Budapest, 29th May 2008


The Budapest Central Business District (CBD) saw high transaction volume compared to 2006, although most transactions were for spaces less than 500 sqm. The largest new contracts in 2007 and 2008 Qtr 1 were the leases of AB Aegon (Kálvin Center, 3 150 sqm), BNP Paribas (Roosevelt Bldg., 2 614 sqm), KBCS (Roosevelt Bldg. 1 312 sqm), Grey Worldwide (Andrássy Palace, 1 275 sqm. In 2008 Qtr 1, 16 transactions happened in the CBD, 15 of them were for space smaller than 500 sqm and one for an area of more than 1 000 sqm, emerges from the latest Colliers Knowlede Report on the Budapest Central Business District (CBD), focusing on this office sub-market.

The 5th district was the first office destination after the regime change in 1989. Since then, developers have focused their construc¬tion effort on the Váci út corridor, the south of Buda and the outer ring roads. There, available land, easy access to road and public transport and more flexible zoning regulation allowed the construction of modern open space buildings, suitable for today’s organiza¬tions needs. As a result, most banks and major consultant firms left the CBD area.

The CBD market found its niche as the preferred location of representative offices and high value added intellectual work, such as law firms. This tendency will be reinforced by the 5th district’s project called The Main Street. The project aims to develop a uni¬fied axis starting at Kálvin tér, crossing Kossuth Lájos út, Szabadsag tér and following Oktober 6 utca until Szent István körút. The Main Street will be 2/3 pedestrian and will complement other redevelopment projects in the area (The City Hall Forum, Szervita tér regeneration, recreation area around Sollár Béla utca).
Research Director of Colliers International Budapest Rémi Couture added: “This project aims to liven up the city center, creating an animated retail area, a prestigious residential sector and strengthening tourism, thus creating in Budapest the equivalent of Barcelona’s La Rambla, or Paris’ Champs Elisés”. Completion of the project is planned for 2010, however, this appear optimistic, but if successful this promises to reinforce the CBD’s office market niche, attracting medium size tenants looking for prestigious surround¬ings and ready to pay superior rents.

The CBD is 2,78 km2 and contains 33 office buildings, of which only 19 (58%) are considered Class A.
Since 2002, when the total leasable office space in the CBD market was 147 500 sqm, the market has seen the completion of only four Class A office building to¬taling 40 000 sqm. Due to the reclassification of older buildings, the total stock of Class A space in this market is now 179 000 sqm.

The Vacancy rate in the CBD fell dramatically from 20,7% at the beginning of 2006 to 12,98% at the end of 2008 Qtr 1, due to the high level of absorption and limited new supply during 2007. Two properties are responsible for the still high vacancy rate, Kálvin Center and Andrássy Palota. Excluding these two buildings, the vacancy rate would fall to 8,5%.

Class A office rents in the CBD have closely tracked rents in Budapest although they consistently remain at the top of the market. According to our research the average asking rent for Class A office in 2008 Qtr 1 is 14,45 €/sqm/month. Depending on where the take up will happen, there may be a small increase in the rent toward the end of 2008. The emergence over the past years of the Class A+ has pushed premium rents in the CBD up to 24,5 €/sqm/month today.