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Eston International. the Hungarian associate of Savills, hosted their annual commercial property conference in Budapest. The audience had the opportunity to chat about the latest trends of the sector with the hosts and speakers of the event: Adrjan Salamon, CEO of Eston International and Chriss Gillum, Head of Offices Regional Investment Advisory EMEA, Savills. As Mr. Salamon explained: “The Budapest property market continues to be very attractive and keeps delivering new records in many aspects. Following the record investment volume of 2018, ~EUR 2 bn we see prime yields reaching new, record low, levels in all main sectors: a CBD office building has been recently transacted at 4.9%. Budapest office and logistics vacancy rates bottomed at 5.9% and 2% respectively and class A rents are increasing dynamically in both segments. Investors also perceive the current situation as appealing and a bigger expansion of investment volume is hindered by the narrow supply of prime products.”
Commercial property investment activity exceeded €8bn across Poland, the Czech Republic, Slovakia, Hungary and Romania in the first three quarters of 2019, 54% above the five year average, according to Savills latest research report. Investment turnover in CEE has been rising steadily since 2013, by 24% pa on average, reflecting increasing investor confidence in the region, underpinned by above EU average economic expansion, falling unemployment and growing consumerism.
Poland, as the largest economy, accounts for 46% of the total GDP of the five countries and has captured 56% of the investment activity in the first nine months of the year with over €4.5bn. The Czech Republic saw transaction turnover reach €2.36bn, about one third of the total, while Hungary and Romania accounted for 6% of the total turnover each and Slovakia for 3%.
Historically, cross border investors have been the strongest players in the region. German, UK and Austrian investors would traditionally dominate these markets accounting for over half of the activity. Over the past three years the share of US and German investors has dropped and the markets witnessed significant inflows from South Africa (14% in 2018) and Asia (12% in 2018). Most notably in the first nine months of 2019, Korean investors increased their share of activity from 4% last year to 14%. Recent deals involving South Korean capital include the sale of an Amazon warehouse in Prague, with Savills advising the buyer.
Competition for the best assets has caused a fast yield compression over the past few quarters in the region. The average prime CBD yield in the five countries was down to 5.26% in Q3 19, 28 bps lower than last year and 12 bps below the previous quarter. Prime CBD office yields are lowest in Prague at 3.9% followed by Warsaw (4.5%) and Budapest (4.9%), while higher yields of 5.75% and 7% can still be achieved in Bratislava and Bucharest respectively.
Chris Gillum, Head of Offices Regional Investment Advisory EMEA, Savills, says: “Offices continue to be the most attractive asset class for investment into CEE, accounting for over 60% of the
investment volume in the first nine months of the year, a strong rise from 45% over the same period in 2018.
“We have seen an increasing willingness of international capital to enter the region, led by the comparative access to good quality product and healthy fundamentals, explaining the sector’s strong performance which we expect will continue to attract investors well into 2020. For example, in October, Corporate Finance House Group, a Middle Eastern investor, acquired the holding structure owning Day Tower office building in Bucharest, its first investment in the country, with Savills advising the buyer.”
Occupier take-up levels across the respective CEE capitals have been rising by 9% pa on average over the past five years, pushing the average vacancy rate across Prague, Budapest, Bucharest and Warsaw to 6.9% compared to 13.8% in 2014 and half a percentage point below last year. Prague has the lowest availability of offices with 4.6% vacancy, Budapest follows at 5.9%, Bucharest at 8.0% and Warsaw at 8.2%.
Eri Mitsostergiou, Director, European Research, Savills, adds: “Oxford Economics forecasts that Warsaw (2nd), Budapest (5th), Prague (6th) and Bucharest (9th) will be amongst the ten fastest growing European cities over the next five years with 2.6% average annual GDP growth, versus a European average of 1.9%.
“As supply of prime product becomes tighter, investment volumes for 2019 are projected to be about 5-10% below last year’s levels. We believe that there is more space for yield compression, especially in the prime logistics segment. Some further yield hardening is also likely in the prime office segments of Warsaw and Bucharest in particular, while yields should stabilise in Prague. The retail segment is expected to witness a stabilisation of yields and some softening trends are already evident. However, growing retail sales should support the performance of the best assets and drive demand for logistics space.”
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ESTON International assisted in finding a new HQ for the tech-giant
The US-based LabCorp life sciences company, whose drug development segment is known as Covance, successfully completed the acquisition of Chiltern in 2017. The aim was to strengthen their position as a global life sciences company with leading diagnostics and drug development businesses. A change of this size in a company’s life requires office expansions, change management and relocation. The two companies, Chiltern and Covance, were initially located in Allee Corner and Canada Square. Neither of these locations were able to fulfill the requirements after the merger. As a best option, the two companies decided move to a new joint location that offered a larger office area and a higher level of service and ESTON International was the partner selected to identify the new location. The optimal solution was the Residence Offices situated in District II. The property was chosen due to the excellent location, the level of service, and the leasable area, all of which perfectly suited the client. The move-in to the new 600 sq m office was completed in March 2019. The Residence Office Buildings belong to the LFPI Group that represented on the Hungarian market by FLE GmbH.
Lendületben az irodapiac – derül ki az ESTON új kutatásából
A budapesti bérirodák piacán dinamikus kereslet-bővülésnek lehettünk tanúi az elmúlt három évben. A szakértők szerint ennek még nincs vége.
2018-ban rekord szintre emelkedett a budapesti bérirodák iránti kereslet: az összes kiadott terület meghaladta az 530 ezer négyzetmétert; erre korábban csak 2015-ben volt példa. Piaci szereplők osztják a véleményt, hogy a növekedés dinamikája szükségszerűen csökken a közeljövőben, de a részleteket nézve úgy látszik, a coworking irodák új lendületet adhatnak a kereslet bővülésének.
Salamon Adorján, az ESTON International Zrt. vezérigazgatója szerint a nagyobb szolgáltatók már jelen vannak a budapesti irodapiacon, de a verseny a jövőben tovább éleződik. „Tapasztalataink szerint az Egyesült Államokban és a Nyugat Európában már bevált formula itthon is egyre nagyobb népszerűségnek örvend, és a korábban 1500-2000 négyzetmétert kereső szolgáltatók ma már jóval nagyobb, akár 4-5 ezer négyzetéteres bérleményeket keresnek operációjuk biztosítására. Közismert, hogy a jelenlegi piaci helyzet nem igazán kedvez a nagyobb bérlőknek, hiszen mozgásterük elsősorban a még építés alatt álló irodaházakra korlátozódik.” A szakember szerint lenne igény arra, hogy Budapest dinamikusabban zárkózzon fel a nyugati trendekhez, hiszen egyre több cég ismeri fel, hogy hatékonyságának növeléséhez a munkavállalói igények kiszolgálásán át vezet az út. A coworking irodaterek jellemzően elsődleges lokációkon, kiválóan megközelíthető épületekben találhatók, ahol az irodai munka mindig újszerű, igényes és változatos környezetben zajlik. A kulcs a rugalmasság, a legfőbb felhasználók lendületes start-up vállalkozások, vagy akár multinacionális nagyvállalatok, ahol sok tevékenységet projekt-feladatként delegálnak.
Bővebben az alábbi kutatásból olvashat a jelenlegi iroda-, ipari-, és befektetési piac helyzetéről:
Office market report:
Four new office buildings were delivered to the Budapest office market in the third quarter of 2018, totalling 110,970 sq m. The largest of the completions took place in the Non-central Pest subregion; Magyar Telekom’s HQ comprises 58,800 sq m. Further handovers included the 36,000 sq m Mill Park, the 11,340 sq m Advance Tower I. and the 4,830 sq m EcoDome.
The total modern office stock currently adds up to 3,587,290 sq m, consisting of 2,943,580 sq m category ‘A’ and ‘B’ speculative office space as well as 643,710 sq m owner occupied space.
Industrial Property Market:
In the third quarter of 2018, one new building was handed over: a 5,000 sq m warehouse in the next phase of Budapest Dock Szabadkikötő.
The total modern industrial stock in Budapest and its surroundings stood at 2,086,120 sq m at the end of Q3 2018.
Total demand amounted to 109,350 sq m in Q3 2018, marking a 10% decrease from the figure noted in the same period last year but 83% increase compared to the previous quarter. Lease renewals accounted for 52.1% of the quarterly volume, while the share of new leases was 31.4%. Expansions stood for 10.1% of the quarterly volume. One pre-lease agreement was signed in the third quarter, representing 6.4% of total demand.
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In the first half of 2018 office areas of around 75 thousand square meters were handed over in five office buildings, which surpasses last year’s volume (5,500 m²) significantly. The main parts of the new areas were finished on Váci Street (about 60 thousand square metres). The biggest newly handed over building is Promenade Gardens (22,500 m²).
The building of further new office buildings, about 462 thousand square metres, has started; out of this 168 thousand square metres could be handed over until the end of the year (10 buildings). The office stock of Váci Street will probably surpass one million square metres in 2020. This means that the current office stock (25% of the market) will remain the largest sub-market in Budapest.
Industrial and logistics property market
Until the middle of 2018 new halls were handed over in three logistics parks with a total area of over 30 thousand square metres (out of which 25,691 m² is warehouse and 4564 m² offices). The size of the area handed over is significantly smaller (30%) than it was a year ago, but the completion of more, big sized units is being planned until the end of the year. The biggest new handed over building is located in Inpark Páty, and is used as a warehouse by Euronics (12,200 m²).
The major part of the 113 thousand square metre logistics property (100 thousand m²), which is being developed, is expected to be handed over this year. By this the annual development volume will grow by 11% compared to 2017. The biggest growth can be expected in Üllő Airport Logistics Center; here 85 thousand square metres can be used by tenants in the two halls before the end of the year.
In the first quarter of 2018 economic growth in Hungary grew by 4.4% compared to last year’s result. This is one of the most significant GDP growth measured in the EU. In the January-May period performance grew in several fields: industry (3.1%), construction industry (6.9%) and tourism (number of guests: 7.1%, income of commercial accommodation: 11%). Inflation in the first half of the year stood at 2.3%; in case of durables deflation could be seen. Labour-market indicators continued to improve; unemployment rate fell to 3.7%, employment rate increased to 69.1%. Average net income surpassed by 12.1% last year’s data in the January-May period. Base rate stills stands at 0.9%, the Hungarian forint weakened significantly compared to the euro (HUF/EUR 328.6).
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The Budapest Research Forum (hereinafter the ‘BRF’, which comprises CBRE, Colliers International, Cushman & Wakefield, ESTON International, JLL and Robertson Hungary) hereby reports its Q2 2018 office market summary.
Three new office buildings were delivered to the Budapest office market in the second quarter of 2018, totalling 57,060 sq m. GTC White House (21,560 sq m) and Promenade Gardens (22,500 sq m) both opened their gates along the Váci Corridor, while Graphisoft Park South (13,000 sq m) is the newest phase of the namesake park.
The total modern office stock currently adds up to 3,503,170 sq m, consisting of 2,838,720 sq m category ‘A’ and ‘B’ speculative office space as well as 664,450 sq m owner occupied space.
Please, find the full report below (pdf).
In the first quarter of 2018, two new buildings were handed over with the size of 18,020 sq m: a 11,020 sq m warehouse in East Gate Business Park, and a 7,000 sq m hall in the next phase of Budapest Dock Szabadkikötő building C. Furthermore, one existing building was included in the stock due to adequate quality and occupational status; the second building of Logicor’s Fehérakác property raised the industrial stock with 4,400 sq m. The total modern industrial stock in Budapest and its surroundings stood at 2,068,900 sq m at the end of Q1 2018.
Total demand amounted to 103,790 sq m in Q1 2018, marking a 45% increase over the figure noted in the same period last year. Lease renewals accounted for 72.7% of the quarterly volume, while the share of new leases was 21.8%. Expansions stood for 5.5% of the quarterly volume. No pre-lease agreement was signed in the first quarter of 2018. 24 leasing transactions were recorded in the first quarter, out of which two agreements were signed for more than 10,000 sq m. The average transaction size was 4,320 sq m during the quarter, which is one and a half times the average level of the previous five years’ first quarters. 98% of all leasing activity was recorded in logistics parks, where the average transaction size was 4,620 sq m, while the average deal size in city logistics schemes equalled 1,075 sq m.
The two largest transactions of the quarter were lease renewals. HOPI at Goodman Gyál Logistics Centre renewed its contract on 21,700 sq m, while in Prologis Park Budapest – Sziget Schneider Electric signed a lease renewal for 19,960 sq m. The largest new lease agreement amounted to 7,000 sq m and was signed in Budapest Dock Szabadkikötő. The largest lease expansion was recorded in Prologis Park Budapest – Batta on 4,180 sq m.
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