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Upturn in Market Activity Continues in 2017

Investors and developers are showing an increasingly favorable attitude to the development, investment and redevelopment of buildings in Hungary’s office, industrial, retail and hotel market sectors. Prime yields are estimated at 6% for office and retail, and 7.5% for industrial.

Eiffel Palace  interior.

Vacancy is low in all market sectors as demand is continuing to rise and average room occupation nights are high in the hotel sector. The challenge is to develop quality, sustainable stock in all market sectors to meet tenant and investor demand.    


A notable investment deal was the purchase by the German-based asset manager Corpus Sireo of the 14,500 sqm Eiffel Palace for around EUR 54 million from the National Bank of Hungary (MNB) at a reported yield of 5.25-5.4%.

The classical turn-of-the-century building was redeveloped into a landmark office building by Horizon Development and subsequently sold onto the MNB. Corpus Sireo completed its first acquisition in Budapest in 2016 with the purchase of the Park Atrium office building. Both established international investors and local funds have become increasingly active in Hungary. OTP Bank managed funds have purchased the 27,000 sqm West End Business Center, the 25,000 sqm Nokia Skypark and the 25,000 sqm Váci Greens building B, all class “A” Budapest office centers. Atenor has also sold Váci Greens building D to a private Hungarian investor, and Erste Real Estate has bought the 25,000 sqm Krisztina Palace.

“I would argue that the market is split 50/50 between core and opportunistic investors, so there is a healthy mix between the two types of buyers,” said Tim O’Sullivan, head of investment properties for Hungary & SEE at CBRE.

Biggest Shift

Mike Edwards, head of capital markets at Cushman & Wakefield Hungary, sees possibly the biggest shift in the investment market as indicated by the sale of Kalvin Square and Cityzen by Europa Capital to KGAL. “They [Europa Capital] purchased both assets two years earlier from the financing bank and undertook a highly successful leasing and refurbishment program enabling them to exit,” he said.

In a deal advised by Colliers international, IT Services Hungary, the largest ICT employer in Hungary, has decided to locate its Budapest site to Mill Park and will occupy approximately 17,300 sqm at the complex. Mill Park by Skanska, located in District IX, will comprise two office buildings with a total leasable area of 36,000 sqm.

The LEED “Gold” certified office complex is more than 70% leased and will be delivered in two phases during 2018. Skanska has sold the 26,000 sqm Nordic Light in Váci út to Erste Real Estate Fund for EUR 67 million, the transaction was recorded at the turn of the year.

A rare delivery in the south Buda sub-market is the 18,500 sqm Office Garden 111 that is currently 95% let to such international and Hungarian tenants as Agco, SIA Pirelli, Manvit, Astra Zeneca and Pannontej.

“The demand for new office areas is significant because no new office scheme had been delivered in this area since 2010. The occupancy has reached almost 100% in a record time,” said Robertson Hungary, who acted for the developers.

Also in south Buda, MOL has acquired the office component of the BudaPart development and is developing its MOL Campus HQ that will include 33,000 sqm of office space providing work places for 2,500 staff. The LEED and BREEAM accredited complex, designed by Foster & Partners and Finta Studio, will include a landmark 120-meter office tower.

JLL estimates that 477,000 sqm of office space is under construction in Budapest, 38% of this is pre-let and vacancy is at an all-time low of 7.7%. Most analysts do not fear oversupply despite the large pipeline.


One of the largest transactions in the year was the acquisition by the prolific South African investor, NEPI Rockcastle of the 66,000 sqm Aréna Plaza for a reported EUR 275 million.

Although this is the first entry by NEPI Rockcastle into the Hungarian market, the investor/developer has already built a strong CEE retail portfolio in Poland, Slovakia, Romania and Croatia. NEPI Rockcastle has also purchased a 22-hectare development plot adjacent to 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 and building owner.

“The purchase of Aréna Plaza is important not only because it represents a complex, landmark deal for the market, but also because another new international source of equity has entered the Hungarian real estate market. It is anticipated that close to EUR 1.7 billion may enter the commercial property investment market by year end,” said CBRE’s O’Sullivan.  

In one of the largest Hungarian retail portfolio transactions in 2017, TREI Real Estate, the property estate arm of the German Tengelmann Group, successfully sold a portfolio of 40 supermarkets to Erste RE Fund. Most of the portfolio is leased to Spar Hungary. The total size of the deal was in excess of 39,500 sqm, geographically spread around the entire country, including 13 locations in the capital, according to Colliers International who advised TREI Real Estate on the transaction.

Renovate and Reposition

Against the background of lack of supply, some owners of earlier generation schemes are attempting to reposition themselves on the market through renovations or changes in their tenant mix. The Hungarian investor Diófa Real Estate Fund has purchased the rebranded Shopmark shopping center and plans to undertake extensive refurbishment. CPI purchased the earlier generation Pólus Center and the Campona mall from CBRE Global Investors and is undertaking redevelopment of the complexes.

Although consumer demand has continued and there are waiting lists for the best performing Budapest shopping centers, there have been no new shopping center deliveries in Budapest in recent years. The only large retail format delivery is a new 35,000 sqm IKEA store in the southern outskirts of Budapest. This is the third IKEA store in the capital area, and one of the largest in the CEE region.

The next planned delivery will be the 53,000 sqm Etele Plaza by the Hungarian and CEE developer Futureal. The complex is located adjacent to the 70,000 sqm Budapest One business park project, currently under development at a transport hub on the western edge of the city. The complex, designed by Chapman Taylor, is scheduled for delivery in the fourth quarter of 2019.

The other pipeline development, the 50,000 sqm ECE Aquincum, located in Óbuda, from the German retail developer and shopping center operator ECE, is not expected to deliver before 2021.

Aerozone Logistics Center.


The major deal of the year was the purchase of the cross-border Logicor logistics platform by CIC, including a Hungarian component.

The U.K.-based investor M7 Real Estate increased its presence in the Hungarian market through the acquisition of seven light industrial assets across the country as part of a larger core-plus portfolio deal. The investor also purchased the 62,000 sqm Aerozone logistics center in the vicinity of Liszt Ferenc airport earlier in the year.

“With nearly two-thirds of assets within M7’s Central European portfolio in Hungary, this is a further show of confidence in our market and is a demonstration of the comparative value that Hungary delivers,” commented Mike Edwards, head of capital markets at Cushman & Wakefield Hungary, who represented M7 on the deal.

Wing has expanded its industrial portfolio with the acquisition of the 75,000 sqm Európa Center Business and Logistics Park, located adjacent to the M0 ring road. The leading Hungarian developer plans to further develop the complex, trading under the new name of Login Business Park.

The Industrial division of Colliers International Hungary sold the Scanfil building in Rozália Park to the Reál food store chain. The building of total 14,500 sqm was used by Scanfil for the production of mechanical and integrated products, and will now be used by Reál as a distribution center for the greater Budapest area.


The Hungarian state-owned NIPÜF (National Industrial Park Management and Development Company) is developing 23,000 sqm of built-to-suit space at Inpark, close to Páty (26 km west of Budapest). This reflects the perception by the state of the need for modern logistics and light industrial space.

“Inpark was founded by the Hungarian state but operates as a classic property developer on a market basis,” said the company.

The regional industrial developer and logistics park operator CTP is undertaking development of the 17,000 sqm extension for Rudolph Logistics at CTPark Tatabánya. Construction is ongoing on a 13,000 sqm factory for Dana at CTPark Győr. The company has also purchased the 58,000 sqm Rozália Park to the west of Budapest.

With falling vacancy rates, there is low supply of continuous logistics/light industrial space to meet demand. Industrial developers prefer the more cautious built-to-suit (development option. Vacancy stands at 5.5% and there are no existing logistics/industrial parks that offer 10,000 sqm plus contiguous spaces. In contrast to other industrial markets in the region, a commercial logistics market has not developed outside Budapest.

Budapest Airport Ibis Styles Hotel.


The development of hotel stock in Hungary has been continuously rising since 2010 and total room supply has expanded to more than 61,000 during the year according to the hotel consultants, Horwath HTL.

In Budapest, new developments are essentially refurbished historic buildings that are redeveloped into mainly boutique hotels in the city center with an average of 80 rooms, according to CBRE. In the first half year, 5.14 million guest nights were registered in Hungary. With similar growth predicted for the remainder of the year, the total volume for 2017 could reach 12.2 million arrivals, the highest figure on record. In Budapest, the occupancy rate of 76% puts the city at the upper end of European capitals.

In the major hotel investment deal of the year, the international private investor, Starwood Capital has acquired the Sofitel Budapest Chain Bridge Hotel from Orbis Hotel Group.

Sofitel Budapest is one of the major five-star hotels in the city, with 357 rooms close to the bank of the Danube. The hotel is being purchased for EUR 75 million, subject to the approval of the European Union Merger Control Office, and an extensive restoration and renovation program is being planned. The complex will continue to operate under the Sofitel brand.

Fastest Growing

The transaction is described as a sale and management back transaction to acquire the hotel. This is regarded by Starwood Capital as an attractive partnership with Accor and Orbis. Budapest is projected to be the fastest growing urban hotel market in Europe in 2018, benefitting from a balanced mix of international leisure and corporate demand.

“We are delighted to be acquiring this iconic European hotel in this high demand hospitality market, while partnering with Accor and Orbis on this transaction. With its irreplaceable location and strong cash flow, the hotel has attractive growth and significant repositioning potential. We look forward to investing in this property and leveraging the hospitality expertise of Starwood Capital Group to help drive future growth together with our partners Accor and Orbis,” commented Keith Evans, vice president of European hotels at Starwood Capital Group.

In the major hotel delivery of the year, Wing has delivered the 145-room ibis Styles Budapest Airport Hotel, the first hotel at Ferenc Liszt International Airport. Budapest Airport, operators of the capital’s international airport, believe the project will create a landmark building that will raise the profile of the airport.

The 5,200 sqm hotel is being developed through a partnership between Budapest Airport and Wing. The project is being constructed on a site in front of Terminal 2 with direct access to the airport terminal. The developers will hand over the hotel to the ibis Styles hotel chain, a member of the Accor group. The operating rights for the project have been awarded on a 15-year contract.