The latest report of Budapest office market developments currently under construction has been prepared by RERA (Real Estate Development Association - the Association of Real Estate researchers).
In the second half of 2010, 29,980 m² of new office space is expected to be handed over, which is almost 80% less than the same period of 2009 (146,047 m²). So by the end of this year, the Budapest office stock will gain a total of 142,110 m² of office space, which has been the lowest value since 2006. Compared to the 2009 record year, it means a 53% reduction - a sharp decline in completed space can be observed. The picture is even more dramatic if we analyze the quarterly figures. After the first two quarters, when 50,503 m² and 61,627 m² of office space was completed respectively, in the third quarter, only barely half of this space (29,980 m²) is expected to be handed over, and in Q4 no expansion of the office market is forecasted. The result indicates the strong effect of the economic crisis, as the Hungarian office market might reach a state when no office buildings will be completed during the last three months of 2010.
Size of office buildings
In the third quarter, the smaller office buildings with less than 10,000 m² space are expected to appear on the market, and on the most popular locations as seen in the previous years. The Váci street office corridor will expand with the DC Offices building and the southern region of Pest with the Downtown IX office building. Momentum Offices, with successful pre-lease contracts, could invigorate the Central Buda submarket, while the renewal of the office building located on 14, Szabadság Square has been completed earlier than expected in the CBD.
Demand and pre-lease contracts
Buildings that are scheduled for completion in the next 12-18 months have already appeared on the supply side of the office market. Demands for these new offices can reach the market in the form of pre-lease contracts. Similarly to the earlier periods, such contracts were scarce in the third quarter therefore the vacancy rate predictably will not decrease with the arrival of these new office buildings. Those office developments, which are only in their planning phase, need one or more large tenants in order to proceed with construction. Some office developments that started prior to the crisis but were halted before completion are still waiting for significant pre-lease contracts. These buildings have a great chance to fulfill the increased demand of the first wave of the new economic growth, as they can be completed within a short timeframe possibly with special features and fit out requested by the tenants.
Source: Eston International Ingatlantanácsadó Zrt. - Oncor International