Industrial and logistics leasing market standing still

The Budapest industrial real estate market remained stable in H1 2012, showing balanced activity in terms of supply and demand. “Rents also performed in line with our expectations. With no new added supply, vacancy, rents and net absorption remained largely unchanged. Despite the fact that the volume of completed transactions was lower than 2011’s totals, leasing activity in H1 2012 showed solid interest on the demand side.” – said Tamás Beck, director of Industrial Ageny at Colliers International Hungary.

Take-up in H1 2012, which included pre-leases, new contracts and expansions, showed activity in demand. New lease contracts were signed totaling 53,000m², but this included an 11,000m²replacement of a service provider. Therefore, the actual space for which new contracts were signed was 42,000m². This is below demand recorded in H1 2011.

Similar to previous years, renegotiations and extended leases doubled the total of new transactions in H1 2012 equaling 82,000m².

Overall, the lease market showed strong levels of activity. Many firms are in the market looking for space and mapping out opportunities. However, they still remained cautious and thus the number of actual transactions completed remained low.

Net absorption was slightly negative (around 6,400m²) and the vacancy rate rose moderately to stand at 21.4% at the end of June. In total, there was 387,000m²of vacant space at the end of H1 2012.

Rents did not show any discernible change in H1 2012 as headline rents for big box buildings ranged from €3.2–4/m²/month, while the rate for city logistics buildings was around €4-5/ m²/month.Rental contract strategies varied among owners taking on new tenants.

The market for industrial and land transactions showed signs of increasing activity in H1 2012. There was interest for smaller plots, industrial buildings and warehouses (1,000–2,000m²) by end-users, while land needs for longer-term projects were also starting to appear. The manufacturing sector has also become more active in the market.

“We expect the trends seen in H1 2012 to continue throughout the second half of the year.  Any major changes would be attributed to the general improvement of the global economic environment or thanks to a country specific improvement. The development pipeline is limited.  The only projects in the foreseeable future will likely be pre-lease developments, and no speculative developments.We expect that take-up will not be significantly higher in H2 2012, thus taking the annual figure to somewhere around 100,000 m², or below 2011 levels.” – summarized Tamás Beck.

The latest industrial market report of Colliers International Hungary can be downloaded from http://www.colliers.hu/content/view/60/57/lang,en/.