City Report Q3 217
3.2% 2.4% 4.2% GDP Growth Q2 217 Inflation Jan-Sept 217 Unemployment rate Q2 217 1,87 4.3% 12.7% 5.1% Spending power, 215, Retail Sales Warsaw Agglomeration Q2 217 Average gross wage growth Jan-Aug 217 Industrial production Jan-Aug 217 Investment Market In Q3 217, the quarterly transaction volume totaled ca. 55 million, which was the highest quarterly volume in 217 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 Nepi Rockcastle. 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 5 bps q-o-q in the office asset class and stand at 6.%. A 25 bps q-o-q compression was recorded for industrial/logistics assets pushing the prime yield to 7.5%, whereas prime shopping centre yields remained stable at 6.%. COPYRIGHT JONES LANG LASALLE IP, INC. 217 Budapest City Report Q3 217
Prime yields in Q3 217 6.% 6.% 7.5% Shopping Center Office Industrial Hungary investment volumes 2,,, 1,8,, 1,6,, 1,4,, 1,2,, 1,,, 8,, 6,, 4,, 2,, 213 214 215 216 Q1-Q3 217 9% Investment turnover split by purchaser s nationality, Q1-Q3 217 2% 22% 6% 17% 41% Czech Rep. Hungary UK USA Germany South Africa Key investment transactions in Q1-Q3 217 Sector Property Size (sq m) Seller Buyer Retail Aréna Plaza 68, Lanebridge Nepi Rockcastle Retail Pólus Shopping Centre 4,2 CBRE GI CPI Office Nokia Skypark 25,17 Futureal OTP RE Fund Office Westend Business Center 27,4 Morgan Stanley OTP RE Fund Office Nordic Light 26,2 Skanska ERSTE Real Estate Fund Office Váci Greens B 25,3 Atenor OTP Real Estate Fund Retail Campona Shopping Centre 4,2 CBRE GI CPI Office Krisztina Palace 25, UNION ERSTE RE COPYRIGHT JONES LANG LASALLE IP, INC. 217 Budapest City Report Q3 217
Quarterly summary Two new office buildings were completed in the third quarter of 217: Nexon s new 4, sq m HQ building in the Váci Corridor and Graphisoft Park, located in Buda North, was expanded by 2,5 sq m. The modern office stock in Budapest totals 3,353,24 sq m. The vacancy rate decreased 32 bps year-on-year to a record low of 7.7%. The quarterly gross occupational activity amounted to 164,98 sq m whereas net demand reached 124,1 sq m. These are the highest Q3 demand levels ever on record. The biggest transaction of the quarter was a 5, sq m owner occupation for a HQ building, which will be the first high-rise office building in Budapest with a total height of 12 m, located in the 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 agreements represented 8.3% of the total leasing activity. Prime office rental levels increased by 2.3% quarter on quarter to 22.5 sq m / month. There is ca. 477, sq m of new office space under construction and due for completion by the end of 219. 38% of this volume is already pre-let. Volume of office completions Sq m 12, 1, 8, 6, 4, 2, 213 214 215 216 217 Completion (sq m) Forecast Stock and vacancy rate by submarket 1,, 9, 8, 7, 6, 5, 4, 3, 2, 1, Class "A" stock Class "B" stock Vacancy rate (%) 35% 3% 25% 2% 15% 1% 5% % Q1-Q3 217 summary Between January and September, three office buildings were handed over in Budapest with a total size of 12, sq m: Graphisoft Park in Buda North was expanded by two buildings (the new 5,5 sq m wing of SAP and a 2,5 sq m start-up house) furthermore Nexon opened its new HQ in the Váci Corridor on 4, sq m. The total occupational activity amounted to 33,7 sq m, whereas net demand totalled 239,55 sq m. Both indicators were above the 1-year average level of the corresponding period. In total, 494 transactions were recorded during the period with an average transaction size of 67 sq m. The vacancy rate declined to 7.7% which is the lowest rate ever on record. Out of the 9 office submarkets, the CBD s vacancy rate decreased at the fastest pace in 217 so far. The rate improved by 49 bps from 9.7% to 4.8% after a large occupier leased the entire vacant office areas in Roosevelt 7/8 office building. COPYRIGHT JONES LANG LASALLE IP, INC. 217 Budapest City Report Q3 217
Prime office rents ( /sq m/month) Q1-Q3 217 demand by main sectors with average transaction size (sq m) 23. 22.5 22. 22. 22. 22. 22. 22. 22. 22.5 Sector Share of take-up (%) Average transaction size (sq m) Oil & Energy 15,3% 16,81 21.5 21. 2.5 2. 2. 2. 21. IT 14,% 65 Public Administration 14,% 1,77 2. 19.5 Professional Services 12,5% 57 19. Banking & Finance 9,% 1,1 18.5 Q1 215 Q2 215 Q3 215 Q4 215 Q1 216 Q2 216 Q3 216 Q4 216 Q1 217 Q2 217 Q3 217 Other Sectors 64.8% - Future supply by submarket until 219 Q1-Q3 take-up by transaction type Sq m 18, 16, 14, 16% 28% 12, 1, 12% 8, 6, 4, 1% 2, 34% Renewal New Expansion Pre-lease Owner Occupation COPYRIGHT JONES LANG LASALLE IP, INC. 217 Budapest City Report Q3 217
Quarterly summary Between January and August 217, the volume of retail sales was 4.% 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 217, an average online customer made 11 purchases via online shops in 217. 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. New openings and projects in the market Pepco opened its 1 th store in Hungary. The Polishbased clothing and apparel distribution network has been operating in Hungary since 215 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, 217, the 6, 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, Líra and 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. Aréna Plaza (source: MTI) Next Stop (source: MTI) COPYRIGHT JONES LANG LASALLE IP, INC. 217 Budapest City Report Q3 217
E-Commerce data of Hungary in 217 Ca. 3,, 5-5% 6% 27% Number of online customers in 217 Share of men and women Share of customers above the age of 4 Share of customers who live in Budapest FMCG Technology Ca. 1 bln. 34 Fastest growing sector Biggest sector Online retail sales volume Average basket value Source: Hungarian Central Statistics Office Source: GKI Digital, October 217 Shopping centre density (sq m) per 1, inhabitants in the Visegrád Group in H1 217 Poland Czech Republic Slovakia Hungary 5 1 15 2 25 3, October 217 COPYRIGHT JONES LANG LASALLE IP, INC. 217 Budapest City Report Q3 217
Quarterly summary During the third quarter of 217, a new 23,7 sq m warehouse was delivered to the Greater Budapest industrial market. The built-to-suit building is the 1 st phase of a new logsitics park, Inpark Páty and is occupied by Kühne+Nagel. The industrial stock was expanded by an additional 3,6 sq m unit after its owner decided to change its use and let it. The modern industrial stock in the Greater Budapest market stands at 1,98,46 sq m. The vacancy rate remained stable at 5.5%, which represents a record low level. The highest vacancy rate was recorded in North Budapest (11.6%), whilst the lowest figure (1.9%) was registered in the Inner city. Total leasing activity amounted to 122,2 sq m in Q3 217, which is 46% more than the 1-year average of Q3 gross takeup volumes. Net take-up totalled 39,23 sq m. Renewals accounted for 68% of the total demand whereas the share of new leases was 19%. Pre-leases represented 12% of the total take-up, whilst expansions accounted for 1%. In Q3 217, four agreements were signed for more than 1, sq m and the biggest transaction was a 37,51 sq m renewal at Prologis Park Budapest Üllő. Industrial stock and vacancy by submarkets 8, 7, 6, 5, 4, 3, 2, 1, South West East Airport North Inner City Whs stock (sq m) Office stock (sq m) Total vacancy (%) 14% 12% 1% 8% 6% 4% 2% % Vacancy rate (%) 16% 14% 12% 1% 8% 6% 4% 2% % Q1 Q2 Q3 Q4 Q1 Q2 Q3 215 215 215 215 216 216 216 Q1-Q3 217 summary Vacancy rate (%) Q4 216 Q1 217 Q2 Q3 217 217 Between January and September 217, the modern industrial stock was expanded by 72,9 sq m, which shows a 59% increase compared to the same period of 216. The vacancy rate decreased by a massive 34 bps. year-on-year. The Q1-Q3 total leasing activity reached 46,38 sq m, which is the highest Q1-Q3 gross take-up volume ever recorded. Net take-up totalled 139,3 sq m, reflecting an 11.5% increase on the same period of 216 (124,69 sq m). Between January and September 217, the highest leasing activity was recorded in South Budapest, representing more than 5% of the total demand, followed by East Budapest (24%) and West Budapest (13%). 68 leasing transactions were recorded in Q1-Q3 217, with an average transaction size of 5,98 sq m. Ca. 66,55 sq m is under construction in the Greater Budapest industrial market. COPYRIGHT JONES LANG LASALLE IP, INC. 217 Budapest City Report Q3 217
Share of take-up types in Q1-Q3 217 9% 21% Volume of warehouses under construction by submarkets East Inner City 4% Airport North South 66% West 5, 1, 15, 2, 25, 3, 35, Sq m New Expansion Renewal Prelease Average transaction size Sq m 7, 6, 5, 4, 3, 2, 1, Q1-Q3 213 Q1-Q3 214 Q1-Q3 215 Q1-Q3 216 Q1-Q3 217 COPYRIGHT JONES LANG LASALLE IP, INC. 217 Budapest City Report Q3 217
Contacts Rita Tuza Head of Research +36 1 489 22 rita.tuza@eu.jll.com Barbara Huszár Junior Research Analyst +36 1 489 22 barbara.huszar@eu.jll.com Ferenc Furulyás Managing Director +36 1 489 22 ferenc.furulyas@eu.jll.com JLL Office Szabadság tér 14. 154 Budapest Hungary Phone number +36 1 489 22 www.jll.hu 217 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.