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Budapest Office Market Report for Q4 2014

Monday, 09 February 2015 14:02
The Budapest Research Forum hereby reports the Q4 2014 office market analysis.

Three new office buildings were delivered to the market in the last quarter of 2014 comprising 18,795 sq m, thus the total Budapest office stock (including owner-occupied and speculative buildings) increased to 3,238,180 sq m of office space. The second phase of Vision Towers (9,075 sq m) was delivered in the Váci Corridor, Corvin Corner (6,120 sq m) was handed over in Central Pest and a smaller office (3,600 sq m) was refurbished in South Buda. In 2014 the annual supply reached 68,190 sq m, more than twice as much as the annual supply of 2013.

The office vacancy rate currently stands at 16.2% showing a 0.7 percentage point decrease q-o-q and a 2.2 percentage point decline y-o-y. At submarket level South Buda is still the best performing market (10.9%), whilst the highest vacancy level is still recorded in the Periphery region (31.7%). During the last quarter the largest positive change was registered in the Central Pest submarket, where the market indicator shrank by 2 percentage points q-o-q now standing at 12.8%.

The remarkable improvement of the rate was supported by the positive net absorption, which was witnessed throughout the entire year and totalled 124,940 sq m in 2014. This volume indicates a considerable, more than 100% growth on 2013.

Similarly to previous quarters, occupier activity was strong in Q4. The total leasing activity amounted to 117,040 sq m, reflecting a 17% growth q-o-q. Out of this volume the renewals had a share of 45% (53,110 sq m). The volume of new leases accounted for 38%, expansions and pre-leases took 17% share.

The largest transactions of more than 9,000 sq m were renewals signed in North Buda and Central Buda. One significant pre-lease agreement was concluded in the Váci Corridor; GE signed another contract in Váci Greens C for 8,165 sq m. The largest new transaction was signed by UPC in Haller Gardens, covering more than 5,600 sq m.

According to BRF, 173 lease agreements were signed in Q4 2014, with an average deal size of 677 sq m.

Annual demand reached a record high in 2014 with 465,600 sq m, indicating a 17% growth on 2013. The structure of demand didn't change: renewals represented 46%, while net take up had a share of 54%. On annual level, the total number of transactions reached 702 with an average size of 664 sq m, the later being 24% higher than in 2013.

Interestingly, 27% of the total leasing activity was recorded in Central Pest (mainly because of the high volume of lease renewals), whereas 28% of the net take up was concluded in Váci Corridor.