Erste Real Estate Fund has closed the acquisition of the second 8,000 sqm phase of the 20,000 sqm Advance Tower on Váci út. This is the first transaction in the Hungarian market of a WELL pre-qualified office building according to the vendor, Futureal.
The transaction represents a follow through from the purchase of the first phase. The deal reflects the current strong demand for high-end office assets, the dominance of Hungarian capital in the Hungary investment market and the ability of local funds to direct deals through their established contacts in the market.
Local investors have developed long-term relationships with developers and are in a position to utilize these relationships and react quickly when an asset is potentially available.
“The current transaction is one of the highlights of our successful long-term cooperation with the Erste Asset Management. We are proud of that two of our office developments including Vision Towers and Advance Tower have already been purchased by the fund,” said Tibor Tatár, CEO of commercial and retail development at Futureal.
Three players (OTP RE Fund, Erste RE Fund and Diófa RE Fund) are dominant in the investment market, in addition to other local funds who have become active on the market, notably at the top end of the office sector, hotel and retail.
Office was the leading investment sector in 2019 with 49% or EUR 834 million of the total, according to CBRE, followed by retail with 28% (EUR 428 mln), hotel with 15% (EUR 260 mln) and industrial at 8% (EUR 144 mln).
The rise in hotel investment activity is significant and has been expected for some time and is seen as likely to extend into this year.
“With the acquisition of the second phase of the Advance Tower, the Erste Real Estate Fund has taken another significant step towards creating a portfolio of office buildings with excellent international tenant mix and high technical quality. The agreement is the next milestone in an outstanding business relationship that further strengthens our solid commercial real estate portfolio,” commented Balázs Pázmány, chairman of the managing board at Erste Asset Management.
Total investment volume for 2019 came to EUR 1.72 billion, according to CBRE. This represented 55 registered transactions with an average ticket size of EUR 31 mln.
“Hungarian investors remained by far the most active on the market, accounting for 90% of the investment volume in the first quarter and 74% throughout the year,” said CBRE.
Prime yields are put at 5.25% for office, 5.5% for shopping center and high street retail as well as hotel, and industrial at 7%.
“New product coming to market further into 2020 may once again put downward pressure on office and hotel yields but generally the current levels form a viable benchmark for the months to come. As the current loose monetary policy cycle carries on globally and economic sentiment shows signs of resilience, a reversal of yield remains unlikely in the near term,” said CBRE on forecast yields for the year.
In general, investment volumes in the Hungarian market are expected to be at similar levels for the year.
“CBRE are of the view that a similar volume to the past three years can be reached in 2020 as well, based on the continuously supportive monetary environment, robust investor sentiment as well as considerable new stock coming to market that is available to trade,” CBRE concluded.