Office, Warehouse Markets in Budapest Continue to Grow

The office and warehouse market in the Hungarian capital will continue to gain momentum this year, and as last year, a significant amount of new space will be added in 2023, Erste Bank told MTI on Thursday.

The statement quoted Erste's head of real estate finance, Tamás Deák, as saying that last year 267,000 square meters of new office space was handed over in Budapest, but this year less than 200,000 square meters may be built, as investors are delaying ongoing developments due to oversupply and the economic environment. “With construction and its financing becoming more expensive at the same time as expected returns are increasing, developers are waiting if they can in such an environment," he added.

According to Erste, demand for office buildings in the capital continues to rise, but the pace of growth has slowed. Older, less modern office buildings have so far been able to stay on the market only at modest rents. The significant increase in supply, coupled with much higher energy prices, means that the gap will widen further in the coming period and there will be some properties that will need to be redeveloped.

It was also pointed out that the warehouse market is breaking records year on year, partly in terms of new development space and partly because demand continues to absorb this growing supply. With 400,000 sqm of space delivered last year, the warehouse market in the Budapest conurbation has exceeded 3 million sqm, and developers plan to increase this by a further 300,000 sqm this year.

According to Tamás Deák, given the gloomy expectations regarding consumption, no major retail development is expected to start in Budapest in the future, which will also help the stable performance of the existing stock and thus its financing.