Budapest office market sees resilience and growth in H1 2024 despite economic challenges

The Budapest office market demonstrated resilience and steady growth in the first half of 2024, reflecting the city’s continued appeal as a business hub in Central and Eastern Europe. Despite facing broader economic challenges, including inflationary pressures and fluctuating energy prices, the sector has shown signs of stabilization, with new developments and sustained demand from both domestic and international tenants.

According to data from the Budapest Research Forum, the total modern office stock in Budapest reached approximately 4.1 million square meters by mid-2024, marking a modest increase from the previous year. This growth has been driven by several key projects that were completed in early 2024, adding nearly 100,000 square meters of new office space to the market. Among these were notable developments such as the Váci Greens F Building and the Corvin Innovation Campus, both of which have attracted significant interest from major corporate tenants.

The overall vacancy rate in Budapest’s office market stood at around 7.5% at the end of H1 2024, a slight increase from 7.2% in H1 2023. This uptick in vacancy is largely attributed to the influx of new supply and the cautious approach of some tenants in the face of economic uncertainties. However, prime office locations, particularly in the Váci Corridor and Central Business District (CBD), continue to experience high demand and low vacancy rates, with some buildings nearly fully occupied.

Rents have remained stable, with prime office spaces in the CBD commanding around €24-26 per square meter per month, while rents in the Váci Corridor range between €16-18 per square meter. Despite the challenges, landlords have maintained these rental levels, underpinned by the quality of new developments and sustained interest from tenants seeking modern, flexible workspaces.

One of the key trends in H1 2024 has been the continued emphasis on sustainability and ESG (Environmental, Social, and Governance) criteria in the office market. Developers and landlords are increasingly incorporating green building standards into their projects, with several new developments achieving BREEAM and LEED certifications. This trend reflects growing tenant demand for energy-efficient, environmentally friendly office spaces, particularly from multinational corporations with strict ESG mandates.

The Budapest office market has also seen a rise in flexible office spaces and coworking facilities, catering to the evolving needs of businesses in a post-pandemic world. As companies continue to explore hybrid work models, the demand for flexible leases and shared office spaces has increased. Providers such as Regus, Spaces, and local operators have expanded their presence in the city, capitalizing on this trend.

Investment activity in the Budapest office market remained robust in H1 2024, with several high-profile transactions signaling confidence in the sector. Notable deals included the sale of the Millennium Gardens office building to a leading international investment fund and the acquisition of multiple properties in the Váci Corridor by regional investors. The total investment volume in the office sector reached approximately €500 million in the first six months of the year, indicating sustained investor interest despite broader market uncertainties.

Looking ahead, market analysts expect the Budapest office market to continue its steady performance in the second half of 2024. While economic challenges persist, the city’s strong fundamentals, including a skilled workforce, strategic location, and growing infrastructure, are likely to support ongoing demand for office space. Developers are cautiously optimistic, with several new projects slated for completion by the end of the year, which could further shape the market dynamics heading into 2025.

Overall, the first half of 2024 has demonstrated that Budapest’s office market remains resilient, adapting to changing economic conditions and evolving tenant needs while continuing to attract investment and development interest.