Busy Year Expected for Investors

Sustainability

An increasing number of international investors have made acquisitions in Hungary, even as activity by domestic funds takes around a 50% market share. Although the fundamentals are positive from both a supply and demand perspective, the relatively low number of investment grade product is acting as an impediment to further development, according to research for the first half of 2019.

“We expect the full year volume to be in the EUR 1.4 billion-1.5 billion range,” says Benjamin Perez-Ellischewitz, head of capital markets at JLL Hungary regarding the current investment volume.  

CBRE forecasts EUR 1.3 bln-1.5 bln for the year. “The main bottleneck for further growth continues to be the shortage of tradeable product after the unprecedented transactional activity of the past three years,” says the consultancy.  

Total CEE-6 (Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia) investment volume for the first half of 2019 reached EUR 5.5 bln, slightly down on the previous year according to Colliers International.  

A similar figure of EUR 5.47 blns has been recorded for the time period by JLL for the CEE region (the Czech Republic, Hungary, Poland, Romania and Slovakia). Poland constituted 50% of this figure and with an extended transaction pipeline, the country could approach the record breaking volumes registered in 2018. Poland was followed by the Czech Republic although further development of the markets is hampered by high price expectations, caused in large part by the limited supply of quality product.    

The breakdown of investors in the regional market for the first half saw a 25% share of Western European origin, 21% for CEE domestic investors, and Asian investors at 20%, according to JLL.  

Sector of Choice

Office is the sector of choice in CEE: in Budapest Skanska has sold the 14,000 sqm Nordic Light Trio, valued at EUR 41 million, to JR AMC, a South Korean real estate investment trust.

Also in the office sector, the German closed-end fund, Warburg-HIH RE has purchased the 21,500 sqm GTC White House for a reported EUR 60 mln-70 mln.  

Another international investor, the South African industrial specialist JT Ross, has entered the Hungarian market with the purchase of the Aerozone Business Park from M7 Real Estate for a reported EUR 40 mln-50 mln. The complex consists of 48,000 sqm of industrial space and 15,00 sqm of office space.          

Hungarian funds, typically long-term holders, represent a growing share of volume with an aggregate 44% volume in the first half of 2019 and almost no disposals, according to JLL figures. Hungary’s Erste RE fund, for example, has purchased the 20,000 sqm Advance Tower from Futureal for a reported EUR 45 mln-55 mln.  

“The remainder of 2019 should be extremely busy for market players acting on the CEE market. In a very possible scenario investment volumes may even outperform the levels seen in the record breaking 2018,” JLL concludes.

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