ESTON’s Property Management (PM) Division has lately won a new assignment for managing an office building portfolio from 1st January 2013. The assignor is a foreign property fund, who assigned Eston to handle a volume of more than 20 000 sq m property portfolio. The property advisor is not doing only PM (property management) services but also FM (facility management) too.

To properly handle the increased volume of work, Mr Dániel Pintér took over the leadership of PM Division at Eston from 1st January 2013. Dániel had previously been head of office leasing team for 6 years at Eston, where he not only succeeded in providing complex office solutions but gained significant experience also in project management, office fit-out, portfolio management and operation too. Now with this expert, Eston PM-clients gained a single-contact advisor where they only need to keep contact simply with one person.

“In this deep-frozen market of commercial properties, keeping your tenants and satisfying their requirements at highest level have become more important than ever. Within these circumstances, where client-centred attitude is key, we see proprietors having greater trust in a consultant, who knows well both tenant market and the landlord’s or operations sides as well; someone who ‘understands the tenant’. With our agency background, Eston guarantees this comprehensive know-how and close contact for the assignors.” – says Dániel Pintér, Head of PM Division at Eston.

Supervision of Eston’s Office Leasing Division has been taken over by Mr Tamás Pál as of 1st January. The professional has 12 years of sales experience (7 years in property business) and he has achieved success in several transactions within the especially tough economic environment of late years. With Tamás’ contribution, not only the most optimal buildings have been found but also significant savings have been earned for tenants, to support them in long-term, profitable operation. Some of Tamás’ references: Heineken Hungária, Chio Magyarország, Bosch Siemens, Vodafone, Carnation.

Eston sales team – constantly unchanged despite of the crisis – has further expanded: Mr Gergely Kendelényi joined the office leasing staff as senior advisor. With the specialist having more than 10 years of professional sales experience, Eston’s office broker team has grown to 6 people, which is one of the largest sales divisions in domestic agency teams.

“It is a pleasure to have started the 20th year of the agency with an ever expanding, professional and dynamic team. Within these market conditions, where keeping and serving clients in an appropriate way has become more essential, to deeply know tenants, to comprehend landlords expectations, and to have customer-centred attitude, mean guarantee for our clients to keep returning to us again and again.” – states Adorján Salamon, Chairman-CEO of Eston International.

By the end of 2012 modern industrial stock in Greater Budapest reached 1,822,933 sq m following the handover of three new buildings with a total area of 16,448 sq m. Two of these had been pre-leased partially or entirely before the completion already.

After the record-breaking statistics of Q3, last quarter’s demand remained quite modest. Total leasing activity (TLA) registered 22,181 sq m – the lowest on record this year. 52% of TLA was made by new leases or expansions, while renewals accounted for 48%, down from 62% last quarter.

With the exception of Waberer’s renewal, there was no lease signed for space above 5,000 sq m in last quarter, creating a remarkable change compared to the previous quarter. Average deal size went down from 6,400 sq m in Q3 to 1,300 sq m in Q4.

For the first time this year, total stock increased in Q4 when three parks expanded, each by adding a new building. Airport City’s was 6,884 sq m, South-Pest BP’s was 5,817 sq m and Europa Center’s was 3,747 sq m. The latter remains vacant at present.

Average vacancy rate in logistics parks did not change in Q4, remaining at 19.1% following the sharp decrease seen in Q3. In case of city logistics the rate increased to 21.7%. Measured against the total industrial stock in Greater Budapest, the rate stands at 19.4% with 353,350 sq m space being vacant at the end of 2012.

Total leasing activity on an annual level reached 354,743 sq m, up by 8% on 2011. However renewals’ share increased further, making take-up in 2012 short on the previous year’s level. In the first half 2012 net absorption was negative but it turned strongly positive in H2. Annual net absorption reached 40,652 sq m.

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Cheminova wished to find an office in Buda that is as quiet as their previous one, and at the same time, is located in a rather more representative business area. Another requirement was to have a hotel nearby for the convenience of the company’s stakeholders and the foreign business partners who visit Cheminova on a regular basis.

Residence 1-2 office buildings – located in the 2nd District of Buda – completely comply for the tenant requirements. The modern office-twins have several banks, ministries, two 5-star hotels and an embassy around, and offer A+ category but still homely working environment for tenants. Residence 2 welcomes its visitors with its impressive, spacious, glass-walled hall; while those working here would be maximally satisfied with the building’s own restaurant, café, medical centre, underground garage and a pleasant green passage that runs between the two blocks. Cheminova occupies its new, 300 square meter office tenement here.

“We are proud to have a great new-year start in this wonderful new, modern office, which has been fitted out according to our corporate requirements. We do believe that this is one step towards achieving new successes in 2013. “– says Attila Takács, CEO of Cheminova Kft.

“It is always a pleasure to conclude transactions, where we can satisfy our clients within a short time, with no need to compromise. Thanks to the flexibility of Residence Offices’ proprietor, our co-operation with Cheminova went uninterruptedly all through the entire process; this is our goal in any case: the satisfied tenant. “– says Adorján Salamon, Chairman-CEO of Eston International.

During the last quarter of 2012 two properties were completed in the Budapest office market: Green House (17,800 sq m) and the office component of the third phase of Madarász Park (2,800 sq m). Since several prelease agreements were signed in both properties during the year, they were each handed over with nearly 60% occupancy.
With the new completions, the total office stock increased to 3,196,405 sq m; made up of 2,642,822 sq m of ‘A’ and ‘B’ grade modern speculative office accommodation, and 553,583 sq m of owner occupied space.

The annual completion volume reached 22,951 sq m in three properties during the year, which indicates a 74% drop compared to 2011.

With 100,312 sq m transacted office space in the fourth quarter, the leasing activity reached its highest level in 2012. Although this volume is 5% higher than the level registered in the previous quarter, it is still 17% lower than the level registered in Q4 2011. New transactions accounted for 44% of the leasing activity, while expansions and renewals took 4% and 52% respectively.

The two largest transactions of the quarter were renewals; by Raiffeisen Bank in Akadémia Bank Center (11.800 sq m) and Morgan Stanley in Millennium Tower III (11.050 sq m).
The largest new transaction of the quarter, and also of 2012 was signed by Strabag in Infopark D for 7,520 sq m.

BRF registered 123 lease agreements. The average deal size increased by 28%; quarter on quarter to 816 sq m.

The annual leasing activity reached 344,977 sq m, which is 13% lower than the 2011 figure. Comparing the last two years’ data the share of new lease agreements remained nearly identical with 37%, while expansions decreased from 16% to 10%. The share of renewals in 2012 amounted to 50%, 11 percentage points higher than in 2011.

The office vacancy rate now stands at 21%, which represents a 50 basis points drop on the previous quarter, but is still 180 basis points higher than a year ago. The lowest rate (16.9%) is recorded in the South Buda submarket, whilst the highest level remains in the Periphery (32.7%).

For the first time in 2012 net absorption showed a positive value with 31.600 sq m in Q4, however the annual volume remained negative with -26.146 sq m.

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A brand new tenant moves to one of Eston International’s exclusive buildings, DC Offices. Thanks to the successful transaction, a total of 2000 sq m lease has been concluded, which means two entire floors in the building. The initial smaller achievements have been followed by this greater success due to which DC Offices office building has reached 57% occupancy level.

The building was designed by award-winning architects on the most popular „Váci Road office corridor” but is not only preferred for its spectacular façade with curved glass panels or unordinary design; neither for its accessibility or great location. The building offers A+ category offices with panorama and due to its effective layout, it is perfect for both smaller and larger area requirements. Further competitive advantage is that the tenants experience a high level of flexibility from the landlord-owner both during the negotiations and all the way through the later relationship, which is an essential decisive factor when they choose a building.

‘We are delighted for the brand new successes of DC Offices. The new lease agreement means a further proof for us that quality projects, high attention to tenants and aiming to cooperate bears fruit with time.’ – says Éva Erdélyi, CEO of the building’s landlord Dunyov Projekt Kft.

‘Recently we have welcome two more new tenants in the building. Lighting solutions provider Zumtobel Lighting, and the personnel recruitment company Work-Force both moved into DC Offices this year, giving a fresh new upswing to their businesses and of course to the house as well. The third, 2000 sq m office transaction is another proof for the fact that larger tenants have not disappeared from the market, they only seek appropriate quality both at the buildings and at the services they get.’ – says Nóra Bercsényi, senior advisor at Eston’s Office Leasing Division.

On the Hungarian office space market, similarly to Western markets, the letting/sale of first-class office buildings is mostly – and often exclusively – assigned to specialist real estate consultant companies. Of course, these assignments operate on a success-fee basis; therefore the main goal of the agency representing the building is to achieve the highest rental fee and the most advantageous terms for the client, in order to provide a foundation for ensuring an appropriate return in line with investors’ expectations.

However, the user’s side (lessee / buyer) is usually not adequately represented. In negotiating the terms of the lease, they can only rely on themselves. The fact that a 5-year lease of 1 000 sqm of category “A” office space with underground parking places requires a decision on a 1-million-euro investment underscores the necessity of representation of the user’s side! Furthermore: due to the economic crisis, the average rate of achievable savings may vary from the previous 10% to even 20-25% usually into a lower range, which is probable to generate significant savings to tenants. This, however, is not recognized by tenants with no or only little market experience – they usually relate to list prices.

Eston experts’ experience shows that in many corporate or institutional property searches, the person in charge of the project is convinced that the selection of the right property and the negotiation of the associated lease or sale contract do not require special skills, so the significance of these skills are marginalized or ignored. However, numerous examples show that the key to an effective solution and a successful lease transaction is not merely found in the obvious indicators, such as nominal “sq m” and “EUR/sq m/month” figures. The total effective cost level depends on a number of other factors as well.

Even in a lease offer, but definitely in a contract, you must know how to read between the lines. This means no problem for an experienced real estate specialist with up-to-date market information on the different buildings, but lessees do not have access to it. Just a couple of aspects that might tip the balance of an initially attractive property solution towards the unattractive:

• Differences in the proportion of the net/gross areas, expressed with a general multiplier. Not only the measure, but also the calculation method can vary from building to building.
• Nominal versus effective rental fee; the effect of inflation trends and interest rates on the rental fee allowances and the total costs of the lease.
• The notion of net-net area used in the real estate business but officially not accredited. This can vary in each building depending on office space demand, as a function of the exact design and workplace layout of the office (depending on the volume of the office space needed, there might be differences in costs even to 5-10% and this becomes evident often only after the compilation of a so-called “space plan”).
• Actual market trends, rental fee variations, and the behaviour of investors can provide an indicator of the ideal lease term for the lessee under the given circumstances.
• Management fees vary building-by-building as well as additional costs incurred during operations.
• The installation costs and technical details included in the rental fee are different for each building, thus, the absence or presence of certain items may result in a difference of EUR 0,5-1,5/sqm/month in the rental fee, depending on the lease term.

Assessing the last 3 years, Eston International sees an increasing trend in tenant representation market (25% growth in Eston’s own businesses). This also reinforces the assumption that more and more companies realise the usefulness of such projects and the implied added value. As the property consultant does not represent the investors’ side and receives no remuneration from them, the exclusive representation of the lessee guarantees the maximum consideration of the lessee-side’s needs and excludes any conflict of interest. Another, not less significant factor to take into account is that the consultant’s success fee is a mere fraction of the savings that can result from these activities benefiting the users’ side.

Further information on our Tenant Representation services.

In Q2 2012, no new industrial developments were completed, therefore the size of modern industrial stock in Budapest and its surroundings totalled 1,806,485 sq m.

The total volume of lease transactions reached 88,370 sq m. This level surpassed the previous quarter by 85%. In the first half of the year 136,064 sq m industrial space was let, representing a 23% decrease compared to the same period of the previous year.

The share of renewals reached the highest level registered since 2010, totalling 59,676 sq m, 67.5% of the total leasing activity. The quarter’s two largest transactions were renewals, both UTI and Diebold renewed with ProLogis.

New leases accounted for 28% market share, no change compared to Q1 2012. Expansions took 4.5% share.

22 leasing transactions were closed in Q2 2012; however, the average transaction size was 4,017 sq m, the second highest level registered since 2010. Logistics parks amounted for 97% of the demand, with an average deal size of 5,038 sq m. 7,755 sq m were let in city-logistics with an average deal size of 1,293 sq m.

Vacancy rate increased by 38 basis points and currently stands at 21.4%. As there weren’t any lease renewals in city-logistics schemes net take-up almost resulted 100% in the decrease of vacant warehouse units, the vacancy rate decreased by more than 4 percentage points. As this type of scheme represents only 10% of the total stock, it does not significantly affect the total market vacancy rate.
During the first half or the year the vacancy rate increased by 51 basis points.

Net absorption remained in the negative range in Q2 2012 accounting for -6,389 sq m.

Download full BRF report in PDF.

The total Budapest office stock (including owner-occupied and speculative buildings) stands at 3,175,807 sq m in the second quarter of 2012. BRF has not registered new office handovers; therefore the total modern office stock includes 2,622,224 sq m of speculative office buildings and 553,583  sq m owner-occupied buildings.

The total leasing activity totalled 95,830 sq m, 80% above the Q1 2012 level, and 10% higher than the level registered in Q2 2011.  In the first half of the year the total amount of leasing activity reached 149,079 sq m, 9% less than in the first six months of 2011.

The office vacancy rate now stands at 21.3%, which represents an 80 basis points increase compared to the previous quarter. Despite of the high leasing activity and the stagnant supply the amount of vacant office space has increased in the previous two quarters.

Contrary to the market trend the vacancy rate sligthly decreased in the North Buda submarket by 37 basis points. The lowest vacancy rate (16.9%) was measured in the Central Pest submarket, whilst the highest vacancy level is still seen in Periphery region (33.4%).

BRF registered 130 lease agreements in Q2 2012, with an average deal size of 737 sq m. This size is 77% higher than in Q1 2012.

There were 22 contracts registered with volumes greater than 1,000 sq m each, covering 11 renewals, 7 new lease agreements and 4 expansions. The largest transactions of the second quarter were also renewals: IT Services’s with a volume of above 16,000 sq m in Infopark ‘B’ and ‘C’ buildings, which contains an expansion, and Citibank’s lease renewal on 9,700 sq m in River Estates.

7 new lease agreements were signed for space exceeding 1,000 sq m; the three largest transactions were registered in the Szépvölgyi Business Park, Millennium Tower II and Mom Park.

The share of renewals has increased and reached 51.1% of the demand, which is the highest rate since Q3 2009.

During the renegotiations numerous tenants also opted for an expansion in the office buildings; therefore the share of expansions was 13%, which is more than double of the previous quarter’s rate.

Download full market analysis in PDF

Hungary’s first inside sports- & adventure park has opened with the contribution of Eston property consultants on Hunyadi János út (11th District). Finding the appropriate property and the successful negotiation have been concluded by Eston advisors.

With his unusual property requirements the client turned to Eston, who vigorously began to gather potential properties suitable for the client’s special needs. Operator of the adventure park aimed to have a roofed place with large interior height, which is easily accessible and is suitable to accommodate busy customer traffic, possesses car park and also its atmosphere fits to this special sports- and action park.

After several viewings and negotiation, the client finally decided to have a property in the 11th District, which suits all his requirements. The hall with its inner height larger than 8 meters is able to host various extreme adventure-, sports- and leisure facilities on 4500 sq m. The building is easily accessible by public transportation (buses and trams), has parking facility and the building is suitable for creating an adventure hall with unique atmosphere and design.

Ropes and zipline courses, inside skate lines, climbing wall, roller skate rink, streetball pitch and many other programmes can be tested in the action park, which provides possibility for beginners and professionals or even for a nice entertainment with the family or with friends.

With the contribution of Eston, eXbox Action Park has been opened during the summer for extreme experiences.

‘Although, industrial-logistics property market has suffered relatively fewer damages than other segments of commercial real estate in the last years, uncertain economic circumstances induced a fall-back in demand. As for our experience, non-traditional property demands have emerged recently, such as this inside entertainment & adventure park, with unique features. Eston team is always delighted to undertake assignments like this, since we are professionals in providing solutions for special property requirements, which has become our trademark.’ – says Ernő Kiss, Associate Director of Eston international.

Eston International Property Advisors has been awarded as ‘most reliable’ business brand again. After 2010 and 2011, the consultancy firm became ‘Business Superbrand’ for the third time this year.

The international Superbrands programme was launched 8 years ago in Hungary; the business version has been present here for already 5 years. The award – dedicated for most reliable brands in which consumers and business clientele trust the most – is a guarantee that by choosing a ‘superbrand’ you cannot fail.

“Besides our clients’ satisfaction, it is always an honour to be recognised by the professionals, since we usually assist our partners from the background. Business Superbrands award is our common achievement, to which the experience and know-how of Eston team and our commitment also contribute. We are proud of the capability to aim for doing our best, even in these stagnating property times – this might be one of the reasons our clients return to us again and again.” – says Adorján Salamon, President & CEO of Eston International.

Superbrands award is valued by the fact that the nominees are selected each year by an independent committee; neither application, nor tendering is possible.