The View 9

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Annual Completion and Pipeline Forecast Volumes

Source: BRF, CBRE Research

RECORD DEMAND DRIVEN BY PRE-LEASES AND RENEWALS For every downside surprise in the development pipeline, Budapest office demand seemed to switch up a gear, gradually strengthening and eventually rounding out 2019 with the highest total leasing volume on record at 637,100 sq m (+19% y/y). The H2 period brought particularly strong demand momentum, with 393,700 sq m of total leasing activity (+39% y/y). However, there was a clear rebalancing in the breakdown of this composite demand volume as the second half of the year brought a rally of large renewals, lifting their share of total demand to 54% after a period of steady decline. Excluding renewals, the 2019 net take-up volume actually contracted slightly to 362,000 sq m (-6% y/y), split evenly between the first and second half of the year.

As such, the renewal surge during H2 contributed significantly to last year’s record demand figure.

The deal type breakdown within net take-up also shifted, highlighting the other main contributor to the demand uptick: pre-leases in the pipeline stood for the largest share of take-up in H2 with 83,000 sq m across 27 deals, followed by new leases in the existing stock with 75,500 sq m across 138 deals. Expansions of existing premises added 24,500 sq m from 52 deals, rounding out the H2 net take-up volume to 183,000 sq m (-14% y/y). In terms of geographical distribution of demand the Váci Corridor retained its position as the most sought-after submarket, boosting its share from all net take-up in H2 to 47%. The submarket continued to attract significant pre- leases, which gave two-thirds of the submarket’s total take-up volume during the period.

Average Asking Rents by Asset Categories

Source: BRF, CBRE Research