30 August, 2012
DTZ Hungary releases its half year property market overview, summary of the reports:
Investment: Standstill market
The uncertainty concerning Hungary’s economic outlook and the unpredictable political environment wiped off the country from the radar of most large institutional investors.
A decline of over 90% was seen in the investment volume in H1 2012 compared to the same period in 2011.
The majority of the investors are opportunistic and prefer acquisitions from liquidations and bank portfolios, thus securing an easy value-added approach.
Pricing expectations between vendors and purchasers are still not in balance.
Prime gross initial yields for Budapest have remained unchanged standing at 7.25%-7.75% for retail, 7.5%-8.0% for office.
Offices: Negative net absorption
As no office projects were completed in Q2 2012, the total office stock remained at 3,175,800 sq m, including 2,622,200 sq m of rental and 553,600 sq m of owner-occupied space.
Compared to the weak start of the year, leasing activity improved in Q2 2012 and surpassed the Q1 level by 80%. With 95,830 sq m of office space let in Q2 2012, demand totalled 149,000 sq m in the first half of the year.
25% of the quarterly take-up was realized in South Buda, which resulted in a slight decrease of the vacancy rate in this sub-market, now standing at 15.6%.
Even though the volume of the office stock remained unchanged and the leasing activity was relatively high, the vacancy rate increased by 82 basis points during the quarter due to such factors as the high share of renewals, and a negative net absorption figure of 16,300 sq m. The overall vacancy rate stood at 21.3% at the end of Q2 2012.
Rental levels remained largely unchanged compared to the previous year; prime rents in central locations ranged between € 14 and € 16/sq m/month.
Retail: One shopping centre completion
Despite the fact that development activity is still far behind the booming years, and most developers focus on the capital city, one shopping centre has been still completed in the provinces since the beginning of the year. Sió Pláza, comprising 9,000 sq m GLA was handed over in Siófok, a major touristic hub at Lake Balaton.
With 44 shopping centres, 59 strip malls and 28 other modern retail schemes the total modern retail stock in Hungary stands currently at 2.1 million sq m.
In terms of future supply, two projects are under construction, and two others were announced to be started in the next two years.
Industrial: Lease renewals dominate
With a vacancy rate of over 20% on the market, developers are not willing to start any project without a larger pre-let or BTS agreement.
Two development projects are currently under construction, comprising over 20,000 sq m in total: a warehouse building in Ablon’s Airport City Logistics Park, built for Benteler, and two buildings in South-Pest Business Park owned by WING.
With a weak start in Q1, leasing activity totalled 136,000 sq m in H1 2012, 24% lower compared to H1 2011.
Vacancy rate increased by 60 basis points, and stands currently at 21.4%.
City logistics headline rents are around € 4.0 to € 5.0 per sq m per month, while logistics parks around
Budapest range between € 3.25 and € 3.8.
Download reports here.