Positive Net Absorption… Barely!

There was a positive net absorption of about 1,900 m2 (0,08% of the total speculative stock) in the Budapest office market between Q4 2009 and Q1 2010, according to King Sturge analysis. The change in total occupied area between two periods is defined as net absorption, while Take-up measures the total leasing volume, without taking into account the change in vacancy or new supply.

A net absorption of 1,900 m2 reflects the trend amongst tenants to relocate within better, newer and more affordable locations or to renew their leases on advantageous terms, while overall the tenant demand for office space remains the same.  The situation varies greatly between submarkets: Váci út Corridor and the Periphery submarkets experienced declining occupancy in Q1 2010.

“Váci út Corridor had a negative migration, while it is the submarket with the lowest vacancy rate (14,8%). This negative absorption is essentially due to the fact that two major financial institutions left the area for other submarkets. As a result, Váci út Corridor vacancy rate increased by about 2% between Q4 2009 and Q1 2010.  However, this analysis is a “snap shot” of changes between two quarters. Therefore, we can only make observations, but we cannot draw conclusion on the future of the Váci út Corridor. This submarket remains a popular and established location, said Rémi Couture, Research Consultant at King Sturge.

This analysis was done based on data from the Budapest Research Forum (BRF), which King Sturge is a member.  The office sample includes Class A and Class B buildings and follows the submarket divisions introduced by BRF as of April 2010.  “Owners and developers will receive several analyses about net absorption and the figures may vary depending on the methodology, but the overall trend will be the same, minimal. We expect positive absorption to pick-up in the second half of 2010. This trend and the reduced construction pipeline will lead to lower office vacancy as of 2011, which currently averages 25% across the city” – concluded Mr. Couture.