C&W: Vacancy rates declining in Hungary


Unlike the situation in Hungary’s traditional competition – Poland and Czech Republic – vacancy rates are  decreasing here, as slow development after the recession and booming demand, including record demand for offices, bode well for future rental growth, Cushman & Wakefield, Morgan Stanley’s advisor in the AEW deal, said late yesterday in an announcement.

Last year saw a clear re-emergence of investment activity, focusing on domestic funds such as Diófa and Erste Fund and the internationals tended to stay away, the announcement noted, adding that, while manufacturers and outsourcing companies have increasingly taken advantage of factors such as government incentives and low costs and a well-educated workforce, this has not filtered through to the international investment market. According to C&W, while companies like Mercedes Benz and Audi continue to flourish here, the German investment funds have been reluctant to move on the market.

Morgan Stanley completed the acquisition of the AEW portfolio in Budapest, while this week it was officially announced that TPG purchased Trigranit, the latter having “obvious positive implications for the Hungarian property market”, the announcement noted.

There has been lots of talk of the “wave of capital” coming east, but experience shows that investors need to see that they are not the only players in town, the announcement say. The positive news from the Morgan Stanley deal is a wake-up call to other funds as to what Hungary has to offer them, C&W believes.

Viktória Szabó, Partner, Head of Retail at Cushman & Wakefield helped analyze MOM Park to identify repositioning and value add potential as part of the AEW deal.  She is optimistic that the future is strong for the retail sector and points out that retail spend is increasing following ten years of decline. The recession saw the “survival of the fittest” retail schemes, with the better schemes realigning themselves, consolidating performance, increasing footfall and taking market share away from failing schemes. There is now a clear definition in the market between schemes and the Budapest market no longer seems oversupplied in the sector. New or expanding retailers struggle to find decent space in the existing stock and Szabó sees this as an opportunity for schemes like MOM Park to continue to pull away from the field.

On the office side, David M. Johnston Associate, Head of Office Agency at Cushman & Wakefield in Budapest points out that record take-up is driven by the larger international occupiers for out-sourced functions.  Yet these occupiers are increasingly discerning in the stock they take – corporate responsibilities (such as green building designation) and the quality of accommodation (critical for staff retention) are increasingly important.  Much of the stock built in the previous decade is already dated or in the wrong location, and with very little supply coming out of the ground in the past five years, true class A buildings are in very limited supply and, indeed, vacancy rates are sub-10% for the best in class buildings.  Against this background, net rents are already on the climb – a trend that is likely to continue.

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