Vacancy rates to rise in Budapest as supply expands

Over 113,000 m² of office space was delivered to the Budapest market in the first half of 2009, according to the latest DTZ Budapest Office Market Update. Of this figure, almost 60% was realised in Q2. The report also indicates that a significant amount of office space - some 190,000 m² - is expected to be completed in H2 2009.

Despite this only 25% of the 1.8 million m² total proposed office developments that DTZ is aware of are currently under construction, the adviser said. DTZ expects a significantly lower level of completions in 2010 compared to 2008 and the expected 2009 figures.

The number of projects launched in 2009 has been lower than in previous years and even planned developments in possession of a valid building permit have been put on hold, waiting for pre-let contracts to be started. The ratio of net take-up is expected to remain low, while the number of lease-renegotiations will rise. With a large amount of new supply coming to market in H2 2009, the average vacancy rate will most likely be higher early in 2010 than at present.

Take-up totalled 118,100 m² in Q2 2009. Although this was twice as much as in the previous quarter, net take-up accounted for just 27% of the total transactions. Some 41% of the demand stemmed from lease renewals, 31% from relocations within the stock. The trend toward smaller office schemes is continuing, the adviser said, pointing out that as 66% of the transactions during the quarter involved office space of less than 500 m².

The vacancy rate for the Hungarian capital increased by 152 basis points by the end of June, to 18%, the highest figure since Q1 2004.