CBRE: After the year of records, property market is in transition (HU)

Both demand and supply brought records to the Hungarian commercial property market in 2008. The crisis deepens as investment market comes to a halt in the whole of Central and Eastern Europe and developers prefer pre-lease agreements. Nevertheless, well-located prime properties remain popular and the core markets of the region are still in the focus of the investors – it was revealed at the annual press conference of CB Richard Ellis (CBRE).

Annual office demand breaks record – for the fifth time in a row
Demand for modern office space in Budapest reached new record high in 2008 – take-up equalled to 330,000 m² which is some 3% up on 2007 and is by a third higher than take-up in 2006. Especially last quarter of the year proved to be very strong, some 35% of the total take-up was due to the deals closed in the last three months. The biggest lease transaction by far was the lease and BTS (built-to-suit) agreement signed by K&H Bank and the developer TriGranit for almost 47,000 m². Pre-lease agreements in general had a very significant share in last year's demand therefore the 2009 pipeline of office space is already up to 28% occupied before completion.

Developers never before managed to secure tenants for such a high share of future developments which can help to balance potential oversupply in coming quarters. After a record breaking 250,000 m² newly delivered office space in 2008, further ca. 270,000 m² available office space is scheduled to come to the market in 2009. Projects already under construction are likely to be delivered according to original timing (or with reasonable delays due to technical reasons) but unconfirmed pipeline (projects not started yet) became much more unsecure. Developers' reaction on the changing economic climate has been very immediate and significant. According to current estimation, only 130,000 m² office development is under construction with planned delivery in 2010, while another ca. 300,000 m² of office space development has been put on hold.

"We are entering a new era of office occupier market" – commented the new year Adrienne Konthur, Managing Director of CB Richard Ellis, Hungary. "Developers will think twice before kicking off a new project. Current market conditions – financing and real estate fundamentals, both – claim developers to have a significant share of pre-lets. BTS agreements were fairly untypical in Hungary, and this is about to change. We will see much more planning ahead before completion starts than in the previous years. This helps the market to avoid long-term imbalances."

Logistics real estate market reaches peak in 2008
2008 proved to be a record year in the Hungarian logistics property market both in terms of supply and demand. Several developments were completed and became successfully let. Currently the modern industrial stock of the Greater Budapest area stands at 1.4 sq m. Annual completion level in 2008 was the highest annual completion ever recorded, and more than twice of the completion level registered in 2007. During only one year the modern industrial stock grew by 30%.

Demand for modern logistics space was significantly higher in every quarter of 2008 than in the same periods of 2007. Take-up accounted for 335,000 m² in 2008, which means more than 50% increase compared to 2007. Pre-lease agreements had a significant share in each quarter's demand.

Nevertheless, due to the high share of pre-lease agreements in the annual take up paring with massive supply, vacancy reached 16.3% by the end of the year. With deteriorating economic environment logistics market is expected to see significant slowdown in the course of 2009. Falling industrial output and recession in Hungary's most important trade partner countries have already impacted the demand for industrial-logistics space: Expecting lower demand, developers re-think their strategies meaning less aggressive expansion.

"First months of 2009 we will still see several large developments to be completed." –added Gábor Borbély, Senior Research Analyst at CBRE. "Cur

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