Are you sure?

South Buda office market faces new challenges after 2018 changes

The South Buda office market went through drastic changes in 2018, with thousands of office areas vacated during the year, while the submarket had the lowest vacancy rate at the beginning of the year. Facing new challenges, new developments in 2019 will create a more diverse situation, says real estate advisor Robertson Hungary.

Robertson Hungary says that the popularity of the South Buda office market has grown significantly over the past 20 years. The momentum started in 1998 with the inauguration of the first phase of Infopark, the popularity and size of the submarket increasing at an incredible pace over the two decades. Currently, 10% of modern offices are located here, and the office market is set to grow further with the delivery of the future developments, according to a press release sent to the Budapest Business Journal.

Beyond the Váci Corridor, the South Buda office market grew at the most dynamic pace in the last ten years. Due to the high level of demand, an office of 1,000 square meters or larger has been almost impossible to find in the submarket in the past two years. By the beginning of last year, the vacancy rate reached the record low of 2.7%. This trend turned by the end of 2018, the press release notes.

The South Buda office market has always been a preferred location for IT and telecom firms as there is a high number of IT and technical higher education institutes located in District 11. The submarket is also popular among FMCG and business service centers requiring strong foreign language skills. The headquarters of oil and gas company MOL and IT firm evosoft are also located in South Buda, and their new, modern headquarters are under construction in the submarket as well.

The location is close to District 12 and the M1 and M7 motorways, with easy access to the city center and the southern areas of Pest over Rákóczi Bridge. Robertson argues that the growth of the submarket was supported by infrastructural developments (Metro 4, the new tram network in Buda, the extension of tramline line 1), as well as a growing number of services such as new shopping centers, restaurants and cafés. A notable feature is that the office buildings of the submarket have a higher parking area ratio, which helps to fulfill considerable demand.

Over the course of 2018, due to the relocation of Magyar Telekom and other large enterprises to the Pest side of the city, several thousand square meters of office area became available once again. By the end of the year, the vacancy rate reached 12.6%. A range of office areas of varying size and quality were vacated, alleviating the scarcity of adequate vacant areas. While some of the buildings were built in the late 1990s, there are buildings of higher technical quality like the South Buda Business Park, which is just ten years old.

Robertson says that due to the new developments, the office supply is going to be more versatile. With the handover of the new office buildings (Bartók Udvar II, Budapest One, BudaPart Gate), state-of-the-art office buildings will be available in the submarket. Furthermore, South Buda is able to offer vacant office space of differing quality and varying price ranges. The rents of the prime assets are close to the rental levels on the Váci Corridor.

"By 2018, the vacancy rate sharply increased in the South Buda office market; however, landlords are still in a good position," says Róbert Tilki, managing director of Robertson Hungary. "The popularity of the submarket is steady, a significant portion of the vacated office areas of 2018 is already let out or being negotiated. In line with the current trends, the vacated and brand-new office areas are expected to be rented out shortly. The interest is vivid, and our mission as consultants is to help the negotiations turn into valid lease contracts by the end of the day."