Colliers calls for slowing of development boom in Budapest

Office tenants in Budapest are set to benefit from a development boom which will deliver 350,000 m² of new space onto the market in 2009, according to Colliers International Hungary. But developers and owners will have a more difficult time as the global economic slowdown dampens down demand. Therefore, some development projects should be delayed, the broker has suggested.

Research carried out by Colliers International in Hungary indicates a total of 355,000 m² of new office space is to be delivered in Budapest during 2009. The broker based the figure on research of all ongoing construction projects scheduled for completion in 2009.

'The figure is larger than expected because no one so far knew the exact figure, most previous lists were incomplete, but we are confident we have a comprehensive list reflecting the situation at the beginning of November 2008,' said Rémi Couture, director of Research at Colliers International.

If all construction is completed in time, it will represent a 17% increase in the total stock of commercial property as recorded by the Budapest Research Forum. Colliers noted the boost in supply arrives at a difficult moment for the real estate market in Hungary as the global uncertainty is discouraging companies to move. Due to the large amount of supply coming on the market, there will be no pressure to increase rent and absorption will take longer.

Colliers said that from the tenants’ point of view, 2009 should be a good year because they will have ample and affordable choice.. As in finance, the Budapest real estate market will go back to the basics: quality and location. Good-quality and well-located buildings will get leased even if the vacancy rate is high. Anything else, according to Colliers International, will struggle.

Colliers said that some delay may be expected and some projects may be delayed to 2010, but the 355,000 m² is based on what the developers and their agents state in their official communication.

'Our research also indicates that there is approximately 136,000 m² of Class A office under construction to be delivered in 2010 and developers have permits for another 540,000 m². Some of these projects can and should be delayed,' Couture said.