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Commercial property investments at EUR 0.6 bln in H1

The value of commercial real estate investments in Hungary rose from a low base by 58% annually to EUR 0.6 billion in the first half of the year, the National Bank of Hungary (MNB) said in a biannual report on the sector released today.

Investments in office real estate accounted for 59% of the total, while investments in retail property made up 10%. Industrial and logistics property investments made up 11% of the total and hotel investments 16%.

Hungarian companies accounted for 63% of the investment volume on the commercial real estate market in the first half of 2019. German companies accounted for 12%, French and South African companies for 8% each.

The annual yield on prime office property stood at 5.5% at the end of June, down by 25 basis points in H1. The yield on industrial property reached 7% after dropping by 50 basis points and the yield on prime shopping center space came to 5.5%, unchanged during the first six months.

The yield spread on office investment in Budapest relative to long-term government securities remains significant. Compared to 10-year euro-denominated bond yields, the prime officesʼ investment yield spread was 5.4 percentage points at the end of June, while the 10-year forint government bond benchmark yields were 2.6 percentage points higher.

In the first two quarters of 2019, around 38% of investment turnover from the buyerʼs side came from real estate funds and around 37% from real estate investors directly.

At the end of Q2, modern office space area available in Budapest was at 3.65 million sqm, of which around 3.05 million sqm was available to let and 0.6 million sqm was occupied by owners.

Record Low

The vacancy ratio stood at just 6.3% at the end of June, its lowest rate to date. The rate was down 1.3 percentage points compared to a year earlier, mainly because of high demand for office space and the relatively low volume of newly completed investment projects.

The vacancy rate is expected to remain low as 120,000 sqm of new office space could become available in 2019, around 48% less than in 2018. At the end of June, however, 591,000 sqm of office space was still under development, some 23% more than at the end of 2018, which could raise the total available modern office space area by 16% in the next two years.

In the next three to four years, total office area could expand by 25% based on the fact that 338,000 sqm of development projects are ready to be launched but are not yet under construction.