City Report Q3 2018
4.8% 2.6% 3.8% GDP Growth Q2 2018 Inflation -Aug 2018 Unemployment rate Q3 2018 10,807 6.7% 11.8% 3.6% Spending power, 2015, Warsaw Agglomeration Retail Sales -Aug 2018 Average gross wage growth -Aug 2018 Industrial production -Aug 2018 Investment market Hungary still represents a significant discount to Western-European and other CEE markets such as Poland and the Czech Republic, appetite for Hungarian assets has gained significant momentum and investors keep on looking for new acquisition opportunities. The transactional volume between Q1-Q3 2018 totalled 1.3 billion. Prime yields stand at 6.00% for offices, 7.50% at logistics and 5.75% at shopping centres. Domestic purchasers remain the most active purchaser group by origin, while international investors are closely monitoring the market. In 2018, we expect strong activity in the office and retail asset classes with landmark assets being transacted. COPYRIGHT JONES LANG LASALLE IP, INC. 2018 Budapest City Report Q3 Q1 2018
Prime yields in Q3 2018 5.75% 6.00% 7.50% Shopping Center Office Industrial Source: JLL Research Hungary investment volumes 2014-Q3 2018 2,000,000.00 1,800,000.00 1,600,000.00 1,400,000.00 1,200,000.00 1,000,000.00 800,000.00 600,000.00 400,000.00 200,000.00 0.00 2014 2015 2016 2017 Q1-Q3 2018 Source: JLL Research Hotel Industrial Other Office Retail Key investment transactions in Q1-Q3 2018 Sector Property Size (sq m) Seller Buyer Retail Mammut 58,000 Lonestar NEPI Rockcastle Retail/Office MOM Park 38,000 Morgan Stanley and JV partners OTP Real Estate Office Váci Greens D 14,500 Atenor HU Private Fund Office Residence 1-2 18,770 RE Development FLE Office Central Udvar 13,800 Goldman Sachs GalCap Europe Retail Eurocenter 17,600 Atrium WING Office EPAM building, Szeged 6,800 Futureal OTP RE Fund Logistics ProLogis Hegyeshalom 32,300 ProLogis Horváth Rudolf Retail Premier Outlet Center 33,000 Lonestar Deutsche Asset Wealth Management Source: JLL Research COPYRIGHT JONES LANG LASALLE IP, INC. 2018 Budapest City Report Q3 Q1 2018
Quarterly summary Office stock by submarket and vacancy rate Four new office buildings were completed in the third quarter of 2018 with a total size of 110,970 sq m: the new HQ of Hungarian Telekom with 58,800 sq m, Skanska s Mill Park with a size of 36,000 sq m, the first phase of Advance Tower on 11,340 sq m and a smaller building, EcoDome with 4,830 sq m. The modern office stock in Budapest now stands at 3,587,290 sq m. The vacancy rate decreased by 1.2 pps quarter-onquarter to 6.4% which is the lowest rate ever on record. The quarterly gross occupational activity reached 111,430 sq m which is 7.7% more than the 10-year average level, whilst net take-up of 83,910 sq which shows a 23% increase compared to the 10-year average net take-up volume. 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Occupied stock (sq m, LHS) Vacancy rate (%, RHS) 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Vacanct stock (sq m, LHS) Prime rent increased 6.6% q-o-q to 24.00 /sq m/month as new leases were signed in the CBD submarket. Vacancy rate in Budapest between 2013-Q3 2018 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% Q1-Q3 summary Between uary and September 2018, nine office buildings were completed in Budapest with a total office space volume of 186,310 sq m. In the third quarter of 2018, vacancy rate decreased to 6.4% which is the lowest rate ever recorded in Budapest. However, there is a high contrast between the submarkets of Budapest, with the highest rate recorded in the Periphery with 30.0%, whilst Pest Central North has the lowest rate with 2.90%. Demand was really strong with a total volume of 364,080 sq m, out of which the Váci Corridor submarket generated 37%. The largest deal between uary and September 2018 was the new evosoft HQ pre-lease of 20,400 sq m in the Buda South submarket followed by Exxon Mobil s 17,500 sq m renewal. 0.00% 2013 2014 2015 2016 2017 Q1-Q3 2018 The construction works of the first high-rise office building in Budapest (MOL Campus) has started.
Take-up and vacancy between 2015-Q3 2018 400,000 14.00% 350,000 300,000 250,000 200,000 150,000 100,000 50,000 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0 2015 2016 2017 Q1-Q3 2018 Net take up Renewal Total vacancy 0.00% New supply under construction by submarkets Key leasing transactions in Q1-Q3 2018 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 12.90 Submarket Building Size (sq m) Type Buda South Univerzum Office Building 20,400 Pre-lease Váci Corridor Center Point 17,500 renewal CBD Vígadó Palota 14,900 new Váci Corridor Nordic Light 3 10,600 Pre-lease Non Central Pest Skylight City 7,700 new Occupied (sq m) Available (sq m)
New openings/expansions We registered 3 new market entrants during Q3 2018: Sloggi opened its first official Hungarian store in Árkád Budapest, Philipp Plein entered the Hungarian high street market with its store opening in Fashion Street and Chinese telecommunication retailer Xiaomi also entered the Hungarian retail market. Peek & Cloppenburg expanded its unit in Arena Mall to a 5,500 sq m store. Auchan announced the opening of 4 more assets in Hungary. Three new units will be supermarkets and one will be a new, superstore concept. Recent events, market trends The refurbishment of Shopmark was finished in October 2018. There were two shopping centre acquisitions in Q3 2018: Mammut was purchased by NEPI Rockcastle and OTP Real Estate Fund acquired MOM Park. In the first half of 2018, a 17% growth was registered in the Hungarian online shopping turnover level when compared to H1 2017. Retail sales growth in Hungary 110.0 108.0 106.0 104.0 102.0 100.0 98.0 96.0 94.0 92.0 90.0 Sept Nov Sept Nov Sept Nov Sept Nov Sept Nov 2013. 2014. 2015. 2016. 2017. 2018 Source: Hungarian Central Statistical Office
SC Future Supply in Budapest Etele Plaza ECE Aquincum Mundo Center Source: JLL Research, Google Major new entrants & expansions in 2018 Future Supply Name Philipp Plein Sloggi Karl Lagerfeld Inglot Footshop Kazar Pandora Mohito Michal Negrin Location High street High street There are 3 shopping malls in the pipeline for the upcoming years with a total size of ca. 140,000 sq m. Futureal s Etele Plaza of 55,000 sq m will be located in the Buda South submarket. The mall is currently under construction with an expected delivery in 2020. The number of retail units in the centre will be around 200. ECE also announced that it will start its new project soon in Buda North with a total size of ca. 52,000 sq m. There will be around 170 retail units in the mall. The expected handover of ECE s new development is in 2021/2022. The development of Mundo Center is planned by Echo, however the start of the project is not announced yet. The new mall will be 37,000 sq m located in the Pest Non Central submarket. Zara High street Source: JLL Research
Quarterly summary During the third quarter of 2018, one new building was delivered to the Greater Budapest market with a total size of 5,000 sq m: the next phase of the Freeport of Budapest. The modern industrial stock in the Greater Budapest market stands at 2,086,120 sq m. The vacancy rate slightly increased by 0.2 pps q-o-q, to the current 3.7%. Total leasing activity reached 109,350 sq m in Q3 2018, whilst net take-up reached 52,330 sq m. Prime rent increased to 4.5 EUR/sq m/month in the Greater Budapest industrial market during the third quarter of the year which is an increase of ca. 6% q-o-q. 27 leasing transactions were recorded in the third quarter with an average transaction size of 4,050 sq m. Main transactions in Q3 2018 Submarket Building Size (sq m) Type West CTPark Budapest West 2 17,500 renewal Airport CTPark Üllő 12,000 renewal South BILK 7,790 renewal South BILK 7,720 renewal Industrial stock and vacancy by submarkets 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 South West East Airport North Inner city Occupied stock (sq m, LHS) Vacancy rate (%, RHS) Q1-Q3 summary Total vacancy (sq m, LHS) Between uary and September 2018, four new buildings were completed with a total size of 35,240 sq m: a 11,020 sq m warehouse in East Gate Business Park, two new assets with a total size of 12,000 sq m in the Freeport of Budapest, and the new BTS phase of Inpark Páty on 12,570 sq m. The vacancy rate at the end of Q3 stood at 3.7% after a slight increase of 0.2 pps q-o-q. The total vacant space was 76,240 sq m but only two existing schemes had more than 5,000 sq m immediately available warehouse space. Between uary and September 2018, the gross take-up reached 272,880 sq m. 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Renewals accounted for 59% of the total take-up volume, followed by new leases with a share of 28%. Currently there is 193,650 sq m under construction in the Greater Budapest market.
Projects under construction in Greater Budapest Submarket Building Size (sq m) Developer Completion Airport Airport Airport Üllő Airport Logistics Center Üllő Airport Logistics Center Airport City LOGISTIC Park 20,950 Goodman Q4 2018 64,400 Goodman Q4 2018 12,800 CPI Q1 2019 West CTPark West 10,000 CTP Q1 2019 South Prologis Harbor 10,500 Prologis Q1 2019 Take-up by submarkets in Q1-Q3 2018 Completions and vacancy rate Inner city North Airport West East South 140,000 120,000 100,000 80,000 60,000 40,000 20,000 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0 20,000 40,000 60,000 80,000 100,000 120,000 0 2015 2016 2017 Q1-Q3 2018 0.0% Renewals (sq m) Net take-up (sq m) Completions (sq m) Vacancy rate (%)
Contacts Barbara Huszár Research Analyst +36 1 489 0202 barbara.huszar@eu.jll.com Ferenc Furulyás Managing Director +36 1 489 0202 ferenc.furulyas@eu.jll.com JLL Office Szabadság tér 14. 1054 Budapest Hungary Phone number +36 1 489 0202 www.jll.hu 2018 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.