by Property Forum | Office

Although many projected that office development projects would be cancelled due to the pandemic, that is not what the numbers are showing. Developments are ongoing despite the emergence of working from home and Eston forecasts about 160,000 sqm of offices for rent to be put on the market this year, following 230,000 sqm in 2020. Meanwhile, the pre-lease ratio of buildings under construction is lower than seen in previous years, in line with the current demand trend.


Although office projects continue, there are several tangible changes in the Hungarian office market. The volume of pre-lease contracts declined significantly compared to recent years to less than 3,000 sqm in the first quarter. The lease ratio in ongoing projects to be completed in 2021 or 2022 is around 50%, while decision-making concerning office rentals has also slowed down. Company executives remain uncertain regarding future global market trends and changes in office use.

As for working from home, it remains to be seen if it is a net positive or not from several aspects including work efficiency, costs, or the preservation and development of corporate culture. Tenants are now apparently strongly considering the option of reducing rented space and its necessary degree. If we assume that of the current 3.3 million sqm office space for rent, the lease for about 500,000 to 600,000 sqm runs out each year, and tenants return 10% of the space rented as working from home gains ground, vacancy rates would increase if we also account for ongoing projects.

Net absorption was 63,000 sqm last year, so according to the above calculation, the space returned by tenants would "eat up" any increase in demand.

As a result of the above, the current market situation is substantially different and only the projects with the best locations or the strongest "stories" can perform well. The influx of new tenants seen in recent years has dried up, and the feasibility of projects in outlying (emerging, non-standard) locations is now strongly questionable.