Office market report:
Four new office buildings were delivered to the Budapest office market in the third quarter of 2018, totalling 110,970 sq m. The largest of the completions took place in the Non-central Pest subregion; Magyar Telekom’s HQ comprises 58,800 sq m. Further handovers included the 36,000 sq m Mill Park, the 11,340 sq m Advance Tower I. and the 4,830 sq m EcoDome.
The total modern office stock currently adds up to 3,587,290 sq m, consisting of 2,943,580 sq m category ‘A’ and ‘B’ speculative office space as well as 643,710 sq m owner occupied space.
Industrial Property Market:
In the third quarter of 2018, one new building was handed over: a 5,000 sq m warehouse in the next phase of Budapest Dock Szabadkikötő.
The total modern industrial stock in Budapest and its surroundings stood at 2,086,120 sq m at the end of Q3 2018.
Total demand amounted to 109,350 sq m in Q3 2018, marking a 10% decrease from the figure noted in the same period last year but 83% increase compared to the previous quarter. Lease renewals accounted for 52.1% of the quarterly volume, while the share of new leases was 31.4%. Expansions stood for 10.1% of the quarterly volume. One pre-lease agreement was signed in the third quarter, representing 6.4% of total demand.
For the full reports, please click on the links below:
BRF PR OFFICE Q3 2018_EN_ESTON
BRF PR OFFICE Q3 2018 HUN_ESTON
BRF Q3 2018 industrial PR_ENG-FINAL_ESTON
BRF Q3 2018 industrial PR_HUN-FINAL_ESTON
In the first half of 2018 office areas of around 75 thousand square meters were handed over in five office buildings, which surpasses last year’s volume (5,500 m²) significantly. The main parts of the new areas were finished on Váci Street (about 60 thousand square metres). The biggest newly handed over building is Promenade Gardens (22,500 m²).
The building of further new office buildings, about 462 thousand square metres, has started; out of this 168 thousand square metres could be handed over until the end of the year (10 buildings). The office stock of Váci Street will probably surpass one million square metres in 2020. This means that the current office stock (25% of the market) will remain the largest sub-market in Budapest.
Industrial and logistics property market
Until the middle of 2018 new halls were handed over in three logistics parks with a total area of over 30 thousand square metres (out of which 25,691 m² is warehouse and 4564 m² offices). The size of the area handed over is significantly smaller (30%) than it was a year ago, but the completion of more, big sized units is being planned until the end of the year. The biggest new handed over building is located in Inpark Páty, and is used as a warehouse by Euronics (12,200 m²).
The major part of the 113 thousand square metre logistics property (100 thousand m²), which is being developed, is expected to be handed over this year. By this the annual development volume will grow by 11% compared to 2017. The biggest growth can be expected in Üllő Airport Logistics Center; here 85 thousand square metres can be used by tenants in the two halls before the end of the year.
In the first quarter of 2018 economic growth in Hungary grew by 4.4% compared to last year’s result. This is one of the most significant GDP growth measured in the EU. In the January-May period performance grew in several fields: industry (3.1%), construction industry (6.9%) and tourism (number of guests: 7.1%, income of commercial accommodation: 11%). Inflation in the first half of the year stood at 2.3%; in case of durables deflation could be seen. Labour-market indicators continued to improve; unemployment rate fell to 3.7%, employment rate increased to 69.1%. Average net income surpassed by 12.1% last year’s data in the January-May period. Base rate stills stands at 0.9%, the Hungarian forint weakened significantly compared to the euro (HUF/EUR 328.6).
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The Budapest Research Forum (hereinafter the ‘BRF’, which comprises CBRE, Colliers International, Cushman & Wakefield, ESTON International, JLL and Robertson Hungary) hereby reports its Q2 2018 office market summary.
Three new office buildings were delivered to the Budapest office market in the second quarter of 2018, totalling 57,060 sq m. GTC White House (21,560 sq m) and Promenade Gardens (22,500 sq m) both opened their gates along the Váci Corridor, while Graphisoft Park South (13,000 sq m) is the newest phase of the namesake park.
The total modern office stock currently adds up to 3,503,170 sq m, consisting of 2,838,720 sq m category ‘A’ and ‘B’ speculative office space as well as 664,450 sq m owner occupied space.
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In the first quarter of 2018, two new buildings were handed over with the size of 18,020 sq m: a 11,020 sq m warehouse in East Gate Business Park, and a 7,000 sq m hall in the next phase of Budapest Dock Szabadkikötő building C. Furthermore, one existing building was included in the stock due to adequate quality and occupational status; the second building of Logicor’s Fehérakác property raised the industrial stock with 4,400 sq m. The total modern industrial stock in Budapest and its surroundings stood at 2,068,900 sq m at the end of Q1 2018.
Total demand amounted to 103,790 sq m in Q1 2018, marking a 45% increase over the figure noted in the same period last year. Lease renewals accounted for 72.7% of the quarterly volume, while the share of new leases was 21.8%. Expansions stood for 5.5% of the quarterly volume. No pre-lease agreement was signed in the first quarter of 2018. 24 leasing transactions were recorded in the first quarter, out of which two agreements were signed for more than 10,000 sq m. The average transaction size was 4,320 sq m during the quarter, which is one and a half times the average level of the previous five years’ first quarters. 98% of all leasing activity was recorded in logistics parks, where the average transaction size was 4,620 sq m, while the average deal size in city logistics schemes equalled 1,075 sq m.
The two largest transactions of the quarter were lease renewals. HOPI at Goodman Gyál Logistics Centre renewed its contract on 21,700 sq m, while in Prologis Park Budapest – Sziget Schneider Electric signed a lease renewal for 19,960 sq m. The largest new lease agreement amounted to 7,000 sq m and was signed in Budapest Dock Szabadkikötő. The largest lease expansion was recorded in Prologis Park Budapest – Batta on 4,180 sq m.
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Two new office buildings were delivered to the Budapest office market in the first quarter of 2018, totalling 18,280 sq m. In the CBD Markó Offices 9 was handed over on 2,630 sq m, whilst the new D phase of Váci Greens was completed with 15,650 sq m in the Váci Corridor.
Furthermore, one asset was added to the BRF stock as in the future it will operate as an office building again.The total modern office stock currently adds up to 3,446,110 sq m, consisting of 2,781,660 sq m category ‘A’ and ‘B’ speculative office space as well as 664,450 sq m owner occupied space.
As the result of our annual stock revision, 1 building was excluded from the modern stock and further 46 buildings GLA’s were amended due to re-measurements taken place over the beginning of 2018.
The office vacancy rate has decreased to 7.3%, representing a 0.2 pps reduction quarter-on-quarter – the lowest rate ever recorded on Budapest office market. In line with the preceding quarters, the lowest vacancy rate was measured in the South Buda (2.7%) submarket whereas the Periphery still suffers from an overwhelming 31.2% vacancy rate.
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In 2017 about 80 thousand sq. m new office area was handed over; this figure is smaller than that of last year or the one previously expected. More than half of the newly delivered office area (42.5 thousand sq. m) can be found in the South Buda region, where new office buildings have been built for the first time since 2010.
The biggest new building is the Hungarian Nobel Prize winners’ Park I (24000 m² in South Buda), where Ericsson is located.
The building of further 410 thousand sq. m new offices has begun; out which about 265 thousand sq. m could be handed over in 2018 (in 15 buildings). The office stock of Váci Corridor will almost reach one million sq. m by the end of 2019; this is a sought-after area, which is shown by the fact that the current occupancy rate of the offices is not worse (41% on average) than the market average despite the concentrated developer’s activity.
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In 2017 industrial and logistics property developers became more active, and the total stock surpassed 2 million square meters. The amount of annual handover was more than 100 thousand square metres for the first time since 2009; the majority of the developments were finished in the second half of the year.
New developments of about 118 thousand square meters were completed in 2017, this is 50% higher than the volume last, and is roughly as big as the development volume of the past five years.
The biggest new hall was made at Inpark Páty Industrial Park: Kühne & Nagel could move into the new establishment of 23 thousand square meters in the third quarter. The new developments which are currently in process take up about 130 thousand square metres. Out of these Üllő Airport Logistics Center is a significant project, here more than 85 thousand square metre of new property is expected to be handed over in the third quarter of 2018.
There was a new record in leases in 2017: following a very strong first half year the annual volume of transactions was close to 620 thousand square metres. This was the first time when demand was bigger than 500 thousand square metres. The number of lease extensions, new contracts and pre-lease agreements increased significantly compared to last year, however, there was a smaller demand for expanding leased areas.
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The Hungarian economy grew at a fast pace, by 4.2%, in 2017 (GDP growth at the middle of the year was 3.7%). The country’s economic performance is middle ranking among central European countries, which is higher than the EU average (2.4%). Investments showed growth (16.7%) again following the setback last year. Building industry’s activity grew significantly, by 30%, in comparison with last year. Strengthening building activity resulted in higher prices: the price index of the building industry was 8.4% for buildings in 2017 (in 2016 this figure was 4.3%)
The volume of residential property buildings grew by one fifth compared to last year, in Budapest the number of completed flats grew more significantly, by 56%. The volume of flat handovers is expected to continue to increase in 2018, on the other hand it can be seen that the number of new developments decreased as a result of the approaching deadline of the new, reduced VAT rate for purchasing new flats, which is to be introduced in the near future.
The expansion of retail trade turnover was similar to last year (4.9%), the growing trend is expected to continue in 2018 due to the increase of net income. Consumer prices grew by 2.4% in 2017.
Rate of unemployment dropped to 4.2% in 2017, which is one percentage lower that the figure in the previous year. Employment rate grew by 1.6% to 68.2% compared to last year. Shortage of labour can be seen in more fields (e.g.: construction industry, production industries), in addition, the rate of unemployment shows significant differences regionally. Base rate has not changed since the middle of 2016 (0.9%).
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Hungarian economy produced a strong growth of 3.7% in the first half of 2017 compared to last year (when the growth was at 1.7% in the same period). The volume of investments grew significantly compared to the low base rate (by 34%); growth could be observed in every area of the economy, investments in the construction industry grew by 49%. Industrial output grew by 5.6% in comparison with the January-June period last year, whereas construction industry grew by an even bigger (27%) rate. Construction of residential properties increased by 46% in the first six months (compared to last year). The number of building permits and simple notifications has increased by 40% in Hungary, and it has doubled in Budapest. As a result of the easement of building permits and the state subsidies (CSOK –state subsidy provided for families, reduced VAT) provided for residential properties the strong increase in building residential properties is likely to continue in the following year. Costs of constructions showed continuous increase in the examined period, prices increased by 8% in the second quarter in comparison with the same quarter last year.
Retail trade continued to expand: the rate of growth was 3.9% in the January-June period compared to the previous year (in 2016 it was 5.3%). Consumer prices grew by 2.3% in the first six months compared to last year, while the rate of annual growth was 1.9%. The biggest rate of inflation could be seen in case of alcoholic drinks and tobacco products.
Unemployment rate dropped below 5% (4.3), in addition employment rate increased to 68.1%. There is a big difference regionally in the unemployment rate, there is a shortage of labour at the more significant industrial areas. The National Bank has not modified the base rate since the middle of 2016, it stands at 0.9% at present.
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Calm before the storm
There was a significant decrease in the growth of supply in the first half of 2017 compared to last year’s data, with only one new building being handed over (Graphisoft Park, 5,500 sqm). On the basis of current data developers’ activity is going to be more moderate compared to the year of 2016 and to previous expectations.
Ongoing property developments make up around 400 square metre office space, the major part of which (316 thousand square metre) is expected to be handed over only in 2018. Two hotspots of property development are the office corridor on Váci Street and sub market in south Buda. The dominance of Váci Street is expected to continue its growth in the near future, the size of handed over modern office stock of the region is going to surpass one million square metres by the end of next year. In the south Buda submarket, which with 3% has the lowest vacancy rate, completion of new offices (over 110 thousand square metres) can be expected a year later, in 2019.
The two biggest handovers in the second half of this year are going to take place in the south Buda submarket (Office Garden 3 and Hungarian Nobel prize winners Research and Development Park I); 42 thousand square meters of office space are going to be handed over in the two office buildings, which account for more than half of the annual growth in demand.
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