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Hungarian Office Market: 'Best Potential for Growth in CEE’

Mar 27th, 2017
Hungarian Office Market: 'Best Potential for Growth in CEE’

Optimistic expectations about the prospects for Hungarian property market is confirmed by the fundamentals, office market experts concluded at PropertyEU's CEE Investment Briefing in Budapest. Here is a summary from the briefing.

‘Hungary has now become a core market and has the biggest potential for growth in the region,’ stated Vlaho Kojakovic, senior banker (European Bank for Reconstruction and Development, EBRD) in London. ‘The market is awash with liquidity.’ A liquid market is favoured by foreign investors who want the option of an easy exit, said Bence Vecsey, director and head of investment, Hungary at Colliers International. ‘Budapestis considered as a safe haven by international capital. There has been a dramatic change in investors, there are fewer people here to make a quick profit and there is more serious long-term money.’

Figures verify the growth of the business real estate

It is no coincidence that a US giant like BlackRock has just announced it is opening an office in Budapest and planning to build ‘a significant presence’ in the country. Numbers confirm the growth of the office market in the last few years. ‘In 1997 total office stock in Budapest was 500,000 m2, while now it is 3.8 million m2. Retail was 130,000 m2, now it is between 800,000 m2 and 1 million m2. Prime yields were 11.5%, now they are between 6.5 and 7%,’ said Arpad Torok, CEO of Trigranit. ‘There has been a huge change in perspective, volume, stock quality and availability of finance,’ Torok said. ‘In 1997 we were just beginning to learn, but real estate in Hungary today is a sophisticated industry, on a par with the rest of the world.’ 

Office market is on the boom

In comparison with other countries now Hungary is in a favourable situation, characterised by strong economic growth and good fundamentals, said Tibor Tatár, CEO of Futureal: ‘The perception of the country has shifted, as Budapest’s booming office market demonstrates it.’ Occupancy rates are at historic highs in the capital, where the office pipeline is restricted and demand remains strong. This year, according to Colliers International forecasts, the 10% vacancy rate will narrow further to 7%. ‘Offices are the safest asset class to invest in,’ said Vecsey.  ‘I believe Budapest will see office development and growth in the sector for the next three years,’ said Torok.

Changing perceptions

Foreign investors’ perceptions of the country have changed just as much, said Lila Pateraki, director of investments at Zeus Capital Management in Greece: ‘A few years ago it was a tough sell because the political situation was not reassuring. Only the yield spreads between Hungary and other CEE countries made it an attractive opportunity. ’Since then, however, ‘Hungary has done an amazing job selling itself,’ she said, and investors believe the political risk is no longer relevant, especially compared to what is happening in the rest of the world'.


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