Will be enough demand for offices?

An office boom is expected in 2008-2009, with as much as 350 thousand square metres of new offices to be delivered to market each year.
NAPI Online, 2008. május 26. hétfő, 23:59

Opinions differ as to whether demand will be able to keep up with the rising supply, or whether there will be developers or operators who will be forced to write down signifi cant losses because of the boom.

Thierry Delvaux, managing director at Jones Lang Lasalle:

According to latest research data the office market in Budapest is expected to expand with more than 800.000 sqm of new offi ce space in the next three years. The increase will nearly reach the half of the recent speculative office market supply. Approximately 300,000 sqm of office space will be delivered in 2008 and another 400,000 sqm will come to the market in 2009. Occupier demand is still keeping pace with the rising supply hence take-up might exceed the last years' record demand of 325,000 sqm. Besides the big international companies, state institutions showed up as tenants on the office market as well.

Real Estate developers might have reason to worry about the rising vacancy rate, especially in the Pest Central and Pest non-Central submarkets., since the highest development activity is experienced in these areas. Despite tenants' massive demand for properties in Buda Central only a few projects are in the pipeline. The rising supply may reduce the effective rents but prime rents will remain stable at €22. The increased supply will result in a tenants' favoured market, which will make real estate decisions more complex for occupiers. Therefore tenants will more likely be taking advantage of tenant representation services of real estate consultancy firms.

Gergely Árendás, Deputy CEO in charge of office developments at Wallis Real Estate Rt:

Death knells have been sounded for the office market for many years, but until now, the balance between supply and demand has never been completely upset. There have been forecasts even for fi ve hundred thousand square metres of completions, but these turned out to be false. As to the supply side, the recent boom in this can be attributed to the nature of the property market: developers, seeing the strong demand of recent years, have launched lots of new projects and many new players have entered the market as well, and these factors have led to this year's record supply.

Regarding the demand side, I believe this will be strong in the upcoming period as well: companies and organisations operating in non-modern leased offi ces will realise in increasing numbers that a modern offi ce does not mean a discernible increase in costs, because of its higher flexibility, efficiency, and better offered services. At the same time, it cannot be denied that we are living in tough times, and supply is high, so buildings in non-ideal locations or containing technical compromises will have a tougher time finding tenants.