Colliers International is reporting that the mood on Budapest’s office market is finally improving, after years in the doldrums. The country could use some good news after a torrid 2010 that saw poor economic news, high interest rates, and low confidence in the local currency, the forint.
Miklos Saly, Director of Office Agency for Colliers International Hungary, reports that while 145,000 m2 of new office stock came on line in 2010, 77% of that hit the market in the first half of the year. In other words, the supply pipeline is shrinking, and has started cutting into the high vacancy figure. At 25.7%, it’s clearly got a lot of cutting into to do. And while total lease transactions totalled 282,000 m2, half of this came through renegotiations or extensions of existing contracts.
Saly says that the vacancy rate looks worse than it really is, and that in certain areas, like the popular Vaci ut corridor on the Pest side of the river, it’s difficult for companies needing more than 2,000 m2 to find space. “With a recent deal for 5,000 m2 that’s close to being announced, the vacancy along Vaci ut will go below 20%,” says Saly.
That sounds like good news, obviously, but the fact is that anywhere else in Central and Eastern Europe, 20% vacancy would be considered a crisis. Budapest has traditionally confronted vacancy rates in the teens, and it’s possible that market players have simply got used to it. But in this new age of risk-aversion, it could be a tough sell when local developers try to cash in through outside property funds.
Robert McLean is Editor-in-Chief of CEE Construction & Investment Journal, the region’s leading property magazine.. To read more, visit the CIJ blog.
Image: Infopark, IVG.