales have risen in the real estate market, with EUR 577 million’s worth of investments arriving on the Hungarian non-housing real estate market, meaning a 46% gain in strength on a quarterly basis.

In Q1-Q3 2019, total investment turnover surpassed EUR 1.1 billion, representing a slight, 3% rise year-on-year. CBRE recorded 34 transactions with an average value of EUR 33 mln, significantly higher compared to the previous year, with a number of portfolio sales involving several pieces of real estate, the company explains.

Offices also seem to retain popularity as an investment product, with 47% of total sales involving the sale of Budapest office buildings in the third quarter, while the figure stands at 55% for the entire year.

Interest in retail space was low early in the year, picking up speed at the beginning of the fall, putting the sector at 24% of annual sales to date. This rate is expected to keep rising, considering transactions currently in progress, says CBRE.

CBRE forecasts that sales this year may amount to EUR 1.5-1.6 bln, which will remain below the EUR 1.76 bln seen last year.

In the investor mood index prepared by CBRE at the beginning of the year, most respondents expected sales to be similar to those of last year, whereas the majorityʼs fear that total sales might remain below last year’s figure due to the scarcity of supply seems justified.

Construction boom to drive growth

According to the press release, increased construction activity in the office market may bring about additional market growth: while the amount of new office space to be delivered in 2019 is set to be barely 112,000 square meters, this figure may be doubled next year (reaching approximately 217,000 sqm).

In addition to investors, tenants who wish to move or expand their room for operation are also posting demand for this new supply. Currently, there is only 217,000 sqm of office space vacant in Budapest, mostly in older buildings in outer districts. This means a vacancy rate of 5.9%, the lowest ever measured in the office market.

Meanwhile, demand refuses to ease up: in Q3 alone, lease agreements were concluded for 191,000 sqm, representing an 82% hike compared to the summer months. However, 63% of the transactions consisted of renewals of existing leases. Rents continued to rise due to the high demand, the moderate new supply, and increased utilization.

"Looking at the completely vacant portfolio, the average rent offered is EUR 12.9/sqm/month, while the figure for class A goes up to EUR 15.3/sqm/month, representing a further 5% rise compared to last autumn," says Gábor Borbély, director and head of business development and research at CBRE Hungary. "Rent offered in newly built buildings may reach as much as EUR 16-17/sqm/month, while the most expensive offices downtown are offered at a rate of EUR 25-26/sqm, provided there is free space available."

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