Hungarian State Completes Majority Purchase of Budapest Airport

Office Market

Photo by BUD Zrt.

The purchase by the state of an 80% stake in Budapest Airport Zrt., the operator of Budapest Ferenc Liszt International Airport, has been positively welcomed by analysts in the tourism and hospitality industries. The Hungarian state is now back in the position of majority ownership after 20 years and following a two-year negotiation period.

With a purchase price of EUR 3.1 billion, this is regarded as a record transaction of its type in the Central and Eastern European region in the view of many commentators. Buying back was extremely complex, while selling it had been easy, according to the government.

The hotel and hospitality sector is once again regarded as an attractive development and investment option. Hungary is seen as a popular tourist destination, with guest nights for Budapest rising towards the record highs of pre-pandemic levels.

“Notably, in 2023, the RevPAR [revenue per available room] in Budapest was higher than in Prague. According to forecasts, passenger traffic at Ferenc Liszt International Airport will return to pre-pandemic levels in 2024,” comments Robert Székely, hospitality and leisure expert at the consultancy Newmark VLK.

“The city is ranked among the top conference destinations, has a rich history, stunning architecture, and unparalleled cultural attractions. It has also consistently demonstrated its ability to host successful large-scale sporting events and is home to one of the largest summer festivals. With these strong fundamentals, the sentiment about Budapest’s tourism outlook is very positive,” he says.

With regard to infrastructure projects, the expansion and improvement of Budapest Airport and ongoing developments in the Castle District will improve the attractiveness of the tourism sector in Hungary.

Over the long term, Budapest is likely to see sustained growth due to continuous investments in tourism infrastructure, increasing international connectivity, and the city’s strategic marketing initiatives, says Attila Radvánszki, director of the hospitality consultants Horwath HTL Hungary. Altogether, approximately 3,000 hotel rooms are in the pipeline for the next five years from more than 22 hotel projects.

“The largest impact on tourism in Budapest could come from the state’s purchase of Ferenc Liszt International Airport,” Székely says. “This acquisition could lead to infrastructural redevelopments at the airport, as well as the long-awaited railway connection between the airport and the city center,” he notes.

“Meanwhile, hotel supply development is continuing: hotel brands such as Kimpton, St. Regis, Radisson Collection, voco, Vignette Collection, Moxy, Mandarin Oriental, So, and Swissotel – just to name a few – are entering the market, resulting in a differentiated supply,” Székely adds.

Investment Market Remains Slow in H1

“The investment market is quiet as investors adopt a wait-and-see position; nobody wants to take a risk and justify an investment deal to a board or colleagues. A fall in interest rates could mark a turnaround in the markets,” comments Benjamin Perez-Ellischewitz, principal at Avison Young Hungary.

Avison Young estimates Hungary yields at 6% for prime office, with prime industrial at 7% and retail (essentially strip malls with tenants with long leases) at 7%. Further yield movement is anticipated. 

With investment activity for the first half of 2024 limited to around EUR 150 million, Perez-Ellischewitz anticipates a total investment value for the year to be up to EUR 400 mln. Several large deals under negotiation could slip into 2025.

“The market bottleneck is, as always, liquidity, the lack and cost of debt, the cautiousness and the fears on the global macro-economic and political fronts. I think that vendors’ expectations and valuation levels in Hungary are becoming more realistic,” Perez-Ellischewitz says.

“This is a plus, compared to some other locations, and will help restart the market cycle as soon as debt is coming back. More robust investment volumes will only come at the end of the year when market sentiment should improve more broadly and debt markets should re-open,” he concludes.

Meanwhile, investment activity is picking up in Poland, where Skanska has sold the Leed “Platinum” and Well-accredited Studio B office building in Warsaw to Stena Real Estate, part of the privately-owned Swedish Stena Group. This is the third transaction between the two parties in CEE.

“The transaction of the Studio B project stands as a testimony to the interest in high-quality and sustainable real estate products in fast-paced, vibrant locations. This is proof of a positive shift in demand in the investment market,” comments Katarzyna Zawodna-Bijoch, president and CEO at Skanska’s commercial development business unit in CEE.

Studio B is part of an office complex designed by Danish Arrow Architects and Polish Grupa 5 Architekci. It has 17,600 sqm of sustainable and innovative space. The office space was already fully leased before it gained its occupancy permit.

Futureal Sells 2 Buildings at Lipowy Office Park

Futureal Investment Partners, a member of the Futureal Group, and 1 Asset Management, an investment management company backed by the developer Hanner, have announced a transaction involving the division and sale of two buildings at Lipowy Office Park in Warsaw.

The buyer, CEE Student Housing Fund, managed by 1 Asset Management, intends to convert the property into a modern co-living and purpose-built student accommodation (PBSA) for students and young professionals.

“This is a fine example of a redevelopment project, where the previous 21,000 sqm of office space will be repurposed into a modern rental living area with over 650 units, and will certainly rejuvenate the surrounding area. There is an immense scarcity of affordable and modern housing in Warsaw due to an existing undersupply and a constantly growing demand from the youth,” said Matas Mockeliunas, a fund partner from 1 Asset Management.

The deal reflects the growing attractiveness of the residential real estate sector for investors. It is an emerging sector in CEE, although it is yet to be established in Hungary.

This article was first published in the Budapest Business Journal print issue of June 14, 2024.

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