"The credit market crisis, soaring inflation, fears of recession, bankruptcy, a struggling Hungarian economy, competitive eastern markets, and a dying construction industry... These are only a few factors, which underlie the negative mood that has settled on the real estate market. Meanwhile, the clouds are crowding the sky over the Budapest office market too and the market is realistically re-evaluating its outlook: Which way is the Budapest office market headed? What kinds of opportunities lie ahead? What is a realistic approach to the future?
Budapest's modern office market comes of age this year. At the same time, 2008 is a year to celebrate noteworthy records too: The volume of modern rental offices exceeded two million square metres this year.
Since two million is a nice round number and a significant emotional boundary, which we have reached despite periods of downfall and the reorganization of global markets, it's a good time to consider our position: As one of the first office markets to awaken in the CEE region following the political changes we ask: What might a realistic outlook for the future be? How can it possibly develop?
Big clouds gathering
In recent years, the Budapest office market has experienced unusually strong activity in terms of development, thanks to which an enormous volume of supply has flooded the market this year.
Though the market has been anticipating a dynamic expansion of supply since the second half of last year (including an increase in vacancy due in part to a stalled economy), the incoming supply is expected to peak this year.
Over the previous couple of quarters, thanks to delayed handovers and more dynamic property take-ups than expected, these fears have not come to be justified, though the situation may take a big turn in the second half of the year. To put it mildly, judging from the office market's natural cycle, things have come to a bunk and, looking at current market indicators, the time for the market's next upswing is nowhere in sight.
The supply side continues to expand, yields barrel on, and yet the crisis on the global market continues and the Hungarian economy is asphyxiating. The credit market crisis fundamentally re-wrote the story, anyway, by deepening and prolonging certain negative processes and speeding up others. Still, life goes on and, crisis or no crisis, the market has got to move in some direction...right?"
Source: Portfolio Online Financial Journal
04.09.2008