In the second quarter of 2021, 19,760 sqm of new office space was delivered to the Budapest office market in the form of BudaPart City, the second completed office building in the namesake urban development project in the South Buda submarket.

The total modern office stock currently adds up to 3,955,570 sqm, consisting of 3,316,090 sqm of Class A and B speculative office space as well as 639,480 sqm of owner-occupied space.

The office vacancy rate has continued to increase to 9.8%, representing a 0.8 pps uptick quarter-on-quarter and a 2.5 pps increase year-on-year. In line with the preceding quarters, the most saturated submarket is North Buda with a 4.4% vacancy rate, whereas the highest vacancy rate remained in the Periphery (28%).

Net absorption fell into negative territory during the second quarter, as the total occupied stock decreased by 16,720 sqm.

Total demand reached 97,990 sqm in Q2 2021, representing increases of 31% quarter-on-quarter and 11% year-on-year. Renewals still made up the largest share of total leasing activity with 40%, followed by new leases in the existing stock with 35%, pre-leases in new developments with 18%, while expansions of existing premises reached 7%. No owner-occupation was registered during the quarter.

The strongest occupational activity was once again recorded in the Váci Corridor submarket, albeit with a more moderate share of 30% of total demand, followed by Central Pest with 27% and the CBD with 14%. Counting only with net take-up, the same submarkets came out on top but in a different order, with Central Pest accounting for 42%, the Váci Corridor for 16% and the CBD for 15%.

According to the BRF, 114 lease agreements were signed in Q2 2021 and the average deal size amounted to an above-average 864 sqm. The BRF registered 11 transactions concluded on more than 2,000 sqm office space, including four renewals, five new leases in existing buildings and two pre-leases in new developments.

The largest deal was a pre-lease by IBM for a total of 14,450 sqm in the ongoing Corvin Innovation Campus development, while the largest renewal was signed by Magyar Posta for 13,780 sqm in Gateway Office Building. The largest new lease in an existing building was signed for 5,000 sqm in Liget Center by an undisclosed tenant.

The Budapest office market statistics showed signs of recovery from the preceding suppressed quarters but were still held back by the recent restrictions and uncertainty in the wake of the COVID-19 pandemic. Although vacancy continued to climb, leasing volumes pointed to an improvement amidst the early economic and societal normalization that is expected to continue in the months ahead.