HUNGARY. Country Snapshots. Third quarter Please click on the appropriate sector to view. Offices Retail Industrial.

Transcription

1 Country s Third quarter 2017 Please click on the appropriate sector to view Offices Retail Industrial About & Contacts

2 Office Market MARKET INDICATORS Market Outlook Prime Rents: Headline rents continue to harden and increase for Grade A product as availability continues to diminish. Prime Yields: The interest from regional and local funds remains strong. It is likely that prime yields are to strengthen over the following quarters. Supply: Vacancy to fall slightly as new space in the 2017 pipeline is circa 60% absorbed. Demand: Investor and occupier demand are anticipated to remain healthy over Prime Office rents September 2017 LOCATION US$ GROWTH % 1 5 Budapest (CBD) Budapest (Central Buda) Budapest (Váci Corridor) Budapest (Periphery) Prime Office yields September 2017 LOCATION Budapest (CBD) Budapest (Central Buda) Budapest (Váci Corridor) Budapest (Periphery) With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yields Yield - Country Average Rental Growth - Prime 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% Yield - Prime Rental Growth - Country Average 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17 Rental growth (y/y) Overview After a strong Q1 this year, economic growth eased slightly in Q2 but stayed buoyant at 0.9% q/q. H2 is expected to be solid, with GDP growth of 3.7% this year. In response to positive market sentiment, the Budapest office market recorded a 67% rise in take-up volumes in Q Vacancy continued to fall further to an all-time record low of 7.7%. Rents were unchanged, but upward pressure is further intensifying with incentive packages already shortening. Labour shortages and increasing construction costs, however, are putting pressure on the development market in particular. Occupier focus In Q3 2017, occupier demand reached around 165,000 sq m of total leasing activity volume in Budapest, producing the highest quarterly results in However, a number of largescale deals, including MOL s owner occupation deal, were a boost to the recent figures. The most active business sectors driving demand remain unchanged, with the Financial, SSC s and Public sectors underpinning a large portion of demand. Owner occupation transactions accounted for 33% of all activity while new and relocation led transactions amounted to 36%, with expansion representing 6%. Caution is still prevalent on the development side, and while new schemes were delivered in this quarter, they are all linked to pre-leases or owner occupation; and new speculative delivery will remain low this year. Investment focus The third quarter of 2017 saw 250 million invested into the office sector, with Budapest being the focus. The largest deal was OTP RE Fund s purchase of WEBC from the consortium of Morgan Stanley, Wing and CC Real. Furthermore, Corpus Sireo RE Investment Fund further strengthened its position on the Budapest market with a purchase of the landmark Eiffel Palace, acquired at an all-time record low yield level. Yields hardened slightly over the quarter, with the benchmark standing at 6.0% for prime CBD office schemes. As both investor appetite for prime assets and the pipeline of deals remains healthy, prospects are for an active end of Outlook The outlook for the office market is positive with take-up volumes exceeding 400,000 sq m expected for Occupiers are still required to think 1-2 years ahead to secure suitable space for their relocation, mostly via pre-commitment.

3 Office Market LOCATION BUILT STOCK AVAILABILITY VACANCY RATE TAKE-UP TAKE-UP YTD UNDER CONSTRUCTION () () (%) () () () Budapest (CBD) % Budapest (Central Pest) % Budapest (Central Buda) % Budapest (Non-Central Pest) % Budapest (North Buda) % Budapest (South Buda) % Budapest (Váci Corridor) % Budapest (Periphery) % Budapest (Overall) % Source: Cushman & Wakefield Key Occupier Transactions PROPERTY SUBMARKET TENANT SIZE TRANSACTION () TYPE BudaPart South Buda MOL 50,000 Owner occupation Arena Corner Non-Central Pest Financial sector 11,130 Renewal Roosevelt 7/8 CBD Public sector 10,840 New City Gate Central Pest Financial sector 4,840 New Source: Cushman & Wakefield Key Investment Transactions PROPERTY SUBMARKET SELLER / BUYER YIELD PRICE MILLIONS Kalvin portfolio CBD, Váci Corridor Europa Capital/KGAL n/a 60.0 West End Business Center Váci Corridor Morgan Stanley, WING, CC Real/OTP Property Investment Fund n/a 72.50* Eiffel Palace CBD National Bank of Hungary/Corpus Sireo Real Estate 5.4* Source: Cushman & Wakefield, Real Capital Analytics, * estimated This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part Cushman & Wakefield LLP. All rights reserved. Orsolya Hegedűs MRICS Head of Research & Consultancy Deák Ferenc u. 15., Budapest, 1052, Hungary Tel: +36 (06)

4 Retail Market MARKET INDICATORS Market Outlook Prime Rents: Upward trend on prime high street and shopping centre markets and stable in other retail segments Prime Yields: Further hardening in prime yields is anticipated across all sectors as activity picks up. Supply: Demand: Limited new supply in the pipeline over the medium term. Strong occupier and investor demand for prime retail locations is set to persist. Prime Retail Rents - September 2017 HIGH STREET SHOPS US$ GROWTH % 1 5 Budapest (Váci utca) 120 1, Budapest (Andrássy út) OUT OF TOWN RETAIL (RETAIL PARKS) US$ GROWTH % 1 5 Budapest Budaörs Prime Retail Yields - September 2017 HIGH STREET SHOPS Budapest (Váci utca) Budapest (Andrássy út) OUT OF TOWN RETAIL (RETAIL PARKS) Budapest Budaörs SHOPPING CENTRES Country prime With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yields Yield - Prime Rental Growth - Prime 8.00% 30.0% 7.00% 20.0% 10.0% 6.00% 0.0% 5.00% -10.0% 4.00% -20.0% 3.00% -30.0% Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17 Rental growth (y/y) Overview Q2 GDP growth of 3.6% y-o-y was slightly below expectations but still buoyant. H2 is expected to be solid with robust growth of 3.7% forecasted for Private consumption remains an important driver of growth, with real wages continuing to soar. It was seen rising 4.1% in 2017, following a 5% rise in 2016, supported by a tight labour market and hikes in real earnings.. Occupier focus In Q3 2017, occupier demand levels were strong with a clear focus on prime high street and dominant shopping centres. With landlords attempting to raise footfall and increase dwell time, a number are reassessing their tenant mix and increasing the F&B element. Supply of retail space remained unchanged during recent years and the situation is not expected to change until 2019 when Etele City Centrer is expected to complete. At the same time, modernisation works are currently under way in prime schemes such as in Mammut Shopping Center. Prime rents experienced no deviation over the quarter, with slight growth expected in the first half of Investment focus Following the strong investment activity seen in H1, Q3 delivered the second highest quarterly retail investment volume on record. This was underpinned by the acquisition of Arena Plaza shopping centre by NEPI Rockcastle, a South African real estate investment firm. Additionally, a portfolio of five assets was purchased by a local investment fund. In response, prime shopping centre yields have hardened by 15 bps during the quarter and a hardening of prime high street yields is anticipated for the remainder of the year. Outlook Stability will be the defining characteristic of the Hungarian retail property market over the short and medium terms. Despite an anticipation of marginal rental growth, a further hardening in prime yields is expected across all retail segments as investor interest increases; however, this will be linked to more product coming to the market. This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part Cushman & Wakefield LLP. All rights reserved. Orsolya Hegedűs MRICS Head of Research & Head of Consultancy Deák Ferenc u. 15., Budapest, 1052, Hungary Tel: +36 (06)

5 Industrial Market MARKET INDICATORS Market Outlook Prime Rents: Prime Yields: Supply: Demand: Very limited available warehouse space is putting upwards pressure on rents for the best units. Yields could sharpen further as investor demand solidifies. Existing new supply is practically fully pre-leased for It is expected that this will be followed by speculative developments breaking ground. Pre-lease agreements and BTS activity are likely to accelerate in 2017 from tenants wishing to secure space for market entrance and expansions. Prime Industrial Rents September 2017 LOGISTICS LOCATIONS US$ GROWTH % 1 5 Budapest Debrecen Miskolc Győr Székesfehérvár Prime Industrial Yields September 2017 LOGISTICS LOCATION Budapest Debrecen Miskolc Győr Székesfehérvár With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yields Yield - Country Average Rental Growth - Prime 11.00% 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% Yield - Prime Rental Growth - Country Average Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep % 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% Rental growth (y/y) Overview Q2 GDP accelerated 3.6% y-o-y, while growth is forecasted at 3.7% for The expansion is mainly backed by net earnings growth (+14% y-o-y) while investment accelerated as well, growing by over 20% y-o-y. However, the strong capacity constraints that the construction industry is currently facing will have financial, timing and delivery implications on the development market in particular. Occupier focus Occupier demand remained robust with 122,000 sq m of industrial space transacted in Budapest in Q3. Renewals equated to 68% of the total leasing activity, demonstrating the lack of available warehouse space. The total market vacancy rate remained at the lowest level ever recorded, and stood at 5.5% at the end of Q3, however there were no existing logistics schemes that could offer more than 10,000 sq m of vacant warehouse space at the end of Q3. There was one new development handed over during the quarter, the 23,100 sq m Inpark Páty development which was 100% pre-leased to Kühne + Nagel. Speculative handovers are expected from Q4; however, upcoming developments are also well pre-let. New entrance, expansion and relocation options are still very limited for occupiers in Budapest, putting upwards pressure on rents. Prime logistics park headline rents currently stand at 3.70/sq m/month, though in the case of BTS and new developments, rental levels are increasing due to the growth of plot prices and construction costs. Investment focus Following the strong investment activity seen in H1, Q3 delivered the highest quarterly industrial investment volume. This is due to the cross-border transaction of Blackstone s Logicor to China Investment Corporation, which included 9 Hungarian assets. Additionally, the former 52,770 sq m Nokia plant, located in Komárom, Western Hungary, was purchased by CTP. Outlook The occupier demand for large, modern logistics platforms exists, though speculative development remains modest, limiting market activity in general. Prime rental values are now close to levels that make speculative development feasible. This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part Cushman & Wakefield LLP. All rights reserved. Orsolya Hegedűs MRICS Head of Research & Consultancy Deák Ferenc u. 15., Budapest, 1052, Hungary Tel: +36 (06)

6 Our Research Services Visit our website to access... Cushman & Wakefield is known the world over as an industry knowledge leader. Through the delivery of timely, accurate, high-quality research reports on the leading trends, markets around the world and business issues of the day, we aim to assist our clients in making property decisions that meet their objectives and enhance their competitive position. In addition to producing regular reports such as global rankings and local quarterly updates available on a regular basis, Cushman & Wakefield also provides customised studies to meet specific information needs of owners, occupiers and investors....global Research Reports To learn more about the global trends in the commercial real estate sectors that are shaping economic development, business practices and real estate strategies....local Market Reports To find out about local real estate trends in the office, industrial and retail sectors in markets around the world...white Papers and Strategic Insights For authoritative and insightful commentary and analysis on the business landscape for commercial property markets...cushman & Wakefield global real estate blogs To hear our point of view on global market trends and how they are impacting on real estate decision making My C&W Research App Accessing Cushman & Wakefield Research To access our industry-recognized research, please visit: Access, download and share our research publications, thought leadership pieces and market analysis on the My C&W Research app. To download the app, please visit the Apple s App Store via an iphone, or the Google Play Store via an android phone; or by typing My C&W Research into the search bar. Orsolya Hegedűs Associate, Valuation & Head of Research Hungary +36 (06) István Tóth Senior Research Analyst EMEA Research +36 (06) istvan.toth@cushwake.com Disclaimer This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes and should not be relied upon as a basis for entering into transactions without seeking specific, qualified professional advice. It is not intended to be a complete description of the markets or developments to which it refers. This report uses information obtained from public sources that Cushman & Wakefield has rigorously checked and believes to be reliable, but Cushman & Wakefield has not verified such information and cannot guarantee that it is accurate or complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained in this report and Cushman & Wakefield shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. The prior written consent of Cushman & Wakefield is required before this report or any information contained in it can be reproduced in whole or in part, and any such reproduction should be credited to Cushman & Wakefield Cushman & Wakefield LLP. All rights reserved. For more information, please contact our Research Department: Cushman & Wakefield LLP 125 Old Broad Street, London, EC2N 1AR, UK www.