The View 9

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Looking ahead, there is ca. 265,600 sq m of office space that is under construction and expected to be handed over in 2020 – this is 34% higher than our previous forecast, mainly due to some completions having dragged over from last year. The pipeline for this year holds limited remaining availability, however, as 70% of the volume was already pre-let as of January 2020. Delays could occur towards the end of this year as well, but it is still early to accurately judge the likelihood of projects pushing into 2021. The new supply currently scheduled for 2021 amounts to 211,500 sq m, all of which is already under construction, while the new supply expectation for 2022 is ca. 280,000 sq m, though the vast majority of the latter volume is still in the planning phase and is therefore at risk of kick-off delays in addition to the actual construction timeline dragging out. In total, the volume under construction has expanded by 7% over the past six months and there is now ca. 576,400 sq m of office space under construction across Budapest. The geographic spread of the pipeline is becoming more balanced. The Váci Corridor submarket remains the top development destination in the city with 35% of the ongoing volume, albeit by an ever-smaller margin against South Buda that follows with 30% and Non-Central Pest that has scaled up to 22%. Although bottlenecks in the construction sector remain in focus with regards to timely delivery of ongoing projects, an expected settling in new residential development due to the reinstating of the 27% VAT rate could release more labour to the commercial sector and thereby alleviate this to some extent. The increasing pre-lease ratio in the pipeline provides further motivation as it keeps raising the stakes of potential delays.