Budapest vacancy rates drop despite new office space

The report notes an improvement in all of Budapest's office market performance indicators. Demand surpassed the high Q1 figure, although it remained below the outstanding Q4 level. Thanks to increased tenant activity, new leases were signed for a total of 65,413 square meters. Contrary to the recent trend of new leases focusing on non-central areas of the city, Q1 transactions were quite equally divided between Budapest's city center (42.4%) and non-central districts (50.8%). (In BRF's definition, central areas do not include the downtown business and government districts.) The two accounted for 93.2% of all office deals in Q2.

Free available space continued to decline, with only 11.58% of offices vacant at the end of June. The vacancy rate declined in spite of 28,295 square meters of new space entering the market in Q2. This figure is rather average - considerably higher than the previous quarter's 10,508 sqm, but nowhere near the record level of newly completed projects in Q3 2006.

New Q2 additions to modern office space in Budapest included 4 properties: Phase 1 of Átrium Park (a 16,100-sqm property of which 72% is already let), Pauler Offices (2,800 sqm), Lánchíd Palace (a 2,755-sqm office building offering premium services), and Mester Park (a mixed-use project with warehouse and office space available in the same building). The first three projects are located in the center, the last one in the non-central area.

Q2 saw landlords sign a number of significant leases. The European Social Fund leased office space in Átrium Park (3,744 sqm), British Telecom took up residence in IP West (3,305 sqm), Citibank signed a lease in Aréna Corner (2,996 sqm), Morgan Stanley chose Lurdy House (2,900 sqm). The nearly completed Building D of Infopark proved the most popular location with the largest total area of new leases."

Source: Portfolio Online Financial Journal