No new office building was delivered to the market in the last quarter of 2013, thus the total Budapest office stock (including owner-occupied and speculative buildings) remained unchanged with 3,172,400 sq m office space. Annual supply was 30,100 sq m, 30% higher than in 2012. We anticipate further improvement in 2014 as several buildings are expected to be handed over with a total area of approximately 67,000 sq m.

Vacancy rate remained stable, reaching 18.4% in Q4 which is only 0.13 percentage points lower than in Q3. On annual level we can observe a more robust decrease with a 2.5 percentage points drop compared to same period of previous year. The overall picture did not change significantly on submarket level either. South Buda and Central Pest are still the best performing markets with 13.2% and 14.3% vacancy rates, respectively. The largest positive change was registered in the CBD where the market indicator dropped back by 7.6 percentage points year-on-year and reached 17%.

Although only a modest net absorption was recorded during the last quarter of 2013, the annual volume of the indicator reached 47,500 sq m, which indicates a considerable improvement on 2012, when it dropped to negative territory.

Total leasing activity was outstandingly high in Q4, amounting to 153,500 sq m. However, 77% of this volume was lease renewal which was boosted by a number of large transactions above 10,000 sq m (MÁV, Budapest Bank and British Petrol, etc.).

On the less positive note, the largest new deal did not reach the 1,000 sq m threshold. The largest deal in take-up was the expansion signed by GE (2,600 sq m) who expanded their shared service centre in the new Váci Greens office.

Annual demand excluding renewals totalled 190,500 sq m, 9 % higher than in the previous year. The volume of renewals also overtook the 2012 figure by 7%.

According to BRF, 215 lease agreements were signed in Q4 2013, with an average deal size of 714 sq m. This indicates a significant increase compared to the Q3 figures, mainly due to the large renewals which occurred during the quarter.

On annual level, the total number of transactions reached 745 with an average size of 534 sq m.