lh x cw market report A4_23.03.02 v34 interactive72

RECORD HIGH DEMAND AND ABSORPTION LEVELS IN THE BUDAPEST MARKET The average annual demand was around 350 000 sq. m per year between 2008 and 2018, but since 2019 it has increased significantly, averaging 570 000 sq. m over the last 4 years. In fact, since 2021, the Budapest market has been setting new records, with 635,000 sq. m and 680,000 sq. m last year, which is due both to the expansion of existing players and to new market entrants. By contrast, annual supply in the period of 2009-2020 did not exceed 130 000 sq. m - an average of 65 000 sq. m per year - pushing vacancy rates to record lows by 2020 and making the post-financial crisis peak of 22.8% a distant memory. Demand in 2022 reached 680,000 square metres, a strong 7% increase on 2021, which was the record year for the industrial market. The development market has become active from 2021 onwards, responding to the local opportunity and the global logistics focus, with 349,000 sq. m of new space coming on to the market in 2021 and 333,000 sq. m in 2022. The new supply has been absorbed by the market mainly on a BTS basis and therefore new supply has come to the market at high pre-let rates. This trend is clearly visible in the extraordinary net absorption figures: 320 000 sq. m in 2021 and 303 000 sq. m last year, less than 60,000 sq. m of speculative space was put on the market in two years, which only slightly increased the vacancy rate. At the end of 2022, the vacancy rate was 3.83%, which is in line with the regional average. 78% of the total leasing activity was net take up, showing that tenants are navigating to new, modern spaces. The buoyant development

market is now dominated by new leases (44%) and BTS leases (30%). Contract renewals accounted for only 22% of demand. The market is driven primarily by logistics, but last year a record contract was signed with a major retailer, which pushed the usual occupier demand numbers. Recently we have seen an expansion in online sales and in response we are seeing increasing interest from e-distribution centres, fuelling a structural increase in demand and a growing need for new types of logistics schemes. Tenants are gradually being encouraged to request renewable and energy efficient solutions from landlords, thereby organically improving the ESG outlook for existing and new stock.

THE SUMMARY CHART OF THE BUDAPEST INDUSTRIAL MARKET

700 000

BRF, Cushman & Wakefield Research

20%

600 000

Take-up volume (sq m) Vacancy rate (%)

500 000

15%

New supply (sq m)

400 000

10%

300 000

200 000

5%

100 000

0%

0

2011

2017

2012

2021

2013

2015

2018

2019

2016

2014

2010

2022

2020

2008

2009