City Report - jll.hu · handed over in Budapest with a total size of 12,000 sq m: Graphisoft Park...

City Report

Q3 2017

Budapest City Report Q3 2017COPYRIGHT © JONES LANG LASALLE IP, INC. 2017

• In Q3 2017, the quarterly transaction volume totaled ca. €505 million, which was the highest quarterly volume in 2017 so far.

• 54% of the volume was driven by one transaction: the sale of Aréna Plaza Shopping Centre. Offices had a share of 38% and the remaining 8% was made up of logistics assets and properties for redevelopment purposes.

• The largest transaction of the quarter was the sale of the Aréna Plaza shopping centre by Lanebridge to NepiRockcastle. The mall was sold for a reported €275 million. The transaction was the third largest single asset deal on record. The South-African investor also purchased a 2.2 hectare development plot adjacent to Aréna Plaza indicating their potential future development plans.

• Further notable transactions included the disposal of the heritage protected Eiffel Palace office building, purchased by Corpus Sireo and the sale of Krisztina Palace, acquired by ERSTE RE Fund.

• Prime yields compressed by 50 bps q-o-q in the office asset class and stand at 6.00%. A 25 bps q-o-q compression was recorded for industrial/logistics assets pushing the prime yield to 7.50%, whereas prime shopping centreyields remained stable at 6.00%.

Investment Market

Unemployment rateQ2 2017

GDP Growth

Q2 2017

Spending power, 2015, Warsaw Agglomeration

Inflation

Jan-Sept 2017

Average gross wage growth

Jan-Aug 2017

3.2% 2.4% 4.2%

€10,807

Retail SalesQ2 2017

12.7%4.3%

Industrial production

Jan-Aug 2017

5.1%

Budapest City Report Q3 2017COPYRIGHT © JONES LANG LASALLE IP, INC. 2017

Prime yields in Q3 2017

Hungary investment volumes

Key investment transactions in Q1-Q3 2017

Sector Property Size (sq m) Seller Buyer

Retail Aréna Plaza 68,000 Lanebridge Nepi Rockcastle

Retail Pólus Shopping Centre 40,200 CBRE GI CPI

Office Nokia Skypark 25,170 Futureal OTP RE Fund

Office Westend Business Center 27,400 Morgan Stanley OTP RE Fund

Office Nordic Light 26,200 Skanska ERSTE Real Estate Fund

Office Váci Greens B 25,300 Atenor OTP Real Estate Fund

Retail Campona Shopping Centre 40,200 CBRE GI CPI

Office Krisztina Palace 25,000 UNION ERSTE RE

Investment turnover split by purchaser’s nationality, Q1-Q3 2017

Source: JLL Research




17%

41%6%

2%

9%

22%

Czech Rep.

Hungary

UK

USA

Germany

South Africa

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

1,800,000,000

2,000,000,000

2013 2014 2015 2016 Q1-Q3

2017

€

Shopping Center

6.00%

Office

6.00%

Industrial

7.50%

Budapest City Report Q3 2017COPYRIGHT © JONES LANG LASALLE IP, INC. 2017 Budapest City Report Q3 2017

Q1-Q3 2017 summaryStock and vacancy rate by submarket

• Two new office buildings were completed in the third quarter of2017: Nexon’s new 4,000 sq m HQ building in the Váci Corridorand Graphisoft Park, located in Buda North, was expanded by2,500 sq m.

• The modern office stock in Budapest totals 3,353,240 sq m.• The vacancy rate decreased 320 bps year-on-year to a record low

of 7.7%.• The quarterly gross occupational activity amounted to 164,980 sq

m whereas net demand reached 124,010 sq m. These are thehighest Q3 demand levels ever on record.

• The biggest transaction of the quarter was a 50,000 sq m owneroccupation for a HQ building, which will be the first high-riseoffice building in Budapest with a total height of 120 m, located inthe Buda South submarket.

• Owner occupation deals represented 32.6% of the demand in Q3,followed by new deals with 27.6%. Renewals equated to 24.8%,while expansions accounted for 6.4%. Pre-lease agreementsrepresented 8.3% of the total leasing activity.

• Prime office rental levels increased by 2.3% quarter on quarterto €22.5 sq m / month.

• There is ca. 477,000 sq m of new office space under constructionand due for completion by the end of 2019. 38% of this volume isalready pre-let.

Quarterly summary

Source: JLL Research, BRF

Volume of office completions

• Between January and September, three office buildings werehanded over in Budapest with a total size of 12,000 sq m:Graphisoft Park in Buda North was expanded by two buildings(the new 5,500 sq m wing of SAP and a 2,500 sq m start-uphouse) furthermore Nexon opened its new HQ in the VáciCorridor on 4,000 sq m.

• The total occupational activity amounted to 330,700 sq m,whereas net demand totalled 239,550 sq m. Both indicatorswere above the 10-year average level of the correspondingperiod.

• In total, 494 transactions were recorded during the period withan average transaction size of 670 sq m.

• The vacancy rate declined to 7.7% which is the lowest rateever on record.

• Out of the 9 office submarkets, the CBD’s vacancy ratedecreased at the fastest pace in 2017 so far. The rate improvedby 490 bps from 9.7% to 4.8% after a large occupier leased theentire vacant office areas in Roosevelt 7/8 office building.


Sq m

0%

5%

10%

15%

20%

25%

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35%

0

100,000

200,000

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1,000,000

Class "A" stock Class "B" stock Vacancy rate (%)

0

20,000

40,000

60,000

80,000

100,000

120,000

2013 2014 2015 2016 2017

Completion (sq m) Forecast


Prime office rents (€/sq m/month)

Q1-Q3 take-up by transaction type

Q1-Q3 2017 demand by main sectors with average transaction size (sq m)

Source: JLL Research, BRF Source: JLL Research, BRF

Source: JLL ResearchSource: JLL Research

Future supply by submarket until 2019

20.0 20.0 20.0

21.0

22.0 22.0 22.0 22.0 22.0 22.0

22.5

18.5

19.0

19.5

20.0

20.5

21.0

21.5

22.0

22.5

23.0

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

SectorShare of

take-up (%)

Average transaction size

(sq m)

Oil & Energy 15,30% 16,810

IT 14,00% 650

Public Administration 14,00% 1,770

Professional Services 12,50% 570

Banking & Finance 9,00% 1,010

Other Sectors 64.80% -

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Sq m

28%

34%

10%

12%

16%

Renewal New Expansion Pre-lease Owner Occupation


Quarterly summary New openings and projects in the market

• Pepco opened its 100th store in Hungary. The Polish-based clothing and apparel distribution network has been operating in Hungary since 2015 and has been expanding dynamically.

• Decathlon will open new units in Békéscsaba and Eger by the end of the year. With these new openings the company will operate 23 stores in Hungary.

• Auchan Retail Hungary has opened its first Hungarian supermarket in Szekszárd.

• Development activity has been non-existent on the Hungarian retail market for several years. In October, 2017, the 6,000 sq m second unit of the Next Stop strip mall concept was handed over in Csömör. The tenant mix of the asset includes: Kik, Fressnapf, Háda, Líraand Regio Játék. CCC Shoes and Rossmann will open in November.

• SPAR is constructing a new factory in Üllő, SPAR ENJOY! a convenience factory, in which they will produce mayonnaise, salads and sandwiches to fulfill the growing demand for fresh and quick meals.

• Between January and August 2017, the volume of retail sales was 4.0% higher than in the corresponding period of the previous year.

• The American coffeehouse chain, Starbucks, finally announced that they would start their countrywide expansion. After 7 years of successful operation in Budapest, the chain chose the city of Szeged, the third largest Hungarian city, as their first regional city location.

• Aréna Plaza was sold during the third quarter of the year for a reported €275 million to a South-African investor group, Nepi Rockcastle.

• Based on GKI Digital’s study, published in July 2017, an average online customer made 11 purchases via online shops in 2017. The 18% growth rate of the e-commerce sector exceeds the growth rate of traditional retail trade, which is also reflected by the increasing number of delivered parcels.

• Similarly to the rebranding and repositioning of Europark (now known as Shopmark) at the beginning of the year, Diófa RE Fund decided to rebrand their regional strip mall portfolio (formerly known as Park Center). In total 11 assets were revamped and renamed to Zone.

Aréna Plaza (source: MTI) Next Stop (source: MTI)


Shopping centre density (sq m) per 1,000 inhabitants in the Visegrád Group in H1 2017

Source: Hungarian Central Statistics Office Source: GKI Digital, October 2017

E-Commerce data of Hungary in 2017

Number of online customers in 2017

Ca. 3,000,000

Share of men and women

50-50%

Share of customers above the age of 40

60%

Share of customers who live in Budapest

27%

Fastest growing sector

FMCG

Biggest sector

Technology

Online retail sales volume

Ca. € 1 bln.

Average basket value

€ 34

0 50 100 150 200 250 300

Hungary

Slovakia

Czech Republic

Poland

Source: JLL Research, October 2017


• During the third quarter of 2017, a new 23,070 sq m warehousewas delivered to the Greater Budapest industrial market. Thebuilt-to-suit building is the 1st phase of a new logsitics park,Inpark Páty and is occupied by Kühne+Nagel. The industrialstock was expanded by an additional 3,600 sq m unit after itsowner decided to change its use and let it.

• The modern industrial stock in the Greater Budapest marketstands at 1,980,460 sq m.

• The vacancy rate remained stable at 5.5%, which represents arecord low level.

• The highest vacancy rate was recorded in North Budapest(11.6%), whilst the lowest figure (1.9%) was registered in theInner city.

• Total leasing activity amounted to 122,020 sq m in Q3 2017,which is 46% more than the 10-year average of Q3 gross take-up volumes. Net take-up totalled 39,230 sq m.

• Renewals accounted for 68% of the total demand whereas theshare of new leases was 19%. Pre-leases represented 12% ofthe total take-up, whilst expansions accounted for 1%.

• In Q3 2017, four agreements were signed for more than 10,000sq m and the biggest transaction was a 37,510 sq m renewal atPrologis Park Budapest – Üllő.

Quarterly summary

Q1-Q3 2017 summary

Industrial stock and vacancy by submarkets



• Between January and September 2017, the modernindustrial stock was expanded by 72,090 sq m, whichshows a 59% increase compared to the same period of2016.

• The vacancy rate decreased by a massive 340 bps.year-on-year.

• The Q1-Q3 total leasing activity reached 406,380 sq m,which is the highest Q1-Q3 gross take-up volume everrecorded. Net take-up totalled 139,030 sq m, reflectingan 11.5% increase on the same period of 2016 (124,690sq m).

• Between January and September 2017, the highestleasing activity was recorded in South Budapest,representing more than 50% of the total demand,followed by East Budapest (24%) and West Budapest(13%).

• 68 leasing transactions were recorded in Q1-Q3 2017,with an average transaction size of 5,980 sq m.

• Ca. 66,550 sq m is under construction in the GreaterBudapest industrial market.

0%

2%

4%

6%

8%

10%

12%

14%

16%

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Vacancy rate (%)

Vacancy rate (%)

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South West East Airport North Inner City

Whs stock (sq m) Office stock (sq m) Total vacancy (%)


Average transaction size

Volume of warehouses under construction by submarkets


Source: JLL Research, BRF Source: JLL Research, BRF

Share of take-up types in Q1-Q3 2017

21%

4%

66%

9%

New Expansion Renewal Prelease

0

1,000

2,000

3,000

4,000

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6,000

7,000

Q1-Q3 2013 Q1-Q3 2014 Q1-Q3 2015 Q1-Q3 2016 Q1-Q3 2017

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

West

South

North

Airport

Inner City

East

Sq m

Sq m

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© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

Rita TuzaHead of Research

+36 1 489 [email protected]

Barbara HuszárJunior Research Analyst


Ferenc FurulyásManaging Director


JLL OfficeSzabadság tér 14.1054BudapestHungaryPhone number +36 1 489 0202

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