The real estate investment market in Hungary is continuing to improve, with EUR 505 million invested into commercial real estate in the third-quarter of the year, pushing the year-to-date total to EUR 1.3 billion, according to figures released by JLL.
“This year is in-line with 2016 when we recorded the disposal of more than one hundred buildings and the annual transaction volume reached EUR 1.7 bln. This year has seen a lower number of lot transactions, but a higher average lot size,” commented Benjamin Perez-Ellischewitz, head of capital markets at JLL Hungary.
The largest transaction in the third-quarter was the acquisition by the prolific South African investor, NEPI Rockcastle, of the 66,000 sqm Aréna Plaza for EUR 275 mln (as reported in the October 6 issue of the Budapest Business Journal).
This is the first entry by NEPI Rockcastle into the Hungarian market; the investor/developer has already built a strong CEE retail portfolio in Croatia, Poland, Romania and Slovakia.
NEPI Rockcastle has also purchased a 22-hectare development plot adjacent to the Aréna Plaza for a potential extension of the project. The company has the policy of redeveloping and extending its purchases as a long-term investor.
Another notable deal was the purchase by the Germany-based asset manager, Corpus Sireo of the 14,500 sqm Eiffel Palace for circa EUR 54 mln from the National Bank of Hungary (previously reported by the BBJ in the September 22 issue).
The classic turn-of-the-century building was redeveloped into a landmark office building by Horizon Development and subsequently sold to the central bank. Corpus Sireo completed its first acquisition in Budapest in 2016 with the purchase of the Park Atrium office building.
“I think that the total investment volume for 2017 will be broadly in line with last year, which is about EUR 1.6 bln-1.7 bln,” said Tim O’Sullivan, head of capital markets at CBRE Hungary, who advised the vendors on the sale of Arena Plaza.
“In the first half of the year we traded around EUR 850 mln and I would expect something similar for the second half of the year. To the best of my knowledge there are around ten transactions in due diligence, due to close between now and the yearend. These vary across all sectors – retail, office and industrial. So, I think that the final half of the year will be very busy,” O’Sullivan added.
He sees the market as being dominated by Hungarian domestic equity and this is essentially tied up in three big funds – Diofa, Erste and OTP. Joining this group are international investors who tend to be the most active buyers of core, well leased, income-producing assets. For the more opportunistic assets this tends to be the more European (Austria, United Kingdom) and Israeli equity funds.
“I would argue that the market is split 50-50 between the core and opportunistic investors. So, we have a healthy mix between the two types of buyers,” O’Sullivan added.
JLL estimate prime office yields at 6% for office and shopping centers and 7.5% for logistics. This represents a 75% basis point differential for offices with Czech Republic.