BRF Q1 2013 office market analysis

The Budapest Research Forum (BRF, which comprises of: CBRE, Colliers International, Cushman & Wakefield, DTZ, Eston International, Jones Lang LaSalle and Robertson Hungary) hereby reports its Q1 2013 office market analysis.

The total Budapest office stock (including owner-occupied and speculative buildings) reached 3,145,467sq m in the first quarter of2013. BRF registered only one new office handover (‘BUD Office Center’) in the Periphery submarket; with this, the total modern office stock comprises 2,571,903 sq m of modern ‘A’- and ‘B’-category speculative office buildings and 573,564 sq m owner-occupied buildings.

Having reviewed the overall stock, we registered 32 buildings changed in size due to a change in the measurement system employed, while 17 buildings were excluded from the stock as their condition no longer meets the necessary technical requirements or BRF’s definition standards. Therefore the speculative office stock decreased by nearly 71,000 sq m. Furthermore, BRF re-classified four buildings into ‘owner occupied’ category based on their ownership status, which increased the owner occupied stock by nearly 20,000 sq m.

The office vacancy rate now stands at 19.6%, indicating an improvement both on the previous quarter and on the same period of 2012. The lowest vacancy rate (15.3%) was measured in the South Buda submarket, whilst the highest vacancy level is still seen in Periphery region (31.8%).

The total volume of demand reached 71,409 sq m in Q1, which is almost 34% higher than in the first quarter of 2012. Moreover, out of this volume renewals had a share of 24.6% (17,575 sq m), which is the lowest ratio since Q3 2009. The volume of new leases, and expansions also improved more than 45% year on year reaching 47,688 sq m while one owner occupation transaction comprised 6,146 sq m.

BRF registered 172 lease agreements in Q1 2013, with an average deal size of 415 sq m. This size is in line with  the Q1 2012 size and half of the size which was recorded in the previous quarter. The reason behind the relatively small average deal size is the fact that almost 80% of the transactions were signed for a volume of ≤ 500 sq m.

There were 15 contracts in Q1 with volumes greater than 1,000 sq m, covering 6 lease extensions, 5 new leases, 3 expansions and one owner occupation, the largest transaction of the quarter. Apart of it in terms of size the largest  4 transactions were new leases including Systemax in Corvin Offices II with a volume of almost 5,000 sq m. It was followed by a new lease agreement in Krisztina Palace on 3,800 sq m and a 2,400 sq m new lease in Bank Center.

The strongest occupier activity was recorded in the Central Pest submarket and stronger than usual activity was witnessed in the Periphery submarket as well. Several leases were extended on nearly 2,000 sq m while expansions and new agreements were signed for 3,000 sq m in TerraPark.