Budapest, 28 August, 2018 - A strong
increase in new supply is expected in the upcoming two years, however, most
submarkets will still face rental growth in 2018. Sustained rental growth for Class A properties across all submarkets - except
the Periphery - is forecasted. Rental growth in the Class B market is expected
to be more moderate, driven both by Hungarian firms entering the institutional
market and multinational firms seeking lower cost office options, according to
Colliers International's latest, mid-year office market report.
The market has been in a growth
phase since 2012, which has accelerated markedly since 2014. The best evidence is
the gradually decreasing vacancy rate which stood at 21% in 2012 and decreased
to 7,5% by the end of 2017. The vacancy rate remained stable during the first
half of 2018 and was 7.6% on June 30, 2018.
Finding 1,000 sq m + units of quality
office space in core locations has become increasingly challenging since early 2017.
This problem will continue to be unabated through 2019 despite the number of
new projects expected to be delivered through the end of the decade due to the
preleasing activity. At the end of 2018 H1, more than 60% of the pipeline under
construction was already pre-leased.
The average headline rent level in
prime locations increased during first half of 2018 and it is approximately 5%
higher than it was at the end of 2017 H1. The market is expected to remain
landlord driven until at least 2020 unless there is a major change in the
„Due to the increasing new supply,
2018 H1 was the first period in more than 7 years, when the vacancy rate did
not decrease further. Older buildings vacated by large tenants have been able to
lease up their space at stable or mildly increasing rents due to the tightness
of the market. We forecast that rising construction costs and low vacancy rates
will lead to further rental growth in case demand remains strong. As a result,
in the case of new developments with good, but not CBD location, such as the
Váci út Corridor until Árpád híd and the Central Pest submarket, the average
headline rent level will likely reach EUR 15-16/sq m/month.” – said Michael Smithing, Director of Landlord
Agency at Colliers International.