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Budapest Office Market Report - 2016 Q3

Monday, 03 October 2016 00:00
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The Budapest Research Forum (hereinafter the BRF) hereby reports the Q3 2016 office market analysis.

Three new office buildings were delivered to the Budapest office market in the third quarter of 2016 extending to 39,570 sq m. V17 (E-on’s headquarters) was delivered by WING on 12,350 sq m; Nordic Light was completed by Skanska with a GLA of 24,900 sq m; and a smaller office building was delivered in North Buda on 2,320 sq m.  Furthermore, one office building (5,000 sq m) was excluded from the stock after its owner had decided to change its use function, while another building was re-added to the stock after becoming occupied (2,760 sq m).

The total modern office stock is currently 3,334,690 sq m, consisting of 2,670,110 sq m of Category ‘A’ and ‘B’ speculative office space and 664,580 sq m of owner occupied space.

After nine consecutive quarters of decline, the office the vacancy rate increased slightly by 50 bps quarter-on-quarter reaching 10.9%.

Similarly to previous quarters, the lowest vacancy rate (4.7%) was measured in the South Buda submarket, whereas the Periphery region suffered from a 35.7% vacancy rate.

Demand in the third quarter of 2016 reached 95,230 sq m, which was nearly in line with the volume of the corresponding period of 2015, but showed a 26% decline quarter-on-quarter. Out of the total leasing activity, renewals had a share of 41%, new transactions represented 37%, expansions accounted for 18% whereas pre-leases for 4%. No owner-occupied and BTS transactions were registered in the third quarter.

 

The strongest occupational activity was recorded in the Váci Corridor submarket with a 47% share within the total leasing activity. 14% of the deals were signed in the Central Pest submarket while 12% of the deals were registered in the CBD.

 

According to the BRF, 176 lease agreements were signed in Q3 2016, with an average deal size of 541 sq m.

 

BRF registered 21 transactions above 1,000 sq m: 10 renewals, 7 new deals, 3 expansions and 1 pre-lease.

 

The largest transactions of the third quarter were two renewals on 11,750 sq m and 5,300 sq m, both signed in the Váci Corridor submarket. The largest new transaction was signed for a 3,900 sq m office space in the CBD.

 

Net absorption was only 3.000 sq m lower than in the previous quarter, totalling 23,020 sq m. Absorption was especially notable in the Váci Corridor (32,320 sq m) and in Central Buda (4,620 sq m). On the contrary, it fell into negative territory in the Periphery, Central Pest and in the CBD.