Boston, MA -- (ReleaseWire) -- 05/01/2014 -- Conditions within Hungary's commercial real estate sector are slowly improving, with the market expected to have reached its lowest ebb during H113. A healthier macroeconomic backdrop should provide the basis for the recovery and, it is hoped, rental rates over 2014, with a strengthening consumer and export sector expected to drive demand.
An upturn in Hungary's macroeconomic outlook in 2014 should help to support growth in demand for commercial real estate, brining some much-needed relief to rental rates, which have fallen sharply since the start of the downturn in 2011. The country's exit from the EU's Excessive Deficit Procedure has been a welcome development; however, we do not expect a strong resurgence in economic activity as the government's erratic policy making and high corporate tax rates deter domestic and foreign investment.
With the country's economic scenario less than assured, the real estate industry's recovery remains at an extremely fragile stage, and should further economic distress emerge during 2014, market contraction will be prolonged. The main area of upside is the retail segment which has outperformed both the office and industrial sectors over the course of the industry downturn.
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- In January 2014, real estate development company Plaza Centers agreed to divest its 50% equity stake in the Uj Udvar project in Budapest. The disposal was carried out by Plaza Centers' 70% subsidiary along with the other 50% joint venture partner in the project.
- The Magyar Nemzeti Bank (MNB) has extended its subsidised loan programme, the Funding for Growth Schemeto finance real estate construction. The bank has also increased the amount of funding made available to businesses under the programme from US$3.3bn to US$8.9bn.
- In December 2013, Swiss-Hungarian investment firm 'Aranypart' RE Investment Fund purchased the office building belonging to French automaker Renault, located on the Robert Karoly ringroad in Budapest.
Key BMI Forecasts
- Rental rates for the office sector are forecast to remain unchanged over the current forecast period, with rates expected to carry their current levels into 2014.
- Retail rental rates will also maintain their current levels.
- The price of retail space in Budapest will continue to outperform those for Debrecen and Gyor, although the latter is the only city for which we currently project growth in rates in 2014.
- Our forecasts for the industrial real estate segment see rates continuing to drag some way below the office and retail sectors.
- That said, the sector is expected to see some movement in rental rates with an increase of about 7% forecast for the city of Gyor.
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