Budapest developers are building 355,000 square meters (sqm) of new office space to be delivered in 2009, property consultant Colliers International said in a press release.
The figure was established following research of all the construction projects which were projected to be delivered next year. “The figure is larger than expected because no one so far knew the exact figure, most previous lists were incomplete, but we are confident we have a comprehensive list reflecting the situation at the beginning of November 2008,” said Rémi Couture, Director of Research at Colliers International.
If all construction is completed in time, it will represent a 17% increase in the total stock of commercial property as recorded by the Budapest Research Forum. This boost in supply arrives at a difficult moment for the real estate market in Hungary when global uncertainty is discouraging companies to move. With such a supply of new space, there will be no pressure to increase rent and absorption will take longer. Naturally, some delay may be expected and some projects may be delayed to 2010, but the 355,000 sqm is based on what the developers and their agents state in their official communication.
“We were expecting the vacancy rate to reach 18% by the end of 2009 at a minimum, but with the questionable economic outlook for 2009 and this level of supply, vacancy could actually be above 25%,” commented Hamish Williams, head of Office Leasing at Colliers International. “Our research also indicates that there is approximately 136,000 sqm of Class A office under construction to be delivered in 2010 and developers have permits for another 540,000 sqm. Some of these projects can and should be delayed,” Rémi Couture said.
Colliers International is predicting that from the tenants’ point of view, 2009 should be a good year because they will have ample and affordable choice. But developers and owners will have a more difficult time. As in finance, the Budapest real estate market will go back to the basics: quality and location. Good-quality and well-located buildings will get leased even if the vacancy rate is high. Anything else, according to Colliers International, will struggle. (press release)