Office Market Snapshot
Stock
Avg. Vacancy
+4% yoy
+2 pp yoy
4,370k sqm
13.3%
Q4 2023
Net Take-up
Completion
YTD: 290,082 sqm
YTD: 102,834sqm
115,454 sqm 25,320 sqm
DISTRIBUTION OF TRANSACTIONS (2022, 2023) Pre-lease
25,4 EUR/sqm/mth +2.0% yoy
New Build
19 EUR/sqm/mth 0% yoy
Expansion
100
12.6%
Avg. Rent Prime
New
cat A
80
2.6% yoy
60
11.0%
Renewal
10.3% 11.0%
OO
BTS
0.6%
16 EUR/sqm/mth
Macro In 2023, GDP is projected to decline by approximately 0.3-0.8% on an annual basis. However, in 2024, as inflation and interest rates decrease, a growth rate of around 3-4% is likely. Domestic inflation, which decreased to 5.5% in December, reached 17.6% for the entire year of 2023. The positive turn in real interest rates by the end of the year supported a stronger EUR/HUF exchange rate; however, there is high uncertainty due to EU Fund inflow and base rate evolution. Despite the economic slowdown, unemployment rate in the tight labour market is expected to remain around 4% (4.2% in November 2023) in 2024. In Budapest, the rate could be even lower, at around 2.2%. Improving economic performance can support the demand in the office market, so in 2024, we can anticipate non-governmental demand similar to or exceeding that of 2023. Nevertheless, it is still expected to fall short of the average levels observed in the years before 2020.
40
20
0
36.9%
38.7%
3.0%
9.3%
30.2%
36.4%
2022
2023
Source: Colliers, BRF
Market summary In 2023, there has been a noticeable increase in tenant activity in the market. Net take-up, which measures the level of new demand, grew by 47% compared to 2022 and its share within total tenant demand (incl. renewal) reached 50.4%. Significant increase in demand is largely attributed to the contracts with BTS (Build-toSuit) and pre-lease governmental tenants that were realized in the last quarter. Increased activity is further supported by distribution of total tenant demand, where the proportion of new lease agreements was 36% in 2023, which is 6 percentage points higher compared to 2022. Due to the high vacancy rate of new handovers in 2023 (44% rate) and the absence of larger new entrants, total market vacancy continued to grow, reaching 13.3%, which represents an increase of 0.1 percentage points on quarterly basis and 2 percentage points on annual basis. Speculative vacancy rate also increased, reaching 16.6% at the end of the quarter, showing a quarterly increase of 0.4 percentage points and a year-on-year increase of 2.8 percentage points.
have shown a stronger preference for buildings that are sustainable, energy-efficient, and meet ESG criteria. This supports the fact that, on average, buildings with green certifications have a speculative vacancy rate that is 3.1 percentage points lower than the market average at the end of 2023.
SUPPLY, DEMAND AND TOTAL MARKET VACANCY RATE (2018 – 2024*) Demand
New supply
Vacancy rate
* Forecast
Looking ahead, the total speculative office pipeline until the end of 2024 amounts to 165,743 sqm, with Central Pest having the largest share at 98,033 sqm, primarily due to the Dürer Park development, which contributes 51,000 sqm. This will not result in new vacant areas on the market, considering that the properties have already been leased to government tenants for a considerable period. During the last quarter, one office building, Bem Center (25,300 sqm), was added to the portfolio of “A”-rated office buildings.
Higher financing costs and increased inflation in 2023 are reflected in rents on an annual basis. Prime headline rent is 25,4 EUR/sqm (+2% yoy), while new headline rent stood at 19 EUR/sqm at the end of the quarter, which shows a stagnation comparted to the end of Net absorption trend for Q4 has shifted into positive territory 2022. Average rent for cat. “A” buildings was 16 EUR/sqm while for (15,236 sqm); however, in 2023, concurrently with increasing cat. “B” 12.6 EUR/sqm, which practically means an annual increase vacancy rates, it reached a negative value (-4,428 sqm). Tenants of 2.6% and 2.4% respectively.
Source: Colliers, BRF
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Office Market Snapshot Q4 2023
North Buda Stock 347,086 Vacancy (%) 8.7% Net Take-up (sqm) 2,042 Completion (sqm) 0 Net absorption (sqm) -723 Average rent (EUR/sqm) 14.5
Central Buda Stock 451,896 Vacancy (%) 10.8% Net Take-up (sqm) 10,061 Completion (sqm) 25,320 Net absorption (sqm) 7,946 Average rent (EUR/sqm) 15.9
South Buda Stock 649,147 Vacancy (%) 13.3% Net Take-up (sqm) 16,031 Completion (sqm) 0 Net absorption (sqm) 8,091 Average rent (EUR/sqm) 13.5
Periphery Stock 122,938 Vacancy (%) 36.8% Net Take-up (sqm) 662 Completion (sqm) 0 Net absorption (sqm) 174 Average rent (EUR/sqm) 10.3
Outlook According to our expectations, the demand for prime locations and modern, green, energy-efficient, and ESG-compliant office buildings will remain stable. This is expected to result in lower vacancies compared to the market average and put upward pressure on rents for these modern buildings. Overall, the office market is projected to remain tenant-driven in 2024, with contract flexibility remaining of fundamental importance. We do not anticipate a significant turnaround in the trend of vacancy rate growth, particularly in lower-grade properties and locations outside central submarkets, during 2024.
Váci Corridor Stock 1,139,711 Vacancy (%) 12.3% Net Take-up (sqm) 9,194 Completion (sqm) 0 Net absorption (sqm) -9,143 Average rent (EUR/sqm) 15.1
Central Business District (CBD) Stock 379,731 Vacancy (%) 11.5% Net Take-up (sqm) 3,718 Completion (sqm) 0 Net absorption (sqm) 2,323 Average rent (EUR/sqm) 19.3
About us KRISTÓF TÓTH Head of Research, Hungary Kristof.Toth@colliers.com
Central Pest Stock 679,607 Vacancy (%) 15.5% Net Take-up (sqm) 60,579 Completion (sqm) 0 Net absorption (sqm) 1,995 Average rent (EUR/sqm) 14.4
MIKLÓS ECSŐDI Head of Occupier Services, Hungary Miklos.Ecsodi@colliers.com KATA MAZSAROFF Managing Director, Hungary Kata.Mazsaroff@colliers.com
Non-Central Pest Stock 599,785 Vacancy (%) 13.8% Net Take-up (sqm) 13,167 Completion (sqm) 0 Net absorption (sqm) 4,573 Average rent (EUR/sqm) 11.9 Source: Colliers, BRF
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