"The Budapest commercial property market closed a two-faced first half this year – it was announced at the quarterly press conference of CB Richard Ellis.The property investment market has significantly slowed down and closed with a turnover of EUR 150 million in the first half of 2008. Although the Hungarian financial system is not connected to the US subprime market, the local market is heavily affected by the consequences of the credit crunch.
The market is undoubtedly going through a re-pricing period, which is mainly attributed to the increased level of risk perceived and to the less favorable margins. Owners on the other hand are reacting very slowly for this need of re-pricing which elongates the negotiations. Margaréta Mészáros, Head of Investment at CBRE Budapest underlined: “Due to the more sophisticated pattern of the market, advisors’ involvement has increased and so the transparency of the market has improved.”
“On the occupiers’ side at the same time the market has kept on growing dynamically”- added Adrienne Konthur, Managing Director of CB Richard Ellis Hungary, then continued: “Office completion level in the first half of the year was as strong as last half year, and completion level is not expected to ease over the course of next year either.”
Strong development pipeline seems to be justified with the high demand for modern office space. Total take-up reached 136,000 sq m in the first half year. “This is the strongest first half ever recorded in the Budapest office market.” – emphasised the Managing Director. “This take up was dominated by new deals, there being only a marginal level of pre-lets and an extraordinarily low percentage of renewals.”
All submarkets have a higher level of vacancy now than in the first quarter. The current vacancy for all Budapest is at 12.6% which is only 20 bp above the three-year average. This relatively slight rise despite the massive completion level can be explained with the high demand experienced this quarter.
Adrienne Konthur continued: “Over the coming quarters we expect the office market to remain strong. Office supply growth will continue in the second half of the year with most completions in the third quarter. Demand remains robust; however, we do not foresee take-up reaching the record level of 2007, unless all deals currently in negotiation complete by year end. Vacancy levels will diverge; we expect the ratio to hover or possibly decrease in the Central Business District, while Non-Central and peripheral areas will experience increasing levels of vacancy. Rents will remain stable, although due to the lack of prime locations number of buildings capable of achieving prime rents is likely to increase.”
“On the investment market after the drop in the first half of 2008, we expect volume to gradually increase in the third and fourth quarters, given the strong investment pipeline.” –concluded Margaréta Mészáros. “First owners are searching for favourable exit strategies which would further increase available supply. Equity buyers are expected to further increase their share due to continuing unfavourable credit conditions.”
Source: cbre.com
30.07.2008