Should we be worried about a lot of empty warehouses?

In the first quarter of 2024, no new property was handed over in the capital, and only one building was handed over in the regional markets in Debrecen, which amounted to 5,650 square meters, the Budapest Real Estate Consultative Forum (BIEF, BRF) informed our newspaper. This news would be welcome if we didn’t know that hundreds of thousands of square meters of warehouses or logistics halls are currently under construction.

That is why it is not surprising that the vacancy rate in the first quarter of 2024, in the case of Budapest, increased to 8.9 percent, which means an increase of 0.3 percentage points compared to the vacancy rate registered in the previous quarter, while an annual increase of 3 percentage points was measured. At the end of the quarter, a total of 313,705 square meters of industrial-logistics area was vacant in and around Budapest. There was 103,085 square meters of empty space in the regional domestic speculative real estate stock, which corresponds to 6.5 percent underutilization. The national vacancy rate is currently 8.2 percent, which is high.

The Magyar Nemzeti Bank (MNB) issued it just this week fresh meaning about the domestic commercial real estate market. In it, among other things, he wrote that in 2023 the volume of new developments starting in the industrial-logistics segment decreased by almost a quarter, compared to the previous year. The pre-leased rate of the new areas planned to be handed over in 2024 is also around 55 percent for office and industrial logistics developments, which is higher than the data of the previous two years, alleviating the pressure in the direction of rising vacancy rates.

Export performance is restrained by the weak European economy, but at the same time, the implementation of ongoing and newly announced significant capacity-expanding foreign direct capital investments will help the expansion of exports in the long term, having a positive effect on industrial-logistics demand and developments.

The total national modern industrial/logistics stock is now 5,103,595 square meters. Of this, 3,522,155 square meters are located in and around the capital, while the regional domestic stock is 1,581,440 square meters. Please note that due to the annual size correction and stock revision, the size of the property stock in Budapest and its surroundings increased by 34,330 square meters, as previously unregistered buildings were included in the stock, while the size of the regional stock decreased by 21,310 square meters.

In the first quarter, the total tenant demand in and around the capital amounted to 90,875 square meters, which is a 15 percent decrease compared to the volume registered in the same period of the previous year. The net demand without contract extensions was 78,275 square meters, which is a 35 percent increase compared to the first quarter of 2023.

In the first quarter of 2024, new rental contracts in and around the capital contributed 45 percent, while pre-leases contributed 25 percent to the total demand. Contracts for expansion accounted for 16 percent. The proportion of contract extensions fell compared to the high results of previous quarters, accounting for only 14 percent of rental contracts.

In the first quarter of 2024, BRF recorded a total of 23 rental contracts with an average transaction size of 3,950 square meters in the Budapest and surrounding market. The number and average size of transactions showed similar proportions compared to the data recorded in the first quarter of 2023. Only three of the transactions exceeded 10,000 square meters. The majority of contracts were still signed in ‘big-box’ logistics parks.