News Article Budapest development Hungary office pipeline
by Ákos Budai | Office

Days of strong development activity on the Budapest office market are once again ahead of us. The market has been growing steadily and cautiously for years now and we have reached a point where tenants looking to immediately rent several thousands of square metres have no options left. BTS developments and large pre-lease deals have dominated property news cycles for over a year now and the time has finally come for developers with speculative projects to make their move. We take a closer look at Budapest office developments.

Between 2013 and 2015 only a handful of established developers dared to be active on the Budapest market. In most cases they have financed their developments internally and they have already pre-let a significant portion of their buildings by the time construction has started. In 2015 a number of large-scale developments have been announced with some of them being entirely speculative. The real turning point for Budapest office developments, however, only came in 2016. As more and more developers announced new projects, currently more than 300,000 sqm of new office space is expected to be delivered on the market between H2 2016 and 2018. 

The revival of the Budapest office market has urged developers to start projects in locations that have previously been deemed risky. Although nearly 30% of the future supply is concentrated on the Váci Corridor, the 13th district is not the only area that is expected to accommodate more construction cranes over the next few years. A quarter of the pipeline is located in South Buda, an area that has long stood out among Budapest submarkets for having the lowest vacancy rate. It is also the part of the city that has seen the biggest number of infrastructural developments in the past years, including a new metro line and the extension of a busy tram line. Central Pest also accommodates a significant portion (19%) of the pipeline, mainly thanks to the final stages of the Corvin Promenade project. 
Corvin Promenade has proven to be highly successful over the years and now Futureal is not the only company in Budapest that sees the future in large-scale, mixed-use city centre developments. HB Reavis has purchased a large piece of land last year at the most important junction of the Váci Corridor that has over 120,000 sqm of development potential. Very few details are public at this point, but the first phase of the new city centre is expected to be materialised in an iconic structure. A new city centre will also be built in South Buda, next to Kopaszi gát which is one Budapest’s most popular recreational areas. The developer, Property Market Ltd has announced plans to construct nearly 600,000 sqm of residential, office and retail space in 27 blocks over the course of 8-10 years. The first office building might be finished by the first half of 2018.
During the next quarters we will find out which developers are brave enough to actually start construction and which projects can secure financing from banks without being at least partially pre-let.
The full version of this article will be published in the next issue of Portfolio Property Forum's magazine, which will be first available at CEE Property Forum 2016 in Vienna.