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Market Research - Hungary

Hungary : Budapest office market - March 2020

Steady occupational and investment improvements characterise Budapest office market

Occupational activity driven by large pre-lets agreements 

 

Office take-up totalled 361,980 sqm rep-resenting a slight decline compared to 2018. Market activity remained concentrated in Váci Corridor, where 42% of the transactions was concluded. The second most important submarket for take-up is South Buda, accounting for 22% of the annual take up. 


The appetite for brand new office areas is still high, the ratio of pre-let agreements grew by 10% compared to 2018 and accounted for 35% of the annual take up. Pre-lets are now an important market feature. Two of the largest deals were pre-let for over 20,000 sqm and the new office schemes delivered in 2019 had an 80% occupancy rate. 


In 2019, 70,545 sqm of new office space arrived in the Budapest office market, which is 58% of the project pipeline thought viable in 2018. The volume of new developments for 2020 is 230,100 sqm and a further 325,250 sqm is expected to be completed in 2021. The ongoing developments mean that the size of the Budapest office market is going to exceed 4 million sqm by 2021.


With a modest level of new completions and high demand for modern office space, the vacancy rate in Budapest reached a historically low rate of 5.6% at the end of 2019. Based on the current trends we do not expect a considerable vacancy in-crease.  Rising labour force and construction costs are encouraging rent levels to grow. Prime rents in the CBD increased moderately; however, in the other submarkets we registered a higher rental growth. 
 

Solid transaction activity in the office sector is resulting in yield compression 

 

The annual investment volume mirrored the levels recorded over the last three years indicating steady interest from buyers in Budapest real estate. Office properties continued to be the leading sector, accounting for 51% of the total investment volume in 2019. The prime transactions concluded over the year included GTC White House, Advance Towers, Váci Greens E and Roosevelt 7/8. Due to increased interest from buyers, compression occurred in prime office yields, dropping by 50 basis points to 5.25%.  Hungarian property funds and private investors carried out most transactions.

 

 

Budapest EOM March 2020
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