Budapest Office Market Seen as Sector of Choice

Industrial

Against a background of strong demand fundamentals, office developers are able to take office projects forward with the confidence that tenants can be found and preleases concluded.

Arena Business Campus by Atenor.

Budapest office supply has continued to boom, with vacancy falling to some of the lowest levels on record. Preleases now constitute a significant part of the market; companies looking for large offices in the short-term have very few opportunities.

The latest delivery is the 27,300 sqm Corvin Technology Park by Futureal; it consists of two phases of 14,000 sqm and 13,000 sqm, with the latter due to be completed by the end of the year.

Total supply in the Budapest office market has reached around 3.6 million sqm according to the Budapest Research Forum (BRF), consisting of CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary. From this figure, a little more than three million sqm is defined as Class “A”.

Vacancy has fallen further to close to 7%, one of the lowest levels ever recorded in the Budapest office market. Established developers are therefore going ahead with built-to-suit (BTS), speculative and long-term phased projects.

As a comparison, total quality office stock in Prague stood at about 3.6 million sqm as of this summer. More than 70% of this is defined as class “A” and around 20% as “AAA” by JLL.

Total new supply in Budapest for 2019 is estimated at 200,000 sqm, with more than 300,000 sqm under construction. Cushman & Wakefield anticipate 90,000 sqm of new Budapest supply office for the second half of the year, much of which will have already been let by the time of delivery.

New Supply

JLL have traced 113,000 sqm of new supply for 2019, 70% of which is already prelet. CBRE has pinpointed 98,000 sqm of space under construction and due to be completed by the end of the year, raising the annual completion for 2019 to 130,000 sqm

In a major phased development in the Váci corridor, HB Reavis is constructing the 136,000 sqm Agora Budapest. The 34,000 sqm Agora Tower and the 32,000 sqm Agora Hub are due to be delivered next year.

Belgium’s Atenor is developing the final elements of the phased speculative Váci Greens that will consist of 130,000 sqm of space in six buildings upon completion. At the same time, the builder has also undertaken development of the speculative, phased 85,000 sqm Arena Business Campus in the outer boulevard of Budapest.

The first 20,000 sqm phase is due to be delivered in the second quarter of 2020, and ground work has already started on a second 14,000 sqm phase. Essentially, one of the four phases of the development is due to be completed every year.

In parallel with both these developments, Atenor has undertaken two projects in Buda.

“Undoubtedly, Hungary is the main focus of Atenor, as it is well ahead of the regional average in terms of economic growth,” comments Nikolett Püschl, leasing and development director at Atenor Hungary. “Our development model remains unchanged: we purchase, develop, lease and sell and then start over again with new projects.”

Selling of Váci Greens E and F is now in progress, and Aréna Business Campus will soon follow, she adds.

Magyar Telekom building by Wing.

Positive Mood

In a further sign of the continuing positive mood in the Budapest office market, CPI is developing the 15,500 sqm Balance Hall, also in the Váci Corridor. This third phase of Balance Office Park is scheduled to be delivered by the end of this year and 9,500 is already leased, bringing the total space at the complex to 35,000 sqm. There remains the possibility for a fourth phase of the development.

The Váci Corridor is the number one development destination with around 40% of the ongoing development volume according to CBRE. However, well-located development sites are becoming more difficult to source in the area.

When it comes to the quality of the stock in Budapest and Central Europe, regional and established international developers such as Skanska, Atenor, GTC, HB Reavis, and CPI have common sustainable development policies across countries. This can be seen as market pressure exerting influence on developers and building-owners to meet the demands of tenants and staff.

Developers are employing architects and interior designers to deliver ever more imaginative projects to meet more sophisticated demands from building users.

The area around the 13,000 sqm Nordic Light complex will offer 2,400 sqm of landscaped multi-activity gardens open to tenants and neighboring communities, bicycle storage facilities with changing rooms and showers, as well as parking with charging stations adapted for electric vehicles.

The complex by Skanska was designed by Paulinyi & Partners and could be one of the first WELL-certified buildings in Hungary in addition to its LEED “Gold” certification.

Excellent

The Hungarian developer/investor Wing achieved BREEAM “Excellent” accreditation for the built-to-suit Telekom headquarters, designed by TIBA Architect Studio. The 58,000 sqm complex includes two restaurants, an internal garden, roof top fitness club and running track.  

For 2020, consultants have traced about 190,000 sqm of new supply, of which around 90,000 sqm is let, lower than previous forecasts.

“Delays have had a domino tendency over the next years, supporting our earlier expectations of the sizable office development pipeline smoothing itself out over a longer time period,” comments Anikó Kovács, head of offices advisory and transactions at CBRE Hungary.

“According to our current estimates, the potential pipeline amounts to circa 208,000 sqm and circa 280,000 sqm in 2021 and 2022, respectively,” she adds.

For 2021, JLL has traced 280,000 sqm of new supply or under construction, of which 160,000 sqm is let.

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