Office Market: More New Buildings Despite Oversupply

The vacancy rate in the domestic commercial real estate market rose in the first half of the year, while the stock of real estate is set to expand. Hybrid working is not good for the market either.

The first half of the year saw rising vacancy rates in the office and industrial-logistics markets, while ongoing developments could lead to an expansion of the real estate stock in both segments in the coming period, the National Bank of Hungary said.

Presenting the latest Commercial Real Estate Market Report of the bank, Sándor Winkler, Head of Department, said that the existing real estate stock in the office market may increase by 6.4%, while in the industrial-logistics market by 13% in the next two and a half years, so that the risk of oversupply may become apparent in the former within one year, while in the latter within two years.

In the Budapest office market, the change in total office stock let was negative in the first half of 2023, with new handovers pushing the vacancy rate up to 12.6%, he said, noting that this trend is expected to continue to rise.

He explained that gross demand levels are still about 15% below average levels prior to the coronavirus outbreak. Some 6.4% of the total office stock in Budapest is currently under development, but no further substantial developments are underway.