News from the Budapest Office Market

The office market in Budapest grows extraordinary: although offices are ever more expensive, there is no shortage of investors or renters. There are plenty of new offices, many of which are already in the hands of the owner. It is already apparent that 2017 has further tapered the office market, but the question is whether the future will be so favorable too? We looked at what is waiting for the Budapest office market in the near future.

According to preliminary calculations, this year the Budapest market could expand with up to 260-280 thousand square meters of new office space. This is due to the favorable market environment, the positive investor mood and the continued strong demand. The latter could not be proved much better, since 60% of the new office space that will be handed over this year had been sold out already. Zoltán Gyöngyösi, Commercial Executive at Tower Budapest Offices, believes that a significant new supply of hundreds of thousands of square meters will be available on the market in about ten to thirteen office buildings at the end of 2018, early 2019.

The Future is in Quality

However, it is also important to note that many of the newly built office buildings will be high quality office buildings enriched with modern solutions, which can change the office market. "Almost all new office buildings already earned green building certifications with modern technologies. They will be ready to make a change on the market not only by attracting potential new tenants, but to attract tenants wishing to upgrade to other office buildings"- Zoltán Gyöngyösi described the future expectations.

So the Prices will Change

However, due to the emergence of new office areas that meet high quality standards, it is still unlikely that the new areas will bring significant downturns. "This is just not expected because these premium-class buildings are aimed at the top of the supply range and are not just competitive in terms of cost-effectiveness," says Dániel Kocsor, Commercial Property Consultant at Budapest Offices.

At present, the average cost of renting one square meter office space per month is around 13-14 euros per square meter. However, in the case of new offices, this amount is expected to increase by up to 15-15.5 euros.
Investors have to count not only on the quality jump but also on the increased costs. Over the past two years construction costs have increased by an average of 26 per cent, out of which cost of labor force increased 40 per cent. In addition, it is also worth noting that the capacity of the construction industry is also finite.

However, this cannot be a cause for concern, as construction work is taking place dynamically throughout the city, and by 2019 approximately 400,000 square meters of new offices will be ready. Moreover, there are plans for additional 250,000 square meters of office space and other office building concepts that have not yet been publicized.

Sources:
- https://www.portfolio.hu/ingatlan/iroda/terkepen-a-legfrissebb-budapesti-berleti-dijak.275951.html
- http://www.piacesprofit.hu/gazdasag/a-legjobb-irodak-mar-az-epites-alatt-elkelnek/