Budapestʼs total modern office stock added up to 3,740,990 sqm in Q1 2020, with the office vacancy rate reaching 6.2% according to a market report by the Budapest Research Forum (BRF).
BRF comprises CBRE, Colliers International, Cushman & Wakefield, ESTON International, JLL and Robertson Hungary.
Two new office buildings delivered to the Budapest market in Q1: BudaPart Gate and Budapest One (18,160 sqm and 27,400 sqm respectively, both in the South Buda submarket). Lánchíd Palota (5,120 sqm, Central Buda) has been added to the owner-occupied stock following its recent acquisition by an end-user.
Out of the 3,740,990 sqm total modern office stock, 3,131,100 sqm are category "A" and "B" speculative office space, while owner-occupied space amounts to 609,890 sqm.
As a result of BRFʼs annual stock revision, 40 buildings’ GLA has been amended as of Q1, due to re-measurement or refurbishment over the past year, according to a press release sent to the Budapest Business Journal.
The office vacancy rate of 6.2% represents a 0.6 pp increase quarter-on-quarter. The lowest vacancy rate was measured in the Non-Central Pest (1.3%) submarket whereas the Periphery still suffers from a 33.6% vacancy rate.
Net absorption over the first quarter amounted to 22,790 sqm.
Total demand in Q1 2020 reached 79,660 sqm, stagnating year-on-year. Out of the total leasing activity, renewals represented the largest share with 36%, followed by new leases (31%), expansions (13%), pre-leases (14%) while owner occupation made up the remaining 6%.
Contrary to Q4 2019, the strongest occupational activity was recorded in the Central Pest submarket, attracting 26% of the total demand. The Váci Corridor ranked second in this respect with a share of 22%, while Central Buda came third with 19%.
According to the report, 118 office agreements were signed in Q1, with an average deal size of 675 sqm.
BRF registered 15 office transactions above 1,000 sqm, split between six new transactions, five renewals, two pre-lease agreements, one expansion, and one owner-occupation.
Three agreements were concluded for office area exceeding 5,000 sqm. The largest transaction was a pre-lease agreement signed in the Váci Corridor submarket, with a 7,450 sqm deal in Váci Greens E. The largest renewal of the quarter was signed in Park Atrium for 6,300 sqm, while the largest relocation lease in the existing stock was registered for 4,730 sqm in the newly delivered Budapest One scheme.
BRF notes that Q1 2020 office market statistics do not yet reflect the current economic restrictions triggered by the coronavirus pandemic. Total leasing activity was largely in line with the past five years’ Q1 average and based on headline rents in the current availability, there has not been any material rent correction.
The report says the average vacancy rate increase was due to organic market developments in the form of expiring leases and planned relocations.