Tag Archives: Market Report

Market report 2017 H1 Investment

Stable growth

Hungarian economy produced a strong growth of 3.7% in the first half of 2017 compared to last year (when the growth was at 1.7% in the same period). The volume of investments grew significantly compared to the low base rate (by 34%); growth could be observed in every area of the economy, investments in the construction industry grew by 49%. Industrial output grew by 5.6% in comparison with the January-June period last year, whereas construction industry grew by an even bigger (27%) rate. Construction of residential properties increased by 46% in the first six months (compared to last year). The number of building permits and simple notifications has increased by 40% in Hungary, and it has doubled in Budapest. As a result of the easement of building permits and the state subsidies (CSOK –state subsidy provided for families, reduced VAT) provided for residential properties the strong increase in building residential properties is likely to continue in the following year.  Costs of constructions showed continuous increase in the examined period, prices increased by 8% in the second quarter in comparison with the same quarter last year.

Retail trade continued to expand: the rate of growth was 3.9% in the January-June period compared to the previous year (in 2016 it was 5.3%). Consumer prices grew by 2.3% in the first six months compared to last year, while the rate of annual growth was 1.9%. The biggest rate of inflation could be seen in case of alcoholic drinks and tobacco products.

Unemployment rate dropped below 5% (4.3), in addition employment rate increased to 68.1%. There is a big difference regionally in the unemployment rate, there is a shortage of labour at the more significant industrial areas. The National Bank has not modified the base rate since the middle of 2016, it stands at 0.9% at present.

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Market report 2017 H1 Modern Offices

Calm before the storm

There was a significant decrease in the growth of supply in the first half of 2017 compared to last year’s data, with only one new building being handed over (Graphisoft Park, 5,500 sqm). On the basis of current data developers’ activity is going to be more moderate compared to the year of 2016 and to previous expectations.

Ongoing property developments make up around 400 square metre office space, the major part of which (316 thousand square metre) is expected to be handed over only in 2018. Two hotspots of property development are the office corridor on Váci Street and sub market in south Buda. The dominance of Váci Street is expected to continue its growth in the near future, the size of handed over modern office stock of the region is going to surpass one million square metres by the end of next year. In the south Buda submarket, which with 3% has the lowest vacancy rate, completion of new offices (over 110 thousand square metres) can be expected a year later, in 2019.

The two biggest handovers in the second half of this year are going to take place in the south Buda submarket (Office Garden 3 and Hungarian Nobel prize winners Research and Development Park I); 42 thousand square meters of office space are going to be handed over in the two office buildings, which account for more than half of the annual growth in demand.

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Market report 2017 H1 Industrial and logistics properties

Dynamically expanding developments

In the first six months of 2017 properties of about 49 thousand square metres were handed over, which is twice as much as the volume of handovers in the same period last year. The annual rate of expanse in supply is going to be higher than it was last year. About 101 thousand square metres of developments are expected to be completed until the end of the year, which indicates a 40% growth in comparison with last year. Since the empty areas are becoming scarce, developers’ activity is expected to be on the increase, while supply is going to exceed two million square metres.

The biggest volume construction works are taking place in the western suburbia, in Inpark Páty. The 23 thousand square metre investment is carried out by NIPÜF Zrt., which is owned by the state but is an active market player. The company focuses on developing properties in accordance with domestic and international clients’ demands.

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Market report 2016 – Industrial and Logistic Properties

Developments launch

71 thousand square meters of new industrial/logistics premises were handed over in 2016; this amount exceeds the sum of all new deliveries from the previous five years. As vacant spaces ran out the intensifying of construction activity is foreseen; however, annual volume of new supply is not expected to return to the formerly usual levels of 150-200 thousand square meters.

Several pre-let and BTS halls are expected to come to the market in 2018; majority of these are located in the southern sector of the M0 ring road.

Developers’ interest is rising in launching new (partially) speculative projects. New developments are primarily realized in the southern-Budapest agglomeration.

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Market report 2016 – Investment

2016 brought an outstanding growth in property investment volume; the sum of deals doubled comparing to 2015 as it approached 1.55 billion euros. This is the second largest amount ever recorded in the Hungarian market.

High quality office buildings continue to be the most wanted; several such properties were sold over EUR 50 million. German investors are active in this segment again; additionally, domestic real estate funds successfully closed many valuable deals as well. The upcoming scarcity of premium offices became apparent by the end of 2016. According to the expectations forward purchase agreements will return to the market.

Domestic real estate funds still have a great appetite int he EUR 30-50 million price range; the Diófa Fund Manager and the Erste Real Estate Fund were active buyers, just as they had been in the previous year.

prime property

Market Report 2016 – Modern Offices

Developers’ rallye launch

Office deliveries doubled in 2016, comparing to last year, and development pace is expected to get even stronger.

Construction of some 303 thousand square meters new offices has already begun; total volume of prepared new schemes, which may be finished till the end of 2018, exceeds 630 thousand square meters. Developers share a positive sentiment of the future and speculative developments are back on, especially where adequate phasing is possible.

Three out of the six new deliveries took place in the Váci út office corridor, representing 42% of the annual development volume.

Newly built office volume is expected to surpass 100 thousand square meters in 2017; the primary locations of new projects are South Buda and the region of Váci út. Office developments have been absent in South Buda since 2010; thus, new premises are expected to quickly rent.

office-market-indicators

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Market Report 2015 Investment

Positive outlook

Hungarian GDP increase has surpassed expectations, the economy grew by 2.9% in 2015. The pace of increase strengthened in the last quarter remarkably, by 3.2%. Hungary’s rate of domestic economic growth was higher than that of the 28 EU countries’ average level (1.8%). Main contributors to this achievement were industrial production, trade and accommodation services. The volume of industrial production grew by 5.7% in 2015; building investments grew by 3%. The volume of residential units built has somewhat dropped in comparison with last year’s data (by 8.9%); however, this figure is expected to increase already in 2016 due to the new subsidies on dwelling purchases.

Retail trade continued to expand in 2015: the volume increase reached 5.5% compared to last year’s 5.2%. On average, consumer prices dropped by 0.1% during the year. The average price level of food, services and durables increased, while household energy and fuel became cheaper in 2015.

Unemployment rate further diminished comparing to the previous year; the ratio of the unemployed went down by 1.0 percentage points to 6.8%. In addition, the ratio of long term unemployment decreased (by 2.1 percentage points to 47.4%). The Hungarian National Bank continued to decrease the base rate; the base rate went down to 1.35% from 2.1% in 2015.

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Market Report 2015 Industrial Properties

Development bottoming out

In the segment of logistics and industrial properties only the fourth quarter of 2015 brought new completions; as such, the development volume dropped compering to an already low base. Similarly to the previous years no new speculative developments are expected.

As known, logistics property development output dropped below 60 thousand square meters in 2010 when speculative schemes vanished from the market due to the crisis. Due to an improving economic situation, increasing consumption and retail trade the rate of stock expansion is expected to grow in 2016; however, total stock is not forecasted to surpass 2 million square meters.

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Market Report 2015 Modern Offices

Before launching

In 2014 six new properties were handed over (comprising more than 67 thousand square metres total territory); however, there were only four new office buildings, comprising to less than 51 thousand square meters in 2015 (Váci Greens C, Bosch HQ phase 2 (owner occupied), Erzsébet Office building „A” (refurbishment), A66). Similarly to the previous year the most intense investment activity is on Váci Street office corridor; in this area offices the size of 70,500 square metres are under construction or in the preparatory phase.

Handovers expected in 2016: Váci Greens B (25,604 m2), V17 (13,000 m2), Nordic Light 1 and 2 (26,200 m2), M2X2 Buda Loft Offices (2,322 m2), Corvin 4 (25,000 m2). The handover of 98,000 m² is projected for next year, thus, provided that developments would be completed as scheduled, the annual volume of delivery would eventually excess the 50-60 thousand m² interval. Developers continue to be careful: the main criterion of launching the project is the right number of prelease agreements; as a result, the exact date of handover of schemes which have not been started yet can only be estimated roughly.

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Office market report Q3 2013

The total Budapest office stock (including owner-occupied and speculative buildings) reached 3,172,400 sq m in the third quarter of 2013. New supply for the quarter comprised the completion of the first phase of the new Bosch HQ and the purchase of a smaller office building by a tenant which was subsequently categorised in the owner-occupied stock. The total modern office stock comprises 2,588,059 sq m of modern ‘A’- and ‘B’-category speculative office buildings and 584,341 sq m owner-occupied buildings.

Building name

Size (sq m)

Type

Bosch HQ Phase I

10,000

owner-occupied

Total

10,000

 

 

 

 

 

 

Budapest office vacancy rate now stands at 18.6%, showing a 1.3 percentage point decrease compared to Q2 2013 and a 3.0 percentage point decrease year-on-year. South Buda and Central Pest submarkets managed to keep the lowest vacancy rates with 12% and 14% respectively, while the highest vacancy level remains in the Periphery region with 30%. High positive net absorption also indicates an improvement on the market.

The total volume of demand reached 98,014 sq m, 33% higher compared to Q2 2013 and almost the same level compared to the same period previous year. Take-up totalled 243,691 sq m in the first three quarters of the year, almost the same level as previous year.
Out of this volume, renewals had a share of 20% (19,924 sq m), the lowest level registered in the past 5 years. The volume of new leases was relatively high, and accounted for 48% of the total demand. With 15,091 sq m expansions took 16% share, and 2,470 sq m were pre-let. The Bosch HQ and the small office building transaction comprise a 13% share in the owner occupation section.

BRF registered 192 lease agreements in Q3 2013, with an average deal size of 442 sq m. This size reflects a small decrease compared to the previous quarter. Demand for smaller office space is still very high, 94% of the transactions were signed for a volume of ≤ 500 sq m.

The largest transaction of the quarter was signed in Váci Greens office building for just over 5,000 sq m, and the second largest transaction was MSCI who acquired 3,694 sq m office space at Green House.

Váci Corridor accounted for the highest share of demand with 38%, followed by South Buda with 16%.

 

Summary Table:

Q3 2013

Budapest

Completions (sq m)

10,000

Speculative Stock (sq m)

2,588,259

OO Stock (sq m)

584,341

Total Stock (sq m)

3,172,400

Vacancy (sq m)

588,675

Vacancy Rate (%)

18.6%

Pre-lease (sq m)

2,470

New Lease (sq m)

47,429

Lease expansion (sq m)

15,091

Lease Renewal (sq m)

19,924

Owner occupation (sq m)

13,100

Total Leasing Activity (sq m)

98,014