FM newsroom – office market, Budapest. Budapest’s office market experienced a notable slowdown in Q2 2024, with no new project completions and developers shifting away from speculative activity. Still, a decline in vacancy and selective absorption signal underlying resilience amid cautious sentiment and evolving workplace trends.
No New Supply, Vacancy Drops
According to the Budapest Research Forum (BRF), no new office buildings were delivered in Q2, leaving total modern stock at 4.43 million square meters. This follows a modest Q1 expansion and was accompanied by 23,000 sqm of speculative space being transferred into owner-occupation. As a result, the vacancy rate dropped to 12.8%—a 1.29 percentage point quarterly decline. Central Buda remained the most occupied submarket, while the agglomeration continued to lag.
As Economx reports, the lack of new completions reflects a broader shift: developers are holding back on speculative office projects and turning toward residential and hotel developments to avoid oversupply in a soft-demand environment. Only a few handovers are expected later this year, primarily government-led or pre-leased projects.
Repurposing Older Stock Gains Traction
With construction activity low, attention is turning to the ageing office stock. Around 1 million sqm of Budapest’s speculative space is classified as Class B, making it a target for repurposing. Several developers have already begun converting older office buildings into apartments or hotels, a trend likely to continue in well-located areas. This shift may gradually reintegrate lower-tier properties into the real estate investment cycle.
Weak Demand, Selective Movement
Total demand declined 16% year-on-year to 120,000 sqm, though it rose slightly from Q1 levels. New leases accounted for 40% of activity, renewals for 39%, and expansions just 2%, underscoring tenants’ cautious approach. No pre-leases were recorded. Net take-up (excluding renewals and owner-use) fell to 50,000 sqm—a 21% drop—though net absorption turned positive at 57,000 sqm, driven largely by state acquisitions and green office deals.
The Váci Corridor led leasing activity (37%), followed by South Buda (22%). A total of 136 leases were signed, with an average size of 882 sqm, stable in size but lower in volume compared to last year.
Outlook: Gradual Recovery Possible
The decline in office market momentum is part of a global pattern. The rise of remote and hybrid work, accelerated by the pandemic, continues to reshape demand. While this has diminished the prestige of traditional office assets, Hungary’s market remains relatively stable in a regional context. In fact, the Central and Eastern European region is delivering just a third of the office space it did during the pandemic, according to Colliers.
Though transformation is slow, selective demand, adaptive reuse, and cautious development may support gradual stabilisation—and possibly recovery—in the coming years.