The total investment volume in Hungarian commercial real estate dropped about 25% year-on-year to about EUR 750 mln in 2006, according to a new report by King Sturge. The property advisor said it expects the recent slowdown in activity to continue through the rest of 2007. The main causes of the slowdown are the emergence of Romania and Bulgaria as viable investment markets, and the limited amount of investment grade stock available in Hungary.
The total investment volume in Hungarian commercial real estate dropped about 25% year-on-year to about EUR 750 mln in 2006, according to a new report by King Sturge. The property advisor said it expects the recent slowdown in activity to continue through the rest of 2007. The main causes of the slowdown are the emergence of Romania and Bulgaria as viable investment markets, and the limited amount of investment grade stock available in Hungary.
Investment demand in Hungary is principally from institutional investors, such as open-ended and closed-end funds from Germany, Austria and the UK, but private investors from Spain and Ireland are also increasing, the report said.
About 180,000 m2 of class A office space is expected to be delivered in the Hungarian market in 2007, compared to 140,000 m2 delivered a year earlier. Demand for office space in the country is robust, increasing from 237,000 m2 in 2005 to around 250,000 m2 last year. King Sturge said a similar level of demand is expected for this year.
Despite improving levels of demand, the increased amount of Class A office development in the Budapest market has pushed up the vacancy rate from 12% in 2005 to about 13% by end-2006. With further development in the pipeline, this trend is forecast to continue in the short term, with the level of vacancy expected to reach 14% during the course of 2007. Prime rents in Class A buildings remained stable during 2006 and the first half of 2007 at about EUR 16 per m2 per month in the metropolitan areas of Budapest and EUR 10 per m2 per month in the suburbs.
