The View 7th edition

31

RENTS STILL INCREASING DESPITE PLATEAUING VACANCY The average vacancy rate across Budapest remained largely stable throughout 2018, hovering between 7.3-7.6% and finishing 2018 at the bottom of that range. At year end, the ‘A’ category segment had an average vacancy rate of 4.5% (-0.9pp y-o-y), ‘B’ category assets averaged 9.8% (-1.6pp y-o-y), while mid-range ‘B+’ assets saw their average vacancy increase to 10.4% (+2.2pps y-o-y). Five of the eight office submarkets saw their average vacancy rates lower than a year earlier. The Váci Corridor showed the greatest decrease by halving its vacancy rate to 4.3%, while the CBD (4.0%), Central Pest (6.7%), North Buda (5.1%) and Non-Central Pest (3.4%) submarkets all decreased by 1.0-3.3pps y-o-y. The remaining three submarkets showed considerable increases in their vacancy levels. The Periphery’s longstanding vacancy rose further to 38.0% after a vacant new completion, Central Buda roughly doubled its rate to 9.0% via the inclusion of a vacated Telekom

ICT, manufacturing/industrial, and public sectors all stood for effectively equal shares of take-up with 16-17%, each. The B2C sector was the only laggard with 7% of take-up, while the source behind 10% of the volume remained undisclosed. Thus, the only notable changes from 2017 were the moderate declines registered in the manufacturing/industrial as well as B2C sectors, counterweighed by an increase in demand from the public sector. In H2 2018, net absorption increased by 60% from the preceding semi-annual period and by 27% y-o-y, to 127,800 sq m, producing the strongest absorption on record during the latter half of a year since 2007. This was driven by the highest completion volume in ten years with a solid pre-lease ratio, as well as the uptick in relocation deals within the existing stock. Geographically, Váci Corridor and Non- Central Pest saw the greatest absorption during the year due to their successful new handovers, while South Buda registered strongly negative absorption following the departures of eg. Telekom and IT Services Hungary.

16,00

15,00

14,00

13,00

MARKET AVERAGE

12,00

Grade A

11,00

Grade B+

10,00 EUR / sq m / month

Grade B-

9,00

8,00

2014 Q1

2014 Q2

2014 Q3

2014 Q4

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

2017 Q1

2017 Q2

2017 Q3

2017 Q4

2018 Q1

2018 Q2

2018 Q3

2018 Q4

Average Asking Rents by Asset Categories

Source: CBRE Research