PIM_2016_3_web

property2016 /3 790 HUF magazineAll eyes onLondonBREXIT fAllouTgoEs All ThE wAyTo CEECompetition among CeeCountries is fierCer than everAirports make cities fly higherA surge in the region’shousing mArkets2016The real turningpoint for theBudapest officemarket



12 investors love 20 Cee – from AllAll eyes on london over the world 2016: the reAl turning pointUnder the impact of Brexit, the apparently incontestable property CEE investment markets have continued tomarket position of London may have been shaken, however, other grow in the first half of 2016 with transaction Days of strong development activity onEuropean cities may profit greatly by astutely navigating in its wake. volumes increasing across all segments. The the Budapest office market are onceSince the announcement of Brexit, many banks have anticipated first six months of the year saw new sources of again ahead of us. The market has beentheir possible relocation from London, ranked as one of the most international capital entering the region with growing steadily and cautiously forimportant financial centres in Europe and the world. The competition the largest share of investments coming from years now. BTS developments and largefor them is increasing in strength. the United States, Germany and South Africa. pre-lease deals have dominated property news cycles for over a year, and the time 30 has finally come for developers with speculative projects to make their move.5-11 36-37 52-54Brief news Poland: stronger than ever? Holiday-home markets in the region12-19 38-39 56-57All eyes on London - Brexit real estate Competition among Magic apps on the property marketfallout goes all the way to CEE CEE countries is fiercer than ever 58-6020-23 40-42 Should Budapest hostInvestors love CEE Beyond Bucharest: potential in the Olympic Games?– From all over the world Romania’s regional hubs 62-6625-27 44-46 Real estate developers in CEEA surge in the region’s housing markets What’s ahead for Bulgaria? 67-6930-33 47-49 Real estate developments in Hungary2016: the real turning point Airports make cities fly higherfor the Budapest office market 70-73 50-51 Real estate developments in CEE Ambitious long-term plans at Budapest Airport 74-77 Law firms 2016 3

Member of the Portfolio Group Katalin Major Editor-in-chief Editor-in-chief Katalin Major – [email protected] [email protected] Contributors Ákos Budai, Péter Futó And then CAme Brexit Tünde Madurovicz-Tancsics Advertising coordinator The United Kingdom’s decision to leave the European Union dominated property news cycles over the Krisztina Barta summer. After the initial shock things have somewhat cooled down, but it is still uncertain to what extent Translator London will lose its position as the capital of the European real estate market. The first figures show that Adrian Bury although investors have started acting a bit more cautiously, they are just as hungry for yields as they were Copy editor before the referendum took place. As London’s position as Europe’s prime office hub is expected to weaken, McLean és Társa Kft. other major cities of the continent can emerge as the winners of Brexit. Our cover story explores the potential Photo consequences of the ‘Brexit fallout’ and how even CEE capitals can attract more tenants looking to move Lázár Todoroff, Shutterstock.com, MTI their operations, or investors and developers looking for new opportunities. Interest in Central and Eastern Layout editor European assets has been growing steadily for several quarters now, with over €5 billion being invested in Tamás Rajhona regional real estate in H1 2016 and Brexit, might give a further push to this growth story. Sales Attila Bacsa – [email protected] Our monolingual issue explores what CEE markets have to offer. We cover each market of the region with Publisher in-depth analyses and exclusive interviews, focusing not only on capital cities but quickly growing regional Zoltán Bán markets as well. NET Média Zrt. 1033 Budapest, Polgár u. 8–10. The contents of this issue and especially its cover story connect with the upcoming international property Tel: (+36-1) 327-4080, fax: (+36-1) 327-4081 conference of our number one professional partner, Portfolio. Central and Eastern Europe’s leading real E-mail: [email protected] estate market experts and decision makers will gather again in the Austrian capital for the fourth time on 21 www.property-forum.eu September. The biggest question of this year’s CEE Property Forum is to what extent fears over the potential consequences of Brexit will overshadow the cautious optimism that has characterised the outlook of real ISSN 2498-5880 estate professionals in the last two years. Our paper is regularly reviewed in the All rights reserved in connection with the copying and distribution of any part of Portfolio Property Magazine Net Média Plc. obtains all the data, information and news included in Portfolio Property Magazine from reliable, verifiable sources. The data and information are checked before publication, to the best of our ability. In spite of all this, it is possible that news and information appears in Portfolio Property Magazine which subsequently turns out to be erroneous. For this very reason we draw the attention of our readers to the fact that, should they wish to make economic or financial decisions on the basis of the published news and information, they should first of all check the adequacy and veracity of the information. Net Média Plc. disclaims all responsibility for damage resulting from the possible falsehood or innacuracy of the published information.4

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GTC launChes Two new projeCTs in BudapesT hB reavis sells konsTruk- Construction commenced on GTC Hungary’s sive letting agents for the building, which is Torska Business latest office development project. GTC White expected to be completed by end-2017. CenTer House’s design incorporates and renovates Concurrently, GTC Hungary will carry out in warsaw the 100-year-old building of a former eleva- a full interior refurbishment and technical tor factory (Schlick Felvonógyár) to create a reconstruction at Duna Tower Office. The HB Reavis has sold its Konstruk- modern office space of approximately 2,000 building, which was purchased by GTC in torska Business Center to interna- sqm with a unique working environment. The one of the biggest single asset office build- tional real estate investment com- preserved historic building will be integrated ing acquisitions of 2015, will be renewed at pany Golden Star Estate B.V. in the into the whole of the new 21,500 sqm Class A a total cost of €2 million. The interior refur- developer’s first divestment in the office complex, which will be built to a LEED bishing of 3,000 sqm of community areas Polish market. Gold environmental standard. Each floor will and the full technical reconstruction of Bu- Konstruktorska Business Center offer 2,880 sqm of office space. Swietelsky dapest’s highest office building started in provides Mokotow, Warsaw’s Hungary was named as the contractor for July. The remodelling of the 16-storey tall prime business district, with the deep foundation and basement works building, which offers a total of 31,500 sqm 49,500 sqm of Class A office space. for the project. Cushman & Wakefield and gross leasable area, is scheduled to finish in The seven-storey office scheme CBRE were appointed to serve as joint exclu- mid-October. boasts two green internal patios of 3,200 sqm in addition to the vaCanCy inCreases on The largest floorplate in Central and CzeCh indusTrial markeT Eastern Europe. Konstruktorska Business Center is 100 percent According to the Industrial Research Forum, ter. Year on year it increased by 4%. Net de- occupied and home to companies the vacancy rate on the Czech industrial mar- mand in Q2 2016 was driven by logistic (3PL) such as Procter & Gamble, PZU, ket reached 4.7% at the end of Q2 2016, hav- companies (51%). The share of renegotia- Otis and Heineken. ing increased by 57 bps since Q1 2016. This tions went down to 25% of quarterly gross represents a total of 282,900 sqm of modern take-up. proloGis devel- industrial premises ready for immediate oc- The largest new transaction in Q2 2016 was ops new park in cupation. Vacancy in Prague increased slight- concluded by Sportisimo, who signed a pre- CenTral poland ly, reaching 3.2% at the end of Q2 2016. lease for 34,800 sqm at Prologis Park Prague- During Q2 2016, gross take-up, which in- Rudná. The second largest new transaction Prologis will deliver an 11,740 cludes renegotiations, reached 349,300 was a pre-lease of 24,500 sqm signed by square metre built-to-suit (BTS) fa- sqm showing an increase of 11% on the Q1 Raben Group for premises at Panattoni D5 cility for Geis PL, a German logistics 2016 figures. In comparison to the same pe- Hořovice Park. The largest renegotiation operator, at Prologis Park Stryków riod of last year, gross take-up declined by of Q2 was concluded by Personna Interna- (in the Łódź Metropolitan Area). 3%. Net take-up in Q2 2016 totalled 263,700 tional, prolonging their 16,550 sqm lease in The project is scheduled for com- sqm, which is 25% above the previous quar- CTPark Teplice. pletion in Q4 2016. The new cross- dock facility will feature a large number of docks on both sides of the building, a design that will help to optimise the customer’s opera- tions. At the request of Geis, both the parking area and the picking area will be expanded, whereas the office space will be provided in the form of a pop-up block.6

Brno’s CourT- 2016/3 www.property-forum.euyard marrioTThoTel seT To TriGraniT opens sixTh BuildinGopen This in krakow offiCe ComplexauTumn Building F, the sixth Class A office building of Krakow’s Bonarka for Business (B4B) complexThe opening of the Courtyard Mar- opened on 6 September. The eight-storey, BREEAM-certified building has 10,000 sqm of grossriott Hotel in Brno, Czech Republic, leasable area, of which half was leased before the official opening.built by CTP at Spielberk has been Developer TriGranit plans to deliver three more office buildings in the near future due to the in-set for the autumn. Apart from 201 creasing demand for office space in the region. Ultimately Bonarka for Business will offer 10 officerooms on 15 floors, the hotel also buildings with a total leasable area of 95,000 sqm and a value of €200 million. In the first stage ofoffers a rooftop suite, a restaurant construction four seven-storey Class A office buildings (Buildings A, B, C, D), were put into servicewith a bar for 150 guests and 10 in 2011, 2012 and 2013. The second phase of the project consists of three eight-storey buildings - Emeeting rooms with access to the (inaugurated in 2015), F and G (scheduled to open in 2017). Construction of another three officelarge outdoor terrace. The main buildings (H, I and J) is planned for the next three years.conference hall boasts 360 sqmof floor space and the capacity for afi europe To sell Three BuCharesT400 people. The Courtyard Mar- offiCe BuildinGsriott Hotel is situated at SpielberkOffice Centre, a popular business AFI Europe Romania has signed a letter of which stands for a yield of 7.75%. Accordingarea of Brno and within walking intent for the sale of three of its five office to AFI Europe Romania’s company report,distance of the Brno Exhibition buildings located in AFI Park Bucharest. Ac- the sale will generate a profit of € 6.5 mil-Grounds. cording to a company report, the letter of lion (before taxes) and a cash flow of €46.7 intent was signed in June. AFI Europe wants million.proloGis opens to sell buildings 1, 2 and 3 of the complex AFI Park is located next to the AFI PalaceiTs seCond sBu with the option of selling AFI Park 4 and 5 to Cotroceni mall. The first three buildingsBuildinG in po- the same buyer. The name of the possible have a gross leasable area of 38,000 sqmland buyer has not been revealed. and are fully let. The other two buildings of The company estimates that the three the complex have 32,000 sqm office spacePrologis has opened a 16,000 buildings will be sold for €92.7 million and an occupancy rate of 70%.square metre small business unit(SBU) facility at Prologis Park Chor-zów, which is already 60 percentleased. This is the last building tobe constructed at Prologis’ largestdistribution centre in Poland, total-ling 251,000 square metres. Prolo-gis Park Chorzów is located on thewestern outskirts of Katowice, inthe immediate vicinity of the A4motorway connecting Ukraine andGermany. 7

ConsTruCTion aCTiviTy reaChes roCkCasTle reCord hiGh in warsaw aCquires Three reGional shop- Sixteen office buildings have been completed in Warsaw in the first half of 2016, totalling pinG CenTres in 350,000 sqm. 100,000 sqm are scheduled for completion in H2 2016, which will bring the poland annual supply to a record high of 450,000 sqm. According to data collected by Cushman & Wakefield, the total modern office stock in Warsaw reached nearly 5 million sqm in H1 2016. Rockcastle Global Real Estate has The highest volumes of new office space were delivered in the city centre (180,000 sqm), the acquired three regional shopping South West (60,000 sqm) and the North (50,000 sqm). This supply trend is expected to con- centres in Poland for a total of tinue given the large number of office buildings planned or under construction in or close €522 million. Bonarka City Center to central locations. The largest office completions in H1 2016 included Ghelamco’s Warsaw in Kraków, Focus Mall in Zielona Spire A (59,000 sqm), HB Reavis’ Gdański Business Center 2 (buildings C and D totalling 49,000 Góra and Focus Mall Piotrków sqm) and Echo Investment’s Q22 (46,400 sqm). Trybunalski will be added to the The first half of 2016 saw strong leasing activity on the Warsaw office market with 360,000 South African fund’s portfolio. sqm transacted, a figure comparable to the office take-up noted in the first half of the record- Two separate preliminary agree- breaking 2015. 75% of the space leased during the first six months of 2016 was located in ments have already been signed office buildings in the city centre (Fringe and Core) as well as the Upper South and South with the sellers. One involves the West subzones. Renegotiations made up 30% of the gross take-up and pre-lets around 17%. acquisition of Bonarka City Cen- The largest transactions in Warsaw included Allegro’s new lease of 7,600 sqm at Q22, the tre, developed by TriGranit, for renegotiation by NC+ of its 7,500 sqm lease at the Canal+ building, and Budimex’s pre-let of €361 million and the other the 7,350 sqm at the scheme at 16-20 Skierniewicka Street. Net absorption reached 133,000 sqm acquisition of Focus Park Zielona compared to 284,000 sqm in 2015. Góra and Focus Mall Piotrków At the end of H1 2016 the average vacancy rate in Warsaw stood at 15.4%, which represented Trybunalski from Aviva Investors a rise of 1.3 percentage points on the vacancy rate noted in Q1 2016 and an increase of 3.1 for €161 million. percentage points on the rate at year-end 2015. The large volume of new office space coming onto the market pushed the city centre’s vacancies up to 17.6% with the vacancy rate in other panaTToni eu- office zones averaging 14.4%. rope Buys ware- house and land panaTToni europe To deliver in Łódź new BTs faCiliTy near poznan International real estate advisor Panattoni Europe is set to deliver a custom-tailored project for Trio Line, the Danish manufac- Savills, on behalf of Aviva Inves- turer of high-end upholstered furniture. The investment spanning more than 32,200 sqm of tors, has sold a Small Business space will be developed near Poznań and will merge warehousing and manufacturing func- Unit type warehouse and a 3.5 tions. The transaction was mediated by AXI IMMO, and completion of the facility is planned in ha development land situated in Q1 2017. Łódź Business Park. The buyer The facility to be built will total more than 32,200 sqm – including a manufacturing section of was industrial developer Panat- approx. 21,000 sqm, warehouse space of 9,032 sqm, and office space of nearly 2,200 sqm. It will toni Europe. be located in Plewiska near Poznań, between the major road junctions of the A2 motorway and Łódź Business Park consists of S11 expressway, en route between Berlin and Warsaw. two buildings, A1 and B1, devel- oped in 2011 according to the8 highest market standards for Small Business Unit-type proper- ties. The subject of the transac- tion was the B1 building which comprises 2,900 sqm of rentable area with 43 parking spaces and a development land of 35,000 sqm.

Speculative Warehouse Development in PolgárSuccessful business decision by InfoGroupAnother large company joined the group of lessees in the Polgár Industrial Park. SONA BLW Hungary Kft., the Hungarian memberof the SONA Group, one of the most important Indian automotive suppliers, has signed a lease agreement for nearly 10,000 sq mwarehouse area with the owner-developer InfoGroup. This precision metalworking company will employ 150 people and will beginproduction in Polgár this year.InfoGroup carried out another unique speculative logistic develop- in Polgár is much more than a business success: a large number ofment in the countryside, and its newest hall has found its lessee as new jobs will be created in a major business sector and it will alsoa result of fruitful negotiations conducted in recent months. The reinforce the role of this region in the Hungarian real estate market.real estate agencies Colliers and Cushman & Wakefield were also We hope that others will follow the example of this Indian companyinvolved in the deal. SONA BLW Hungary Kft. took possession of the to establish themselves in Polgár.”first hall with 4,262 sq m warehouse and 459 sq m office space in Lessees in the industrial park, which has the ‘Regional LogisticsAugust. The first machines will arrive in October and production can Centre’ title since 2013, include such Hungarian and multinationalstart in Q4 this year. The company will occupy the second building companies like Jabil Circuit, Toyota Tsusho, Volvo and Gyermelyi.comprising a 4,215 sq m warehouse and 469 sq m office and service The existing logistic halls in the Polgár Industrial Park representarea in September 2017. Apart from India, SONA has had manufac- an area exceeding 27,000 sqm – with an occupancy rate of 100%.turing facilities only in Germany and the United States so far. Moreover, the second building of the newly built hall will be used by“The SONA Group, as part of its expansion plans, was searching an existing lessee until SONA moves in. Now it is apparent that fur-a manufacturing site in CEE. Hungary in the recent years has at- ther storage area will be needed within the park as of Septembertracted a number of global automotive companies, which was defi- 2017. The owner-developer InfoGroup has concept plans for anothernitely a positive factor for the SONA Group in selecting Hungary as 90,000 sq m facility, including conventional “big box” warehousesa destination for our investment. The investor friendly environment and so-called cross-dock and refrigerated warehouses as well. Inof Hungary, the competitive lease conditions and the flexible exten- addition, the park, with its excellent location along M3 motorwaysion opportunities offered by Polgár Industrial Park, as well as the offers plots for development to long-term investors and companiescooperative working atmosphere with the mayor’s office in Polgár, looking for a site.all contributed to SONA establishing its new unit there in Hungary.”– said Sunjay Kapur Head of SONA Group. INfOGrOuPÁdám Székely, managing director of InfoGroup, a company operat- 105-113. Bartók Béla Street, Budapest, 1115ing in the Hungarian real estate market for 26 years, said in con- +36 1 481 4530nection with the conclusion of the agreement: “Settling of SONA [email protected] www.infogroup.hu, www.polgariparipark.hu Hirdetés/Promotion

BudapesT offiCe vaCanCy raTe vaCanCy in-ConTinues To deCline Creases on The BudapesT indus-The Budapest office vacancy rate continued previous quarter. According to the Buda- Trial markeTto decline by 3.9 pps y-o-y and 1.0 pps q-o- pest Research Forum, 202 lease agreementsq bottoming at 10.3%, the lowest level since were signed in Q2 2016, with an average Total leasing activity on the Buda-the financial crisis. The lowest vacancy rate deal size of 639 sqm. Renewals were the ma- pest industrial market amounted(5.8%) was measured in the South Buda sub- jor drivers of the market with a share of 51%. to 92,100 sqm in Q2 2016, whichmarket, whereas the Periphery region suf- This was followed by new deals with a pro- marks a 22% decrease q-o-q.fered from a 31.2% vacancy rate. portion of 37%. Expansions accounted for Similarly to previous quarters,Demand in the second quarter of 2016 8%, whereas pre-leases for 4%. No owner- most of the demand was gener-reached 129,172 sqm of transacted office occupied or BTS transaction was registered ated by renewals with 65% of TLA,space, which was 53% higher than in the in this quarter. while new leases made up only 3% and expansions 13%. Due to lim- ited available space several large pre-leases were signed during the quarter, totalling 17,650 sqm (19%) The vacancy rate currently stands at 9.7%, which is 1.1 pps above the level of Q1 2016 and thereby marks the first quarterly increase since Q3 2013. hB reavis sells firsT london developmenT new offiCe To wells farGo BuildinG opens in Buda In one of the largest single office deals in the City of London market this year, international real estate developer HB Reavis is selling 33 Central to Wells Fargo, the third largest bank in With the last works completed the U.S. by assets. Upon completion in Q3 2017, 33 Central, which is HB Reavis’ first London in July, Budapest’s newest office development, will allow Wells Fargo to consolidate all of its London-based team members building “Buda Loft Offices” is in a single location. ready to welcome its new ten- HB Reavis’ original strategy for 33 Central was to retain and lease the development, but af- ants. The building – which used ter initial leasing discussions Wells Fargo approached HB Reavis expressing the wish to own to be the Goldberger textile fac- and occupy the 21,000 sqm building. HB Reavis agreed then to forward sell the shares in its tory – now offers modern loft subsidiary which owns the development. offices. Divided over five floors, offices are available from 212 up10 to 2,500 square metres. Colliers International has been appointed as the exclusive letting agent on the building.

2016/3 www.property-forum.euneinver roCkCasTle enTers The CzeCh markeTenTersThe CzeCh Rockcastle has acquired Forum Liberec served, Sportisimo and Tiger.markeT from British retailer Tesco for approx. €80 Rockcastle´s investment focus has been in million. Forum Liberec is a regional shop- Poland where it owns 6 retail centres andNeinver, a Spanish developer, in- ping centre located in the heart of Liberec, this acquisition represents its first invest-vestor, property and fund man- the capital of the North Bohemia region. ment in the Czech Republic. Its strategyager, has partnered with The The 47,000 sqm centre is tenanted by is to expand its retail property portfolioPrague Outlet to forge a joint ven- strong retailers including Tesco, Cinema in Poland, Czech Republic and Hungaryture launching Prague The Style City, C&A, Datart, Gant, H&M, Lindex, New through the acquisition of existing assetsOutlets, the first premium outlet Yorker, Nord Blanc, Norma, ProBest, Re- and retail development sites.centre in the Czech Republic, witha GLA of more than 20,000 sqm.Neinver will be in charge of leas-ing, retail and property manage-ment. The conversion, remodel-ling and rebranding process willbe fully completed by October2017. The second phase, with anadditional 10,000 sqm of GLA, isscheduled for two to four yearslater. The joint venture is financedby PPF Bank. HIRDETéS / PROMOTION INNOVATION IS IMPORTANT fOR US STRABAG Property and Facility Services Zrt. - adapting to changes on the market and in technology - keeps an eye on and keeps up with the latest trends, while performing regular daily activities with a people-centered approach to operations.The key to our success is our decades of experience as a market leader in operation and service reliability, in addition to our staff of more than five hundred committed experts with broad experience, whose work is underpinned by state of the art infrastructural and IT functions. The customer focused operation and quality services of STRABAG Property and Facility Services Zrt. received the BUSINESS SUPERBRANDS award in 2016! www.strabag-pfs.hu

ALL eyes12

2016/3 www.property-forum.euon London 13

Frankfurt BReXIT fALLouT goes ALL The wAy To Cee Péter Futó Just recently, the deputy prime minister of poland went to the city armed with an inviting package, but other europe- an cities are also queuing up in london. the mayor of frankfurt, for instance, will travel to the british capital at the beginning of autumn, and paris is also promising to roll out the red carpet for the bankers. since the announcement of brexit, many banks have anticipated their possible departure from london, ranked as one of the most important finan- cial centres in europe and the world. the competition for them is increasing in strength. it is not at all surprising that the mayors have taken this “road to canossa” by visiting london, and at the same time it throws light on highly impor- tant market processes. under the impact of brexit, the apparently incontestable property market position of london may have been shaken, however, other european cities may profit greatly by astutely navigating in its wake.14

2016/3 www.property-forum.eu ParisLondon and the european market than the whole of France, but it also and then came Brexitproperty market exceeds the collective investment volume of the largest German cities. The total value of London can therefore be regarded as notOn a global scale, commercial property in- London investments is 12-14 times greater only the global capital of the financial mar-vestments show a very high concentration, than that of the Amsterdam and Dublin mar- ket, but also of the property market, at leastwith half of the investments in the world cen- kets, whilst it exceeds the entire investment until now. But in the historic referendum oftred in 30 cities. London stands out from volume of Hungary by 100 times during the 23 June, the population of Great Britain opt-among these (although New York outran it crisis, and by 60 times since the upswing in ed for Brexit, and it appears that the coun-to some extent last year), persisting in the the Hungarian market. try’s leaders will consequently implementfirst position on the list for years. 6 percent the will of the people. In several respects thisof world property investments are directed RATIOS OF PROPERTY INVESTMENT will be a turning point in the life of the islandat the British capital. VOLUMES IN THE CITIES OF EUROPE (%) nation. Deliberation on the future of the Eu-In order to illustrate the relative weight of ropean project and the political and econom-London, let us examine a few more figures. 44 3 ic consequences of Brexit has received enor-Based on GDP the leading economy of Eu- 5 mous attention since then, and it is becom-rope is Germany, as well as the most pop- 5 ing increasingly clear that this decision mayulous, and in terms of per capita product it 5 47 transform the European property market inalso outruns both Great Britain and France the long term. By leaving the EU, the appar-by almost 50 percent. However, it is only in 7 ently incontestable property market positionsecond place in the volume of commercial of the British capital could be shaken, andproperty investments. There may be a num- 10 other European capitals could attract greaterber of German cities among the most im- 10 attention, more opportunities and first andportant commercial centres, but none of foremost more capital.them can compete with Great Britain, where London Paris Berlin Frankfurt Madrid Just a few months have elapsed since thethanks to London, property investments Hamburg Munich Milan Dublin Amsterdam vote, but a number of major banks have al-have been successively made in recent years ready indicated that they consider movingto the value of 40-50 bn euros. Source: JLL out of London to be conceivable. Accord-In itself the British capital signifies a larger ing to Bloomberg, the chief reason why the 15

London people 8.7million liveinLondon 360 000 work in the financial sector in London banks are worried is that the United Kingdom the number of bankers working has no concrete plan as to how it would main- 100 000 in the City may fall by this number by 2020 tain its leading status on the European finan- % 174567.95 000GBP/year cial market. The greatest fear is that because average salary of a banking analyst of Brexit, London would lose its present un- restricted operating licence in the EU states. Fortune 500 companies have this share in London's offices 13-14 million people live in Greater London at proportion of offices standing empty in the City present, and more than 100 of the top 500 stock exchange index condensing London finance companies European businesses have their head offices fell by this amount in the days following the Brexit vote here. 75 percent of the Fortune 500 compa- 1 000 000sqm nies have an office here. office space which may become vacant due to this Numerous American, Swiss and German banks have their major offices in London, Vacancy rate on the office markets of European cities (%) which means that more than 10 percent of their total workforce works in the British Source: Savills capital. According to Bloomberg economic experts, these banks may depart from the 16.0 British market long before the exit date in 14.0 two years’ time and seek a new European 12.0 centre. European capitals with a stable eco- 10.0 nomic environment may profit from this. The loss of investor confidence, the uncer- 8.0 tain prospects resulting from the news of 6.0 Brexit may involve significant negative con- 4.0 sequences. Experts agree that the fall in the 2.0 number of transactions experienced in the 0.0 first half of 2016 may continue, which soon- er or later may be perceived in the prices of Amsterdam Dublin Frankfurt Paris London London commercial properties. The possible defec- – Canary Wharf – City tion of leading world companies may mean a blow, not only with regard to the City, but interest rates in Europe and the UK are here by 10%-20%, due to lower rents and weak- also to the British commercial property to stay for a long time and that due to the er capitalisation rates, which are a meas- market as a whole. fall of the sterling vs. EUR and USD, paired ure of returns on investment. They believe “Immediately after the vote, the Bank of with the value adjustments, UK properties that Europe will be less affected but is by no England cut interest rates to avoid a con- became much cheaper over the summer, means out of the woods, and as economic traction. What is already certain is that low says Benjamin Perez-Ellischewitz, Head of uncertainty takes up tenancy, global inves- Capital Markets at JLL Hungary. tors may shift to key U.S. and Asian proper- According to Morgan Stanley experts Lon- ty markets. don’s commercial property prices in Canary The loss of ground by the London financial Wharf and the City could potentially drop market may be felt not only in the commer-16

2016/3 www.property-forum.euCEE markets could profit from Brexit Benjamin What will Brexit mean for the British real estate market? Perez-Ellischewitz (There is news about banks leaving London...) Could the CEE Head of Capital Markets, JLL market profit from Brexit? If Brexit transforms into a nasty divorce and the UK is stripped ofIn what time frame do you expect any changes caused by the “financial passporting” rule, the role of London as the financialBrexit on the international real estate market? centre of Europe will definitely diminish. Jobs might be then relo-Some effects of Brexit are already visible, others will take years to cated to the continent and therefore leave behind empty build-materialise and will depend on the way the divorce, if any, is ulti- ings. In this scenario cities which should directly benefit are today’smately negotiated. So far the impact has mainly been on the UK secondary financial centres: Frankfurt, Paris, Amsterdam or Dub-itself and much less on the rest of the EU. lin rather than Budapest or Warsaw. Nevertheless, if an exit from London was to take place, banks might decide to have a more inHave you already seen changes since the vote? depth review of their geographical footprint in Europe and couldImmediately after the vote, the Bank of England cut interest rates decide to near-shore some job to the CEE region instead of trans-to avoid a contraction. What is already certain is that low interest ferring all of them to expensive locations like Paris or Frankfurt.rates in Europe and the UK are here to stay for a long time and In this case, CEE markets could profit. Several European cities andthat due to the fall of the sterling vs. EUR and USD, paired with the countries picturing themselves as credible alternatives to Londonvalue adjustments, UK properties became much cheaper over the are already trying to woo some of the large banks and investmentsummer. Some investors might be scared away, others will look at managers currently based in London. In our view reorganisationsthis as an attractive acquisition window. and job transfers, if any, would only take place once there is moreEuropean transaction volumes are down compared to the same clarity on the shape of the new relationship.period of 2015. This is mainly caused by the UK and Germany. Thefall in the UK was very substantial. Even if H2 2016 remains at the What will Brexit mean for the Hungarian RE market in thesame level as last year, yearly volume will be down by more than short and long term?30%. In Germany the fall in volume is mainly due a basis effect as As discussed, the long term impact and in particular the demandQ2 2015 was an exceptionally strong quarter. side of the equation is impossible to read yet, but Hungary and Budapest should present themselves as potential hosts for someWhat is the possible global effect from now till the exit and of the financial jobs. It looks like Warsaw is already doing it (seeafter the exit? the article on the front page of the Financial Times on August 30).The unknowns around the specifics of the divorce and the shape I think that the successful example of Morgan Stanley which hasof the ultimate relationship between the UK and the EU is creat- progressively built up its operations in Budapest (now occupyinging uncertainty; always a problem for economic growth. more than 17,000 sqm in the Millennium City Centre and employ-So far there is little sign of any direct strain contaminating the CEE ing more than 1,300 people) is a strong case study.region. The impact could come from secondary effects via a neg- In the short term and in the context of low interest rates, the rela-ative mood swing in economic sentiment or lower growth for our tive pricing of Hungarian real estate offers a great opportunity formain economic partners (Germany, Austria and other CEE coun- investors to find returns. This has not changed, as prime yield intries). A lack of confidence in the European project and the robust- Paris or Germany are heading towards 3%: a 7% return on primeness of the economic system could depress the economy and the office in Budapest looks like a bonanza. The general expectation isgrowth level, and therefore push down demand levels. What is that real estate yields will drop in the coming months in Hungary.clear is that the impact of Brexit is much more limited than that In the short term therefore, there is nothing to fear.of the global financial crisis or the European sovereign debt crisiswhich peaked at the end of 2012.cial property market, but also in the hous- million population of the city is constantly however, companies were to file out ofing market. In consequence of its role as growing due to the influx of labour, reach- London or make cut-backs, the positivean economic centre, London is extreme- ing 13-14 million together with the sur- balance of migration would also ease off.ly attractive to young employees. The 8.7 rounding built-up area. If due to Brex it, There is a shortage of housing in the British 17

Dublin capital at present, which investments can stantly increasing. Besides this, Paris, Am- be mentioned, however, that French labour only keep up with in a limited way, so hous- sterdam and Dublin are vying to provide law and the fact that rental fees are higher ing prices are among the highest even in a homes for companies leaving Great Britain than those in Germany do not favour com- global context. The market is not only heat- as it exits the EU. panies’ relocating here. ed by the natural demand resulting from According to analysts, under the impact of From Dublin’s point of view, it is positive the growth in population, but also by the Brexit the number of people working in the that moving beyond the Irish debt crisis, presence of investors. A London property – London finance sector could fall by 100 000 it can exploit its lower rental fees and its besides the prestige – has always been reck- by 2020, and if the cities of continental Eu- young, trained workforce. Last year, the oned a stable investment. rope benefit from this, then demand for 1 most contracts since 2007 were conclud- million square metres of new office space ed in Dublin, the number being 25 percent the winners of Brexit could appear. higher than in the previous year. The oth- Frankfurt’s vacancy rate of 9 percent means er great advantage of Dublin is that it has On the present market, London is the eco- that 1.2 million square metres of office are the same language as London, while in oth- nomic centre of Europe, where most global standing empty at present. Besides this, er capitals of Europe language difficulties firms have a seat. But under the impact of the construction of a further 450 thou- may arise. There may be only 300 thou- Brexit the centres of gravity could be relo- sand square metres is planned over the sand square metres of empty office space cated, if multiple companies decided to leave next three years, which at all events points in the Irish capital at present, but there are and move to another European capital. to investor optimism. If only 5 percent of plans to construct a further 500 thousand The vacancy rate of London offices is at pre- those working in the London banking sector by 2018. sent at a lower level than that of other Eu- transfer to Frankfurt, even that will have a ropean cities, but if firms move away, the significant impact on the city. An additional centraL and eastern euro- proportion of offices standing empty could positive point in favour of Frankfurt is that pe couLd aLso Be among the increase. This could lead to a fall in rental rental fees there are at present 60 percent winners fees, whilst in other European capitals, the lower than in London. firms moving there from London could cre- Paris has the second largest office market Central and Eastern Europe is in a pecu- ate greater demand and increasing rental in Europe after London. Besides the 1 mil- liar position, where the property market is fees on the local office markets. lion square metres available at present, becoming increasingly attractive indepen- Several of the major office providers are al- there are plans to make over 1.5 million dently of the British processes. After all, ready planning expansion in Frankfurt, and square metres in the coming year. It should the yields achievable here are significantly interest in Amsterdam offices is also con- higher than in Western European countries,18

2016/3 www.property-forum.eu Amsterdamboth on the housing and the commercial market, yields of 7 percent can be achieved, At the same time, the weaker pound offersproperty markets. Whilst Poland and the with up to 8.5 percent for logistics proper- opportunities as well, as it can lure in foreignCzech Republic have been popular among ties. investors, like high-net-worth individuals toinvestors for years, over the past two years With its 10-12 trillion forints annually, the London’s high-end residental property mar-an increasing number of foreign investors London investment market exceeds the ket. There is a silver lining on the commertialhave bought in Hungary as well. So even Hungarian one by 50-60 times. In theo- property market as well, as while some inves-this region could profit from the loss of con- ry, this means that if investors were to re- tors might be scared away by market uncer-fidence in the London market. group just 1.5-2 percent of this sum to tainties, others will look at this as an excellentIn particular Warsaw should be highlighted, Hungary, this would involve a doubling of point to enter the UK market.which not only welcomes investors, but in the Hungarian market. This is of course This means that the British capital may be ex-competition with Western European capi- just a theoretical number, but in any case it pected to continue to enjoy special attention;tals it has also begun specific negotiations clearly shows that if just a small fraction of it just may not be as dominant.with several London banks on the possibil- London investors are looking for another It may not yet be reflected in the numbers,ity of establishing new head offices in War- target for their investments, what a great but London has now suffered a tremendoussaw. Warsaw may be geographically more impact this could have on the market of a loss, which even in the case of a frictionlessdistant from London than Paris, Frankfurt smaller country. exit may take many years to restore: theor Amsterdam, but even so the significant- shaken confidence of investors. Up till now, itly lower costs could give the Polish capital a shaken confidence has been possible to invest almost complete-competitive advantage. ly without risk in the largest property marketIn contrast to these, Hungary could be more It is a fact that low interest rates globally are in Europe and as yet one of the most stableinteresting from the investors’ standpoint. still directing investors towards the prop- in the world, but in future, investors cannotAfter the 400 million euro volume typical of erty market, and besides this, London will know that their money is completely secureprevious years, in 2015 investment deals to continue to be a cosmopolis, which despite here either. Market processes have becomethe value of 790 million euros were made the partial disappearance of finance market somewhat unpredictable, and this is a signalin Hungary, which was unprecedented since players will still be in high demand. Further- to investors that they should be more careful2007. Indeed, this amount is expected to in- more, London is not only an economic cen- when deciding on the British capital. At thecrease further in 2016. Yields on the Hun- tre, but is also one of the most important same time, London’s fallout capital is wel-garian market are still exceeding those of destinations in the world in terms of tour- comed by more predictable markets, or pos-Western Europe. On the retail property ism, besides continuing to enjoy enormous sibly those with enticing higher yields. prestige. 19

Investors love Cee– From all over the world Ákos Budai CEEinvestment markets have continued to grow in the first half of 2016 with transac- tion volumes increasing across all segments. The first six months of the year saw new sources of international capital entering the region with the largest share of investments coming from the United States, Germany and South Africa. Taking a look at the largest deals and the latest trends can help determine how long this momentum is expected to go on.20

2016/3 www.property-forum.euStrong reSultS from all umes: €338 million have been transacted Although the overwhelming majority ofover the region in H1 2016, compared to only €12 million deals closed in H1 2016 involved premium in H1 2015. The Czech Republic has post- assets, demand is continuously growing forOver €5 billion have been invested in Cen- ed slightly weaker results than it did a year secondary properties. There are more andtral and Eastern European real estate in H1 ago, but considering that 2015 saw the sale more segments of regional markets where2016, a significant increase (59%) compared of a prime shopping centre in the heart of quality assets are becoming scarce and this,to the same period of last year. According Prague for over €500 million, this year’s re- combined with the increasing appetite forto data collected by CBRE, this growth is sults are showing that there in a continued risk of investors hungry for higher yields,mainly a result of the region’s strong per- strong interest in the country’s assets. can mean that there will be more transac-formance in the second quarter, where in- Just like last year, retail has been the most tions involving secondary assets in the nearvestment volumes grew by 157% y-o-y. popular asset class of 2016 with several future.Most key markets – Poland, Hungary and large deals closed all over the region, main- “The Czech Republic and Poland have longRomania – performed better than they ly in regional cities. The subject of the larg- been considered the two favourite destina-did in H1 2015 with Poland remaining by est single property transaction in Q2 2016 tions among investors looking to acquirefar the largest market in terms of invest- was a retail park in Sibiu, Romania. NEPI ac- property in Central Europe, but in the lastment volumes. Slovakia has seen the most quired Sibiu Shopping City from the Argo 12-18 months Hungary has also started tosubstantial increase in investment vol- group for €100 million. During the second appear on their radars. Interest in Hun- quarter, retail accounted for the majority garian assets is definitely growing, which of investment at close to €1.5 billion. A fur- is clearly shown by the fact that a number ther €800 million was invested in offices, of significant transactions were closed in which remain the second most popular as- H1 2016 by investment groups that were set class, followed by industrial. not active in Hungary earlier. Eiffel Square has been purchased by German asset and investment manager KGAL, while Váci Cor- ner Offices, the first building developed by HB Reavis in Budapest, has been sold to a group of investors represented by Zeus Capital Management – just to name a few of the new entrants to the Hungarian mar- ket,” commented Mátyás Gereben, Gener- al Manager of CPI Hungary. “I think that Ro- mania needs time to catch up with the rest of the region and it will take around three years for it to get on the map of the biggest investors.” new SourceS of international capital Less than 20% of capital invested in CEE came from within the region in H1 2016 and a significant portion, approximately 35% was attributed to non-European investors. According to Cushman & Wakefield, close to two thirds of the capital has emerged from three countries – the United States (27%), Germany (19%) and South Africa (18%). In the last quarter alone South African inves- tors have spent €1 billion in the region, pre- dominately on Polish property. This year’s largest deal to date was closed by a South African company when Redefine acquired 21

44 a 75% stake in Echo Investment’s mixed-as- frontrunner in terms of investment market set portfolio, for €890 million. German insti- momentum. Demand continues to rise ro- ((€€//ssqqmm//mm)) tutional investors have also increased their bustly from both foreign and domestic buy- regional activities, even in Hungary, a coun- ers. As a result, capital values are expected 45 try that they seemed to have vowed to stay to rise between 7-9% across prime sectors away from after the financial crisis. while secondary markets are forecasted (€/sqm/m) Unlisted funds were the dominant purchas- to see price growth of around 4% over the ers over the second quarter with just over next twelve months. 100(€/sqm/m) €1 billion invested, taking their investment Continuing on from the previous quarter, over the last twelve months to €5.3 billion. demand from foreign and domestic inves- 200 Listed companies (predominantly South Af- tors rose in each nation. With the excep- rican) invested over €1 billion, making them tion of Hungary, the Czech Republic attract- (€/sqm/m) the most active investor group over Q2 ed the sharpest rise in foreign investor en- 2016. quiries relative to all other CEE markets. 46 Although capital value projections in the moSt cee marketS feel Czech Republic point to solid growth in (€/sqm/m) commercial real eState iS prime subsectors over the coming twelve at fair value months, the outlook is flat for secondary 300(€/sqm/m) markets. Likewise, capital values are ex- The RICS Investment Sentiment Index (a 90 composite measure capturing overall in- (€/sqm/m) vestment market conditions) continues to be in positive territory across all large mar- kets in the region, although only marginally so in Poland. The Czech Republic recorded the most notable pick-up during the second quarter of 2016, with the ISI rising from +18 to +34. Nevertheless, Hungary remains the Prime rents in the CEE region (€/sqm/m) Office Industrial High street retail Bratislava 15.5 Bucharest 18.5 3.6 4.25 3.5 3.9 3.8 4.75 5.4 Budapest 21 Prague 20 Sofia 13 Vienna 25 Warsaw 2422

Cee Investment markets (mIllIon euros) 2016/3 www.property-forum.euMarket H1 2016 H1 2015 pected to increase in prime markets acrossBulgaria - 14 Romania over the year ahead, while sec-Croatia 12 98 ondary sectors are anticipated to see lit-Czech Republic tle change. Just like in previous quarters,Hungary 968 1337 the prime office and prime retail sectorsPoland 734 271 are expected to see the strongest growthRomania 2046 801 in these nations. In Bulgaria, capital valuesSerbia 359 173 are projected to increase in all sectors, albe-Slovakia 203 it only marginally across secondary indus-CEE (excluding Russia) 338 - trial units. 5013 12 In Poland, the largest market of the region, 3134 twelve-month capital value expectations remain mixed. Projections point to primeSource: CBRE, Portfolio Property Forum retail assets posting modest growth, while the outlook is marginally positive acrossPrime yields 5.5% the prime office and industrial areas of thein the CEE region 6.75% market. Meanwhile, prices are expected to come under further downward pressure in Office the secondary office sector. High street retail Compared to previous quarters there have Industrial been major changes in respondents’ mar- ket valuation. Only Bulgarian respondents 5.0% Warsaw continue to feel that commercial real es- 6.5% tate is currently underpriced in the coun- try. An overwhelming majority of respond- Prague 7.0% 5.25% ents view prices as close to fair value in the 7.75% Czech Republic, Hungary and Poland. In Romania the largest share of respondents now feel that the market is overpriced to some extent, although views are mixed. 4.0% 4% 6.75%Bratislava 6.25% Vienna 8.25% 7.5% 3.4% 7.5% 9.0% Budapest 8.5% 7.75% 10% Bucharest 6.0% 8.5% 23 Sofia

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2016/3 www.property-forum.euBlue skies over theregion’s housing marketsTünde Madurovicz-TancsicsONthe whOle, we caN say that a great Number Of eurOpeaN hOusiNg markets are Over the crisis, aNd prices have ONce agaiN beguN tO rise. the upswiNg iN the regiON’s hOusiNg markets is suppOrted by a Number Of factOrs.we see strONg recOvery iN hOusiNg market demaNd, aNd sigNificaNt develOpmeNt activity all Over the regiON.The upswing in the region’s housing markets the whole, we can say that a great number ences in price dynamics may be observed.is supported by a number of factors. Follow- of European housing markets are over the Hungary stands out from the field, whereing the economic crisis, GDP has begun to crisis, and prices have once again begun to a highly significant price rise has been ob-grow once again in most countries, and the rise. Depending on when the turnaround oc- served in the past two years, the prices ofinterest environment is also favourable to curred, the countries are at various points second-hand homes leaping by 29 percent.borrowing. These both contribute to a re- on the upward section of the cycle. Also, in Let us look at the housing markets of the in-covery in housing market demand, which the case of housing markets in the Central dividual countries one by one, to see wheremay then materialise in higher prices. On Eastern European region, significant differ- they stand in the upswing. 25

Hungary credit interests and a new housing benefit very faint growth, prices fell again by 1.3 per- scheme which increase the demand for hous- cent in the fourth quarter. However, the factAfter a long and significant fallback, the Hun- ing (this can be seen in the increasing num- that a 1.8 percent price rise was observed ingarian housing market started to grow again ber of transactions), prices have only risen to the first three months of this year accordingat the beginning of 2014, and the surge which a very minimal extent. At the end of the first to BIS data does give reason for confidence.has lasted two years now appears to be un- quarter of 2016, around 1 percent more had The improvement which has begun on thebroken, ranking as outstanding even in a Eu- to be paid for homes than one year previous- housing market in Croatia could continue thisropean context. Although it seemed at the ly. The capital Warsaw still ranks as the most year: economic growth could exceed that ofend of last year that the growth was slowing expensive, with an average price per square last year, and investor interest in propertiesdown, at the beginning of this year the price metre of about 1950-2000 euros, the second could continue to strengthen.rise broke a record, as second-hand hous- most being asked for properties in Cracow,ing prices increased by 5.6 percent in three with an average specific price of about 1560 romaniamonths. euros. As the previously described favourableUnder the impact of the significant price ris- conditions still exist in the future, the pros- It appears that the Romanian housing marketes of recent years, compared with the nadir of pects for the Polish housing market continue has also started to grow, aided by improving2013, at the end of March 2016, housing cost to be positive, and we can count on increas- economic performance and the low level of29% more. Thus, prices have even surpassed ing demand. interest rates on credit. At the same time, thethe pre-crisis maximum, second-hand homes political uncertainties overshadowed the pos-being 5.3 percent more expensive than in Croatia itive picture for a long time. After the initial2008 on a national average. It is true, how- fallback at the beginning of last year, however,ever, that there are still regional differences Housing prices in Croatia have been falling for prices once again started to rise, thus 2.6 per-in the growth of housing prices in the coun- many years, partly due to the economic cri- cent more had to be paid for residential prop-try. The largest price rise can be seen in Cen- sis, worsened by the eurozone crisis. These erties in the country as a whole at the end oftral Hungary, whilst in the economically less strongly affected the economy of a country so the first quarter of 2016 than one year earlier.developed areas the rise was smaller. In the dependent on tourism. But after this extend- In major cities the increase was even greaterfuture, prices may still continue to rise in the ed period, it appears that the Croatian hous- than this. In Bucharest prices rose by 3 per-country: the factors supporting the housing ing market is finally climbing out of the pit; ac- cent, thus close to 1100 euros had to be paidmarket, such as low credit interests, positive cording to BIS data, prices once again began for an area of one square metre. Prices alsoeconomic growth, increasing wages and low to rise in the third quarter of 2015. Prices of shot up in Cluj-Napoca, producing a growthunemployment continue to aid the increase. residential properties in the country had in- of 12.4 percent between the third quarter of creased by 2 percent by the end of the first 2015 and the same period of 2014, and thePoland quarter of 2016. prices per square metre have exceeded even The upswing is more conspicuous on the those in the capital. The future prospectsBefore the crisis, the housing market in Adriatic coast, where over three quarters of for the Romanian housing market are posi-Poland was soaring, with prices rising by 23- a year, by the end of the third month of 2016, tive, economic growth and expanding lend-48 percent per year between 2005 and 2007. prices were higher by 3.3 percent. Interna- ing could promote a continuing rise in prices.In 2008, the year of the crash, the rise was tional investor interest could have played aonly 13 percent, and a downhill trend lasting major role in the greater success of the coast-6 years began. al areas. The recovery is less convincing in theAlthough the housing market is supported capital. While the third quarter of 2015 saw aby numerous factors in Poland, such as lowHouse price index in CEE (2010=100)Source: Eurostat120115110105100 95 90 85 80 75 2010Q1 2016Q1 Bulgaria Czech Republic Croatia Hungary Poland Romania Slovenia Slovakia26

2016/3 www.property-forum.eu Housing constructions have been launchedBulgaria With the exception of Croatia and Slovenia, the number of building permits for the construction of buildings with two or more apartments is growing in Central EasternThe Bulgarian housing market is likewise Europe, i.e. the launching of housing developments has begun. On this front too, theexperiencing a period of recovery. Housing largest growth was produced by Hungary, where compared with the annual averagemarket demand is increasing, and there is value in the year 2013, ranked as the minimum, the number of building permits hadalso significant investor interest. Many are risen by more than 60 percent by 2015. In spite of the significant growth, however,looking for a place for their money on the the number of permits still remains far below the maximum from before the crisis.housing market. Prices were showing con- The level of building permits issued in 2015 was less than 29 percent of those in 2007.stant growth in 2014, and the rise contin- In Hungary, however, a further significant improvement is to be expected. Theued in 2015 too, although it should be men- reduction in VAT and the new housing benefit system both favour the launchingtioned that something of a fallback was ob- of investments, as a result of which in the first, traditionally weak quarter, close toserved in the third quarter. But at the end 20 percent more permits were issued than in the last three months of 2015, whilstas well as the beginning of the year, growth compared with the first quarter of 2015, the number of permits issued for buildingshad the leading role. The main driver for the with two or more apartments almost doubled.housing market upswing was the capital So- Bulgaria also produced good results in the area of housing construction, where byfia, where housing prices rose by 6 percent 2015 the number of permits issued had grown by 63 percent compared with the na-in 2015 compared with the previous year dir, but the lag compared with the pre-crisis maximum is also significant here, beingand in the final quarter of the year the aver- more than 73 percent. Compared with before the crisis, the lag is smallest in Poland,age specific price overstepped the 800 eu- where the number of building permits issued was just a little more than 23 percentros/square metre level, for which there had lower than the earlier maximum.been no precedent since 2011. The buoy-ant housing market of the capital is clearly Building permit trends in CEE (2010=100)shown by the fact that the number of trans-actions is also increasing. According to data Source: Eurostatfrom BulgarianProperties, following a 17percent improvement, close to 24.4 thou- 160 2012 2013 2014 2015sand sales deals were concluded. In spite of 140the upswing, prices are still far from the level 120 Bulgaria Czech Republic Hungarybefore the crisis, but they could rise further 100 Poland Romania Slovakiaduring the current year. 80 60CzeCH rePuBliC 40 20The Czech housing market is likewise on therise, like several of its companions in the re- 0gion, the economic growth, the low cred- 2011it market interest rates as well as increasing Croatia Slovenia demand from abroad are all having a posi- ter of 2008, which ranks as the maximum be- tive impact. According to BIS data, around fore the crisis. 4.5 percent more had to be paid for residen- The significant surge in housing market de- tial properties in the first quarter of 2016 than mand in the country is clearly shown by the one year previously. Growth is therefore sig- fact that the number of transactions has ex- nificant, although with this result the country ceeded the 2008 level. Besides domestic de- is still not in the frontline. At least, as an effect mand, a considerable influence is also exer- of the housing price rises over recent years, cised by foreigners from many other coun- at the end of March 2016, the same amount tries, who found a place for their money on had to be paid for homes as in the third quar- the Czech housing market. 27

The Hungarianhousing marketis soaringTHE FHB HousIng pRICE IndEx, BasEd on THE HousIng MaRKET TRansaCTIons oF THE pasT 15 yEaRs, RosE To a vaLuE oF 215.06 In THE FIRsT quaRTER oF 2016. THus duRIng THEpERIod oF gRoWTH LasTIng FRoM THE BEgInnIng oF 2014 TILL THE End oF THE FIRsT quaRTERoF 2016 pRICEs gREW By appRox. 40 pERCEnT In HungaRy, In BoTH noMInaL and REaL TERMs.In THE FIRsT THREE MonTHs oF 2016 THE MaRKET pRoduCEd RECoRd gRoWTH, THE dEgREE oFInCREasE BEIng 7.6 pERCEnT.Prospects for the Hungarian housing mar- late borrowing: the national bank base rate The geographical details within the data fea-ket continue to be positive. The number of is still at a historical nadir in Hungary. tured in the FHB Housing Price Index showbuilding permits has undergone significant The FHB Housing Price Index and the asso- that there are significant variations be-expansion; as an effect of favourable gov- ciated property trade services are useful tween the different submarkets. The eco-ernment measures, more building permits for every economic player who has contact nomically more developed areas with bet-were issued in the first half of 2016 than in with the housing market. Understanding the ter job opportunities pull up the nationalthe whole of last year. Compared with the market is indispensable for making correct statistics, whilst prices have risen less in thesame period in the previous year, the num- and well-grounded decisions. This applies to less developed localities. The driving forceber of permits issued doubled in the first every developer, bank, agency or fund man- for housing price growth continues to bequarter, whilst in the second quarter the ager which is active on the property market. Central Hungary, but prices have risen to anumber of permits increased 2.65 times The formation of a realistic pricing strategy much smaller extent in Northern Hungary.compared with the second three months is crucial for the success of new housing pro- In answer to the challenges posed by theof 2015. The growth cannot be seen yet in jects, but this is impossible without a pro- market differences outlined above, the FHBthe number of houses being completed; the found knowledge of the market. offers much more than a simple national in-projects begun now as an effect of changesin the regulatory and subsidy environment FHB Index from 1998 until 2016Q1 FHB Index nominalwill be completed in 2017-2018, and a sig- (2000=100) FHB Index realnificant leap in the number of certificates ofoccupancy will presumably be observed at 200.7 250that time. 215.1The mortgage market is likewise perform- 45.6ing well. 260 billion forints worth of housing 200loans were issued by the banks in the firstseven months of 2016, whilst in the same 150period of 2015 this number was just 176.5 112.1billion forints. The amount of lending permonth between March and July ranged be- 100tween 40 and 50 billion forints. The presentlow interest rates are continuing to stimu- 50 0 1998q 1999q 2000q 2001q 2002q 2003q 2004q 2005q 2006q 2007q 2008q 2009q 2010q 2011q 2012q 2013q 2014q 2015q 2016q28

2016/3 www.property-forum.eu average specific prices are hovering around 235 thousand forints/sqm, by Lake Velence only 145 thousand forints had to be paid on average for 1 square metre of proper- ty, while by the cheapest Lake Tisza, the av- erage specific prices did not even reach 80 thousand forints. As can be seen from the above, the Hungari- an housing market shows a complex picture, so there is a great need for deeper, specific and regional studies analysing longer time- lines. Subscribers to the FHB Index there- fore receive customised analyses on the de- velopment and/or current state of a given housing market segment in accordance with their business and strategic requirements or their enquiries.dex. Besides the FHB Housing Price Index sis level, but even exceeding it in many plac- FHB INDEXpublished every quarter, the FHB offers its es. Of the locations examined, Győr was inclients access to a whole series of regular- the forefront, where prices were higher by URL: www.fhbindex.huly updated and detailed indices. These in- a third in 2015 than they had been in 2008. E-mail: [email protected] provide data detailed according to re- But properties are considerably more ex- Direct line: +36 (1) 452-7999gions and property types, and in addition, pensive in the districts of Budapest popu- Address: 1082 Budapest, Üllői út 48.experts who are interested in the property lar among university students, these be-market are helped by numerous individual ing V, XIII and XI, as well as the inner part ZSOLT MOLNÁRand thematic analyses. of district VII. At the same time, a numberIt also deals with current topics such as of provincial locations fall short of the pre- DEPUTY CEOthe housing market demands of universi- crisis housing price levels, the greatest dif- FHB Real Estate Ltd.ty students or the trends in housing prices ferences being in the cases of Miskolc and Phone: +36 (1) 452-9208in the vicinity of institutions of higher edu- Pécs. It also turns out from our analysis that Mobile: +36 (30) 748-3913cation. From this year’s analysis, for exam- although housing prices have risen signifi- E-mail: [email protected], it turns out that regional differences cantly over the past two years, due to thealso show up in pricing in university towns. fact that rental fees have also leapt up, it is DR. GYULA NAGYWhilst the square metre price of housing in still worthwhile for families to think aboutBudapest did not sink below 190 thousand purchasing housing for newly enrolled stu- FHB Index Project Managerforints even during the years of the crisis, al- dents, to live in themselves or to rent out. FHB Mortgage Bank Co. Plc.most everywhere in the provinces, even in Within the scope of the thematic analyses, Phone: +36 (1) 452-59302008 which counts as the peak before the we have also examined the Hungarian holi- Mobile: +36 (30) 964-6087crisis, the average specific purchase price day home market, and the results here also E-mail: [email protected] ranged below this value. Prices rose show significant differences between thesignificantly in locations hosting the major various areas. The most expensive are theuniversities, not only reaching the pre-cri- surroundings of Lake Balaton, where the 29

2016: the real turningpoint for the Budapestoffice marketÁkos BudaiDays of strong Development activity on the BuDapest office market are once again aheaD of us. Bts Developments anD large pre-lease Deals haveDominateD property news cycles for over a year, anD the time has finally comefor Developers with speculative projects to make their move. have they learnttheir lessons from the crisis or is over-optimism going to Bring us Down thesliDe of the property market cycle sooner than we expect? we try to finD outBy taking a closer look at current trenDs anD future Developments.“From 2008 to 2014, the Budapest office mar- their buildings by the time constructionket was characterised by a high oversupply started. In 2015 a number of large-scale de-of vacant office space. The vacancy rate fluc- velopments were announced, some of themtuated between 16% and 22%, rental lev- entirely speculative. The real turning pointels dropped, investment activity fell and fi- for Budapest office developments, howev-nancing terms became stricter. From 2010 er, only came in 2016. Although at the be-the worsening market conditions were re- ginning of the year many feared that theflected in weak development activity as well, dynamic revival of the Hungarian housingwhich reached its nadir in 2012 when the of- market might take away some attention andfice stock expanded by less than 1%, and manpower from commercial developments,only three new office buildings were deliv- that has quickly proven not to be the case.ered comprising 23,000 sqm,” says Rita Tuza, “Currently, we are experiencing increas-Head of Research at JLL. “2014 brought the ing development activity and it seemslong-awaited change. Occupational mar- that speculative constructions have alsokets recovered and the vacancy rate shrank returned. As a result, we expect roughlyto 16%, which was similar to Warsaw’s and 200,000 sqm of new office space to be de-Prague’s level. Market conditions improved livered on the market between 2017 andfurther in 2015 and various developers start- 2018, but as there are many other projectsed the preparation of new developments, or in the pipeline, this volume could easily bedecided to dust off their former plans.” exceeded. The overall office market vacan-Between 2013 and 2015, only a handful of cy rate stood at 10.3% in Q2 2016, nearingestablished developers dared to be active the all-time low, while the vacancy rate ofon the Budapest market. In most cases they the Class “A” stock stood at 7.5%. Thereforefinanced their developments internally and the pick-up in construction volumes washad already pre-let a significant portion of very much expected. Considering that 1030

2016/3 www.property-forum.euyears ago, between 2007 and 2008, when dapest submarkets for having the lowest va- dor that has over 120,000 sqm of develop-the vacancy rate was around 12%, roughly cancy rate. It is also the part of the city that ment potential. Very few details are public460,000 sqm were added to the market, we has seen the biggest number of infrastruc- at this point, but the first phase of the newcan easily see that there is room for further tural developments in the past years, includ- city centre is expected to materialise in tedevelopments, and the market will not be- ing a new metro line and the extension of a form of an iconic structure. A new city cen-come overheated soon,” adds Rita Tuza. busy tram line. Central Pest also accommo- tre will also be built in South Buda, next toThe revival of the Budapest office market dates a significant portion (19%) of the pipe- Kopaszi-gát, one of Budapest’s most popu-has urged developers to start projects in lo- line, mainly thanks to the final stages of the lar recreational areas. The developer, Prop-cations that have previously been deemed Corvin Promenade project. erty Market Ltd has announced plans torisky. Although nearly 30% of the future sup- Corvin Promenade has proven to be highly construct nearly 600,000 sqm of residen-ply is concentrated on the Váci Corridor, the successful over the years and now Future- tial, office and retail space in 27 blocks over13th district is not the only area that is ex- al is not the only company in Budapest that the course of 8-10 years. The first officepected to accommodate more construc- sees the future in large-scale, mixed-use building might be finished by the first halftion cranes over the next few years. A quar- city centre developments. HB Reavis pur- of 2018.ter of the pipeline is located in South Buda, chased a large piece of land last year at the “The positive trends currently characteris-an area that has long stood out among Bu- most important junction of the Váci Corri- ing the Budapest office market – strong de- BudaPart 31

New office space delivered in Budapest (thousand sqm) Magyar Telekom HQ Source: BRF, Portfolio Property Forum mand and record-low vacancy – will con- tinue at least until the end of the year. It is 203 249 292 350 yet unknown how market sentiment might 2008 2009 300 change when tenants move into large BTS 128 160 250 schemes currently under construction, thus 2010 200 putting previously occupied office space 87 23 30 68 51 150 back on the market,” says Norbert Schőmer, 2011 2012 2013 2014 2015 100 Deputy CEO (Office Portfolio and Develop- 50 ments) at WING, which is in charge of devel- 0 oping Magyar Telekom’s new headquarters, the largest single office building in Hunga- 2006 2007 ry in terms of GLA. “Developers have an- nounced a number of speculative projects Future supply on the Budapest modern office market in the past couple of months. Probably the most important question of the near future year quarter submarket name developer gLa (sqm) is which developers are brave enough to ac- tually start construction and which projects 2016 Q3 Váci Corridor V17 WING 12,350 can secure financing from banks without 6,600 being at least partly pre-let.” 2016 Q3 Váci Corridor Nordic Light (1st phase) Skanska 2,320 “I think that the memories of the financial cri- 19,600 sis and its effects on the property market still 2016 Q3 North Buda Buda Loft private 25,000 live on in decision-makers’ heads and they 8,000 will be very careful when giving the green 2016 Q3 Váci Corridor Nordic Light (2nd phase) Skanska light for speculative constructions. I hope 2,700 that the optimism characterising the market 2016 Q4 Central Pest Corvin 4 (Nokia HQ) Futureal 18,510 – which a year from now might be as strong as it currently is on the residential market – 2017 Q1 North Buda Graphisoft Park SAP building Graphisoft 7,709 won’t turn into over-optimism, because we have all learnt the hard way where that leads 2017 Q1 Central Pest Markó Office Building private 24,000 us,” Norbert Schőmer continues. “All in all, I (renovation) 14,000 think that today we are without a doubt in the rising stage of the property cycle and we 2017 Q3 South Buda Office Garden 3 GRT Group 25,000 haven’t reached the peak yet. How long this 11,300 expansion period will last, however, depends 2017 Q3 Váci corridor Business Center 99 CPI 24,890 more on Hungarian and European macroe- (renovation) conomic developments than on the proper- 18,000 ty market itself.” 2017 Q4 South Buda Magyar Nobel-díjasok WING Kutatás és Fejlesztés Park I 15,000 55,000 2017 Q4 Váci Corridor Váci Greens D Atenor 14,600 13,100 2017 Q4 Váci Corridor Promenade Gardens Horizon Development 2018 Q1 Váci Corridor Advance Tower Futureal 2018 Q1 Váci Corridor White House GTC 2018 Q1/Q2 South Buda BudaPart (1st phase - building Property Market C) Ltd 2018 Q3 Váci Corridor New district centre (1st HB Reavis phase) 2018 N/A Non Central Pest New Telekom HQ WING 2018 N/A Central Pest Corvin 5 Futureal 2018 N/A Central Pest Corvin 6 Futureal Source: Eston International, Portfolio Property Forum32

2016/3 www.property-forum.euClosing the doorto the past oPInIonGERGELY DITRóY space, if only the growth of the Hungarian effortlessly; on the other hand, there is a economy and foreign companies moving to good chance for predictable and sustainableCommercial real estate manager Hungary does not progress at a faster pace growth on the Hungarian property market.Mapsolutions Zrt. than the developments, which would gen- The upswing of 2016, however, was pre- erate even greater extra demand than the ceded by 7 years of preparation, of whichIn the 5-6 years after the crisis, the stand- areas being made over. We can only hope the last year and a half was highly intensive.still in developments and transactions ob- that this latter will occur. There are a few ob- This meant that a significant move could beserved in the areas of both residential and jective and subjective criteria which speak made in the area of new developments,commercial properties, as well as econom- against explosive economic growth. These reacting to both tenant and investoric uncertainty, pushed the Hungarian prop- include the domestic shortage of a skilled requirements. Due to this, around 250-300erty market to a real nadir. Yields skyrocket- workforce, which is receiving ever more em- thousand square metres of new, moderned, demand stagnated at a low level on both phasis, though this is difficult to deal with office space may come onto the market overthe investor and the tenant side, and any on its merits from one day to the next, even the next 3 years. A significant proportionnew projects launched had almost exclu- with every good intention. Budapest, how- of these, however (the largest units), aresively unique conditions, suitably secured ever, is doing well, or at least much better new buildings of a bts type, developed onfor the long term (prelease, often equity). than other parts of the country. Young peo- the basis of individual requirements. ForToday, however, all this is over. In 2014-2015 ple, i.e. the new generation, who ever more SMEs, however, who rent smaller officesthe trend reversed, and in 2016 everything frequently have special notions and expec- of a couple of hundred square metres,is strongly pointing upward. The situation tations in connection with their working en- there are still plenty of opportunities tohas improved at such a pace that the office vironment and not least with their work it- choose from almost 350 thousand squaremarket vacancy rate of around 10% which is self, mostly favour the modern spaces de- metres of office space, standing emptyseen nowadays is already causing serious veloped for Budapest (preferably in the city but fragmented throughout the capital.problems in certain market segments (mul- centre). Wages and services all entice the Those desiring to rent a larger moderntinationals and major companies seeking trained workforce to the capital city, though office area of up to 2-3 thousand squarecontiguous areas of more than 2-3 thousand nowadays high house prices and rentals are metres, however, may be compelledsquare metres). It is no coincidence that ar- restraining this process somewhat. to make significant compromises. Theticles have appeared stating, “Budapest An important development giving cause primary reason for this is that even nowis full”. This strain will be alleviated in the for optimism is the fact that institutional just a few tens of thousands of squarecoming years by newly built modern office investors have also returned and various metres of speculative development have acquisitions of differing sizes have been been made over, i.e. those not tailored to transacted (e.g. TPG Real Estate, CTP) to individual requirements or launched within the value of almost 1 bn euros just in the the scope of a prelease agreement, which first six months of 2016, which is already is just one or two office blocks, a pretty more than the total volume for 2012, 2013 low proportion compared with the total and 2014 together. The development space of almost 3.5 million. Mechanical environment is increasingly attractive, diggers are lining up to move some earth project financing in beginning to find its in Budapest, however, so leaving the past feet, and there are positive signs from both behind us, the Hungarian commercial tenants and investors (whether they be property market can look forward to the small or large). Of course, golden years need coming years with even greater confidence. not be envisioned – those will not return so 33

InnovaTIon oF THE MonTHHIP on Váci CorridorCPI Human Innovation Program in Balance Office ParkWhat does a tenant need in an office In addition to the general and routine ser-building? How can its weekdays be made vices of a reception, a landlady – as a per-easy? What could a property develop- sonal assistant – helps tenants with settlingment company contribute to this? all kinds of issues. She organises cleaner’s, shoemaker’s or motor mechanic’s servicesCPI Hungary launched its new program, as well as the administration of official doc-wherein a service package was introduced uments, on demand. Taxis, chauffeur ser-to ease the day-to-day routine of those vice, cinema or theatre tickets, flowers, fruitworking in the office block and bring some baskets, healthy food or even a businessmore colour into everyday office life. lunch can be ordered with her assistance.CPI considers creating a human-centred Within the frame of the program facilitat-working environment as part of its high- ing to maintain the health of the employeeslevel service offered to tenants. CPI is con- and their feeling of comfort, health checksvinced that a reception in a 21th century of- will be repeatedly organised and a separatefice building should not undertake opera- room will help with their relaxation wheretional and security tasks only. among others, massage, yoga and spinal ex-The focus of this novel approach is CPI’s ercises will be regularly held.Human Innovation Program with the aim Employees of the tenant companies canof facilitating the everyday of the employees find resting and sports facilities in the 3000working in the offices. square metre park adjacent to the Bal-Some elements of this service have already ance Building; sporting goods like ping-appeared; e.g. the farmers’ market organ- pong paddles and tennis rackets can beised earlier met with great success. The full borrowed from the Balance depot. Open-program was first introduced in the com- air cinema and jazz concerts are also foundpletely renovated Balance Office Park locat- among the planned programs serving en-ed on the Váci Corridor. tertainment and leisure.Hirdetés/Promotion

The living workplaceTHe Brand neW BaLanCe LOFT On VáCI COrrIdOrBalance Office Park developmentsFollowing trends and continually monitoring the needs of tenants, Balance Building was the flagship of renovations carried out in lineCPI Hungary pays distinct attention to sustainable and environmen- with CPI’s new approach as a technically and aesthetically recon-tally friendly solutions and the adoption of up-to-date and innova- structed building. Interiour spaces went through a significant trans-tive technologies, as well as to the modern and aesthetic develop- formation, an imposing interior design offers a new generationment of space. Accordingly, in 2015, the company decided to begin working environment.streamlining office buildings in its possession. As the second phase of the development of Balance Office Park, theBalance Office Park consists of two buildings, with a total of 15,600 refurbishment program of Balance LOFT has been launched in Au-square metres of leasable area. gust 2016. The unique Loft building features the characteristics of anThe park performs well in all criteria of the BREEAM certification, industrial and modern style. The building offers 6,600 square me-which recognises a special focus of sustainability and environmental tres of high-tech office space. The renewed building could functiondesign combined with a high level of competence in the BREEAM as a headquarters or could offer 1500 square metres of flexible andassessment process. trend sensitive working environment on each floor.Within the park, tenants can use the underground car park, bicycleracks with shower room, the in-house restaurant and café, free wifi www.balanceloft.hu, www.balancebuilding.huaccess in all public areas, outdoor meeting rooms and pavilions, andrecreational and sporting possibilities.Thanks to its good location the park is easily accessible by publictransport and has also great access to highways. Hirdetés/Promotion

Poland:strongerthan ever?THE poLIsH pRopERTy MaRKET Has Long BEEn THE REgIon’s FRonTRunnER and IT sEEMs LIKE noTHIngCan sLoW IT doWn. In spITE oF aLL THE FEaRs LasT yEaRRELaTEd To poLITICaL InsTaBILITy and THE WaRsaW oFFICEMaRKET gETTIng poTEnTIaLLy ovERHEaTEd, InvEsTMEnTvoLuMEs aRE up sIgnIFICanTLy and dEvELopMEnT aCTIvITyIs sTRongER THan EvER. pIoTR MIRoWsKI, dIRECToR oF CEEInvEsTMEnT sERvICEs aT CoLLIERs InTERnaTIonaL poLandTaLKEd To us aBouT THE CounTRy’s InvEsTMEnT MaRKET.Ákos Budai so far over €2 billion has been in­  Are there any segments of the market struction. Given the strong reputation of vested in poland this year, indi­ where investors have to face a scarcity of the developers behind the projects, theycating that 2016 could be a record year quality product? are to be delivered in line with the sched-for the country in terms of investment ule. Naturally, the western extension ofvolumes. What are the most sought after In general, all the prime assets which are the Warsaw CBD is expected to see moreasset classes? placed on the market receive appropriate office development in the near term as all traction and subsequently trade, there- the largest players are already present inIt seems that 2016 could indeed be anoth- fore given the current depth of the market the area, therefore the pricing and liquidityer record year, taking into consideration in terms of availability of product for sale, of CBD office properties is predominantlythe volume of transactions which are cur- investors would welcome more opportuni- driven by the length of the residual cashrently in due diligence and/or contract ne- ties in each asset class, particularly for core flow.gotiations. Historically office and retail as- properties, given the demand.set classes have accounted for over 85% of  Over 60% of investment transactionsthe overall volume and I expect this trend  Last year many feared that the War­ have been closed in regional cities. Whatto continue in the foreseeable future. How- saw office market was getting over­ are the most popular markets? Is thereever, I must note that other alternatives, heated. With annual supply expected to strong competition between cities?such as student / retirement housing are reach a record high level this year, do yougenerating more interest, although there expect a consolidation on the market inis limited availability of product that can be terms of developments?directed to institutional investors. Platform/ corporate deals have also been in high de- The office development pipeline containsmand. numerous projects that are under con-36

2016/3 www.property-forum.euBack in 2011, 85% of the capital invested in ed to Poland until 2020), depth of the quali- established investment destination. In fact,Poland was allocated to Warsaw and the fied labour pool, quality of the legal frame- the transaction involving Redefine at ca.remaining 15% to regional cities. We have work, political stability, scale and depth of €900 million was the largest deal in Europewitnessed an exact reversal of the above the domestic market and relative liquidity in in Q1 2016. I expect that Polish capital willtrend in the course of the last two years the real estate market. Poland has emerged ultimately become a larger contributor to(ca. 85% of the volume allocated to regional as an undisputed regional leader over the the market, following the establishment ofcities), which highlights the fact that Poland last decade. It is the EU’s sixth largest econ- REIT structures, which are currently in theas a whole has been underwritten by the omy, CEE’s largest consumer market and the pre-planning stage and as a result createinternational investment community. In- investment gateway to the entire region. additional liquidity for the market, whichvestors are more willingly looking into sec- Currently Polish real estate investment will facilitate its further growth.ondary and tertiary markets in search of volumes account for ca. 40% of the overallquality assets. In terms of office projects, transaction activity in the region.  What are your expectations for theWrocław and Kraków have been the front- next 12 months in terms of investmentrunners, but we see increased interest in  Where are investors coming from? volumes?the Tricity, Katowice and Łódź. Cities com- Have there been new entrants to the pol­pete for new occupiers and it also creates ish market? Subject to the availability for sale of real es-critical masses for investors in terms of the tate product of appropriate quality, the in-size of the market, one of the criteria which The geographical composition of the inves- vestment volumes are expected to remainis important when considering the poten- tor pool continues to expand. Historically, strong.tial of a given city. German investors have been the market- makers, particularly for core product. Cur-  How have yields changed since the  There is also a race between CEE coun­ rently the landscape is more diversified, beginning of the year? What are your ex­tries to attract investors. In your experi­ with the most notable group of new inves- pectations for the next 12 months?ence what are the most important fac­ tors originating out of South Africa, Southtors that are driving investors’ decisions Korea and Singapore, both directly as well Yields have contracted meaningfully in se-when it comes to choosing countries? as through money managers. Successful lected markets over the last 12-18 months, deals involving investors such as Redefine and I do not expect similar dynamics go-Performance of the economy, further and Rockcastle have generated more liquid- ing forward, rather the market to stabilise.growth prospects, level of FDIs and EU ity in addition to increasing the transaction However a further slight adjustment cannotstructural funding (ca. €105.8 billion allocat- volume and increasing Poland’s status as an be excluded. 37

Competition amongCEE countriesis fiercer than everÁkos BudaiCentral european CommerCial property markets are expeCted to attraCt even more investors than last year and the Competition among Countries is fierCer than ever. What does it take to Change lost lasting perCeptionsand seCure the interest of international buyers? andy thompson mriCs, direCtor of investment serviCes at Colliersinternational talked to us in bratislava about reCent developments on the CzeCh and slovakian markets. How are the Czech and the slovak  What are the most popular investment are interesting, however. Investors typically property markets doing in the race products? prefer the number one schemes in the city,to attract investors? but there is also demand for secondary There is demand across all sectors. Demand assets. As for offices, it’s mostly BratislavaI think that the Czech market has always been for industrial has increased, but the lack of and to some extent Kosice which I thinkstrong and it is additionally benefiting from product is a big problem, although to a lesser represent good value for money for investorsthe challenges in Poland. The uncertainty extent than in the Czech Republic. And it’s looking for longer term opportunities.created by the Polish government and the not just the operators; there are some other Patterns are really similar in the Czechoversupply of office stock in Warsaw has en- pure investors who would like to get into Republic, but the market is deeper and wider.couraged new and existing investors in the industrial. There are a number of partiesregion to look at other markets. Slovakia on who want to buy Bratislava retail but there’s  It has often been said that Slovakiathe other hand has always faced a challenge really nothing to sell. The regional markets is too small and too illiquid to be anin terms of getting investors to look at it. I attractive choice for investors looking tohave been trying for the last seven or eight get into the CEE region. do you think thatyears to get investors who have bought in this perception is changing? What do youthe Czech Republic to look at Slovakia and think can be done in order to change it?it’s been difficult. But this is really chang-ing now. There are new buyers like Lone- In my opinion there are three things thatstar, Macquarie and Allianz who have not can change this perception. The first is hav-bought before in Slovakia and there are ing more international buyers in the mar-some others behind them who are looking ket, and that’s happening. Investors followand want to buy. We have seen a few new other investors, so having these transac-entries in the last couple of years, but this tions completed will attract more press andkind of interest truly represents a turning more investor interest. The second chal-point for the Slovakian market. Buyers are lenge that Bratislava has had, and it hasn’tcoming from different regions via different gone away, is that its office developmentroutes and for the first time ever there’s real market is run by three local players. I thinkdemand for all types of products. international investors would prefer that38

2016/3 www.property-forum.euthere be other developers, ideally interna- that’s moving in that direction. So for retail It’s difficult because you always comparetional developers here. Some international and industrial, the supply and demand is in the current situation with what happeneddevelopers looked, but limited stock has place. For offices the challenge is more of at the height of the last boom, but bondbeen developed by them. Hopefully that will an HR challenge. The BPOs and the SSCs yields were very different then. I don’t thinkchange. At least in the last couple of years, that are driving the demand for office space that there’s much more compression to gosome other Slovakian developers have could be attracted to the regional markets, in the Czech Republic, although it’s reallystarted to develop in the market so that is a but they need to then make sure that they dictated by the weight of money and wheregood start. The third part is the transparen- have the right calibre people coming out of else you can get yield. In Slovakia there’scy of the market, which I think has become the universities to staff these centres. And definitely yield compression; there’s no rea-more attractive for international investors. that means language skills. In lots of re- son why there should be a 200 bps differ-It’s improved with new transactions, with gional cities in the Czech Republic and Slo- ence between an office building here and aninternational interest and with agents being vakia these occupiers can’t get the language office building in Prague. I don’t think theremuch more involved and active, and matu- skills from the undergraduates and in many is much of a difference in country risk rat-rity is definitely approaching. cases not even from the graduates. That is ing, it’s only about liquidity and in some of the limitation across the region and that is these markets there are less and less differ-  Do you think that in the longer run why Budapest, Bratislava and Prague are so ences in liquidity.there is room for more investors and de­ dominant in this market. Kosice is maybevelopers in secondary slovakian cities? an atypical example because, like Brno, it  What are your expectations for 2016 has a very strong technical university and a investment volumes in slovakia and theI had a very interesting discussion with a lot of the occupiers who are growing there Czech Republic?recruitment company a couple of days ago are from the IT sector. Outsourcing is alsoabout this topic. Retail happens anywhere, helped by international flights: if you are a Looking at what’s under offer or close toright? If there is a catchment area and the regional city and no one can get there, then being under offer I think that the final num-occupancy-cost ratios are attractive, shop- it’s difficult for you to have a case to present bers will be 400-500 million euros for Slo-ping centres work. Then it’s an investment to Paris or London and say that you want to vakia and 2-2.5 billion euros for the Czechproduct and there are buyers for that in- have a shared service centre there. Republic. It may come in at substantiallyvestment product. Industrial is mostly fo- above that depending on some major trans-cused around Bratislava but there’s also  How do you think yields will change actions and portfolios, but I doubt it will beinstitutional interest outside Bratislava, so over the next 12 months? much less. 39

Beyond Bucharest :potential in Romania’sregional hubsIonut opreaRomania has significantly stRengthened its position as a favouRable investment destination within centRal & east- eRn euRope, and unlike otheR countRies in the Region, the Romanian pRopeRty maRket is not entiRely dominated byits capital city. although investoRs and developeRs aRe most active in buchaRest, secondaRy and even teRtiaRy citieshave a lot of potential as well, and seveRal companies have decided to exploRe what these Regional hubs have to offeR.Retail on the Rise retail sales and consumer confidence. This ing retail, leisure and office space, is expect- trend, which is likely to continue in the fu- ed to be delivered in 2017.The total investment volume on the Roma- ture, has encouraged retailers to expand. Looking east, Immochan is already extend-nian property market for H1 2016 was over Nevertheless, they remain highly selective ing Coresi Shopping Resort in Brasov, which€359 million, the highest level in five years. when it comes to the locations of their new was opened in March 2015 with 13,500 sqmAccording to a report by CBRE Romania, the openings, focusing mainly on well-perform- in three buildings. A €10 million additionaltop five investment transactions recorded ing shopping centres. investment will be added to the initial €60during H1 2016 account for over 80% of the Over 50 new international brands have million. AFI Europe Romania has complet-total investment volume. Although a large opened units in Romania since 2014. Food ed the acquisition of a 40,000 sqm plot innumber of the assets transacted are located retailers, which expanded aggressively over the centre of the city, where it will develop ain Bucharest, one of the largest single asset the last two years, encouraged by the surge mixed–use project that includes AFI Palacetransactions of the last few years was record- in retail sales of food products, are pre- Brasov Shopping Mall and AFI Park Brasov, aed outside of the capital. This June, Shopping sent in all major cities and are now target- Class A office project. The shopping mall willCity Sibiu, a retail park worth €100 million, ing tertiary cities of under 100,000 inhab- have a total GLA of more than 40,000 sqm.was acquired by New Europe Property In- itants. One example is Element Develop- The Mudura family, developer of Lotusvestments (NEPI) from Argo Capital Property. ment’s project in Bistrita, Transylvania. The Center Oradea, has also announced a newNot only investors, but developers also see city of 70,000 inhabitants will have a shop- mixed-use project. At first a new shoppingSibiu’s potential. Primavera Development, ping mall of 15,000 sqm. Shopping City Pi- centre will be delivered, but Oradea’s Lo-a Bucharest-based company has recent- atra Neamt, developed by NEPI in the coun- tus Center 2 will have residential and officely announced the restart of the €70 million try’s Moldova region, will be opened at the components as well.Festival Shopping Center project, the city’s end of 2016 and will have a leasable area offirst centrally located shopping mall, with 28,000 sqm. office boom44,000 sqm of rentable area. Inauguration In Timisoara, Israeli real estate developer in Regional citiesis scheduled for H2 2018. Plaza Centers has signed an agreement withOnly one large retail project was completed Auchan for 10,426 sqm of its future mall By the end of 2015 the total office stock inin Q2 2016 in Romania. The refurbishment with 38,000 sqm of retail space, Timisoara regional cities was 20% higher than in 2014,of an old department store, Mercur Craio- Plaza. Alpha Group Investments, an invest- and in the first six months of this year an-va was executed by SIF Oltenia in the cen- ment arm of Alpha Bank, together with TBE other 47,500 sqm became available on thetre of Craiova, the fifth largest city in Roma- Business Solutions has also decided to in- market. Estimations are that in the next 18nia. Developers announced close to 191,000 vest around €90 million in the “western cap- months an additional 165,000 sqm will besqm of further retail space to be delivered ital” of Romania. Timisoara Centrum, offer- delivered outside Bucharest and that byin 2016, supported by the strong growth of the end of 2017 the total regional stock will40

2016/3 www.property-forum.euVox Techonology Park, Timisoarareach 800,000 sqm. Demand was 25% high- Business Center 2 (UBC 2), offering 18,000 In Brasov, Ascenta Management and Build-er in 2015 than the year before. Developers sqm on 11 floors, will be completed by the Green have joined forces for the BREEAMsuch as Iulius Group, Ascenta Management, end of 2016. By the same time, the compa- certification of the second phase of Core-NEPI, Vlerick Group, Werk Property Group, ny will also open a total of 33,000 sqm of si Business Park, comprising three low-riseAFI Europe, TBE Solutions, Tester Group, office spaces. The first development stage office buildings. The first building is alreadyMultinvest and Transilvania Constructii are of the Openville ensemble will be complet- built, while the other two are currently un-investing in extensions or new projects in ed during the last quarter of 2017 and will der development. Coresi Business Park isregional cities like Timisoara, Cluj-Napoca, comprise 80,000 sqm Class A office spaces, developed on the former Tractorul indus-Brasov or Iasi. retail spaces and the park. The second de- trial platform in Brasov. The scheme is oneLast year Iulius Group started construction velopment stage includes the development of the major urban regeneration projectson its mixed-use project, Openville in Tim- of office spaces up to a total of 131,000 sqm. in Romania, transforming 12 hectares ofisoara. Over €220 million will be invested in The latest announced project for Timisoara the old manufacturing plant into a contem-the urban ensemble located in the imme- is Werk Property Group’s Vox Technolo- porary business environment. The initialdiate vicinity of Iulius Mall Timisoara, mak- gy Park, a Class A office building featuring phase of Coresi Business Park consists ofing it the largest infusion of private capi- 26,000 sqm of rentable office space. The approximately 25,000 sqm. The master plantal in the real estate industry in western building will provide the largest floor sur- of Coresi Business Park features a mix of in-Romania. Openville will bring together of- face available in a commercial building in dustrial halls, office conversions and new-fice, retail, park and entertainment func- the Timisoara region upon its completion in ly built offices, envisioning 100,000 sqm oftions. This is the second mixed-use project December 2017. Ovidiu Șandor has also an- GLA within 10 years.in the company portfolio alongside Palas nounced a new office project for Timisoara, NEPI and entrepreneur Ovidiu Șandor haveIasi. The first Class A office building, United scheduled to be delivered in 2018. begun the construction of the third and last 41

AFI Palace Brasov Shopping Mall and AFI Park Brasovphase of the largest office complex in Cluj- they are a part of Logicor, Blackstone’s Eu- ty, owning over 125 ha of development land.Napoca, called The Office. 18,500 sqm are ropean logistics platform. Another major They have recently made a move from in-scheduled for completion in Q2 2017. The player, Panattoni Europe also decided to en- vestor to developer and have now finishedentire complex will include a total renta- ter the Romanian market last year, initially infrastructural preparations in Sanandrei.ble area of 59,185 sqm upon its comple- focusing on BTS developments. Having negotiated a contract for 10 years,tion. Also in Cluj-Napoca, Liberty Technol- One of the biggest players on the market, construction is now underway with deliveryogy Park, a Fribourg Capital initiative under CTP has increased its strategic investments scheduled for the beginning of 2018. Thethe patronage of businessman Ion Sturza, in Romania. The company is currently con- company is accelerating projects in Giarma-has recently reached a 90% occupancy rate. structing two facilities in Bucharest and is ta and near Timisoara Airport as well.Although the second phase of extensions also active in regional cities. CTP is current- Cluj-Napoca, in the centre of Romania, ishave been finalised in 2015, the developers ly preparing groundworks for a facility for also an area that attracts a lot of interesthave further extension plans. an expanding client in CTPark Sibiu. In Cluj- for new developments and demand is veryIasi, the largest city in Eastern Romania, is Napoca, CTP is constructing a 19,000 sqm high for industrial space. Transilvania Con-also gaining more and more interest frominvestors and developers, partly thanks to “Regional markets are attracting more investmentsthe large number of employees in the IT/ and an increasing number of developers.”outsourcing sector. Two large projects havebeen completed in the past years. Palas Iasi facility for Romanian retailer, Profi. structii, a developer with Transilvania Logis-was developed by Iulius Group and Iulian Last year, developer Zacaria Group doubled tic Parc in its portfolio, is currently buildingDascalu. Tester Group and entrepreneur its portfolio of industrial warehouses in Ro- a speculative 17,000 sqm warehouse in JucuBogdan Pitigoi have developed Ideo Busi- mania, surpassing 140,000 sqm of rentable near Cluj-Napoca, on 16 hectars of land, asness Center and Tester Technology Park. area. The company is now developing an part of the TRC Park project.New projects will be launched soon. additional 107,000 sqm of industrial space Helios Phoenix, developer of the Olympian in Sibiu, Craiova and Cisnadie. The Group’s Parks network, has also announced a newbReaking new gRound investors, Alf Mizzi & Sons from Malta, now 43,000 sqm project in Jucu, Cluj county. The own and operate 10 industrial projects lo- first phase of 13,000 sqm is to be finalisedSeveral developers have announced new cated in 7 major cities across the country. this year. The company also has plans to ac-projects in Romania, driven by the strong Timis County, having an unemployment quire land in Bacau or Iasi for new Class Ademand for industrial space. Regional mar- rate of only 1.4%, is a popular choice among warehouses and to extend its existing facili-kets are attracting more investments and developers. One of them is Bardeau Imo- ties in Brasov and Timisoara by 20,000 sqman increasing number of developers add biliare, the developer of Banat Internation- this year.speculative components on top of space se- al Business Park. Artemis Real Estate, thecured through large pre-leases. Romanian subsidiary of Swiss group Arte- The author is the Publisher of 2016 /2017 Yearbook:This year marked the entry of one of the mis Holding AG, is also active in the coun- Office, Logistic and Industrial Parks in Romaniabiggest investment funds in the world,Blackstone, into Romania. Three Romanianassets have been purchased from Immofi-nanz as part of a portfolio deal and now42

SPECIALISTIN OFFICEPROPERTIES R70 Office Complex Capital Square Víziváros Office Center Canada SquareCity Gate IrodaházBartók Ház IP West Infopark ACA Immo is a specialist in office properties in Central European capitals, which controls a high quality real estate portfolio in Germany,Austria and Eastern Europe. Its core business involves letting, managing and developing office buildings. Founded in 1987, CA Immoshares have been listed on the Vienna Stock Exchange since 1988. The company started expanding into the CEE Region in 1999 byacquiring properties in Hungary and the Czech Republic.Hungary is one of the core markets of CA Immo. CA Immo’s property portfolio in Hungary is mainly located in Budapest. CA Immo isinvested in large and medium-sized office properties in Budapest in favorable locations in different submarkets in the capital both of Pestand Buda side. Every property has an excellent accessibility to public transportation as well as individual features. Moreover, CA Immofocuses on sustainability - almost all buildings of the Hungarian portfolio have been awarded gold certification in accordance with LEEDstandards.VIENNA • BERLIN • FRANKFURT • MUNICH • WARSAW • PRAGUE • BUDAPEST • BUCHARESTFor more information, please [email protected]

What’s aheadfor Bulgaria?Ákos BudaiInternatIonal Investors seem to have redIscovered one of the bIggest and most Important markets of southeastern europe, that has matured a lotover the past few years. mIchaela lashova mrIcs, ceo of forton (an allIancepartner of cushman & wakefIeld for bulgarIa and fyrom) and rIcs see ambas-sador talked to us about the present and future of the bulgarIan commer-cIal property market. How has investor interest for Bul­  In your opinion, which segment of the market is developing at a fast pace, mir- garia changed over the past year? market currently offers the best oppor­ roring the increasing demand and rental tunities for investors? growth. With only 2% vacancy and a lack ofInvestors have rediscovered Bulgaria as modern supply, the industrial market in So-one of the top-performing economies in The market today, being in a more matured fia is interesting for local and internationalEurope and as a commercial property mar- phase, offers opportunities in all segments. developers as well.ket with solid growth potential. This puts There is core product in the office and retailthe country back on their radar as property submarkets suitable for institutional inves-  The supply of quality office space inbuyers seek higher returns and are look- tors. The office segment in Sofia, for exam- Sofia has been limited for a while now.ing for new opportunities outside the core ple, shows significant potential for worth- When can we see new developments?markets. Bulgaria is attractive due to its while acquisitions due to performance inimproving macroeconomic indicators: GDP cash flow, tenant mix and location. After Indeed, the lack of quality space is a fact at thegrowth ahead of the Eurozone and above years of recovery, the market now offers moment. The requirements of the occupiersthe average in the CEE region, lower infla- prime product with increasing rents and have increased and only high quality prod-tion, currency stability, increasing consum- low vacancy – about 2% for the top per- ucts in good locations would attract them.er spending and wage growth supported formers in Sofia. Although considered satu- That being said, developers are now moreby improving housing and labour markets, rated, the Bulgarian retail property market careful and banks are cautious in financingfalling unemployment, etc. With regard to registers density below the EU average new projects, so delivery in the next yearsthe commercial property market, Bulga- level and offers attractive opportunities as is expected to remain behind demand. Theria offers growth potential in terms of size, well. In Sofia and the main cities there are shortage of quality space is to be partly over-strong demand and rent increase. Yield lev- prime shopping centres with a rebalanced come in 2017 with the expected completionels are expected to further decrease since, rent roll and rent growth potential which of more than 110,000 sqm of office space. Atas of now, risks and growth are not prop- could be outlined against the ones in need the same time, we mustn’t forget that part oferly appreciated. I believe that the Bulga- of restructuring. More opportunistic inves- this pipeline is already pre-let, compensatingrian market has significant growth potential tors can also find valuable product in all for the lack of ready-to-move-in prime officethanks to high product quality with rebal- commercial segments – office, retail and in- space on the market. That considered, we ex-anced rent levels. dustrial. Moreover, the industrial property pect slow supply growth in the coming years.44

2016/3 www.property-forum.eu  Due to this lack of space a number ofcompanies have started looking into sec­ond­tier markets. Which cities can emergeas new office hotspots? What kind of com­panies are the drivers of this shift in focus?IT and BPO companies remain the maindrivers of the office market. In most casesthese companies have already establishedoperations in Sofia and are looking for sec-ond or third locations in the second-tier cit-ies such as Plovdiv, Varna, Burgas, as well asRuse and Stara Zagora, where skilled man-power and other basic facilities are easilyavailable.  Plovdiv also seems to be a top choicefor shopping centre developers in Bulga­ria. What is the reason behind that?Plovdiv is lagging behind other main citiesin terms of shopping space, which is thereason behind the impressive developmentactivity. For now, only Mall Plovdiv with its20,000 sqm leasable space is under opera-tion, plus there are two other shopping cen-tres under construction or in the process ofrestructuring. The total supply of shoppingcentre space will increase to around 40,000sqm with the completion of Markovo TepeMall in the fall of 2016. This is half of whatthere is in stock compared to other maincities, such as Varna. The renovation plansfor the third location, Galeria Plovdiv arestill unclear in terms of timing.  Nonethe-less, Plovdiv is a promising market, beingthe second largest city in the country. Dueto its convenient location, the concentrationof manufacturing, logistics and outsourcingcompanies in the region, as well as the sta-ble increase of wages and salaries, the localretail market has long-term potential.  Can we expect new shopping centredevelopments in other cities in the nearfuture?The shopping centre market seems welldeveloped with dominant and strugglingones in each city. For the time being, itis unlikely new shopping centres will bedeveloped. We see opportunities for retail todevelop as part of large mixed-use schemes. 45

National Palace of Culture, Sofia  Have there been many new entrants logistics as well as manufacturing spaces. national tenants that offer better returnson the Bulgarian retail market lately? Sofia’s market still suffers a lack of specu- than similar ones in core markets. BulgariaWhat sort of brands are the most lative logistic space since a lot of the large now offers such product and due to the in-important sources of demand? developments have been frozen during the creased interest from investors we expect crisis. The good news is that with rents in- the market to improve in liquidity in theThe stable growth of consumption in post- creasing and vacancy decreasing to around short term. Compared to the region, Bulga-crisis years has put the Bulgarian market 2% last year, some of the large speculative ria has better performing office and logisticback on the map for a large number of in- projects have been resumed and currently markets with rental growth and limited va-ternational retailers. During that period a about 31,000 sqm are under construction. cancy. The retail market has stabilised andwide range of retailers – from fast fashion With the accumulation of prime product rebalanced with growth potential as well.operators to luxury brands – have made the industrial segment is becoming increas- We offer the lowest capital value of primetheir debut on the local market. Interna- ingly interesting for international investors. retail product in the EU. At the same time fi-tional brands such as Mango, Forever 21 Outside of Sofia the market is dominated nancing is available at quite attractive levelsand Springfield in the fast fashion, as well by light industry and automotive suppli- which results in a spread of 300-350 basisas Escada in the upscale class and Philipp ers that have a preference for both own- points or more.Plein among the luxury brands, are worth er-occupied properties and build-to-suitmentioning. Due to the improving market schemes. That’s why we have lower rates of  How are you promoting RICS valuesfundamentals many international retail- speculative stock there. and practices in the region?ers are noticing faster turnover increase inBulgaria compared to competing markets.  As RICS SEE Ambassador you oversee I do believe that market transparency is im-That’s why we expect a lot of large interna- the entire region. How is the future of proving, the quality of the products is high-tional brands to include our country in their the Bulgarian market looking compared er and the advancement of the profession isexpansion plans for the coming years. to other countries in the region? faster. My main goal and role is to educate and promote international standards local-  The industrial market has shown con­ What we have noticed in the last few years ly so that our market becomes more under-siderable movement this year. What are is that buyers moved on from the core to standable and transparent to internationalthe main trends characterising this sub­ Southern  Europe and in 2015 to Central buyers. For this purpose every year we or-market? Europe as well. Eastern markets and Bulga- ganise an RICS conference in Sofia, which ria in particular are next in line. In general, attracts professionals from the region andFirst of all, the industrial segment has investors are looking for core product in international investors that are consideringhuge development potential in terms of non-core markets, e.g. buildings with inter- the region.46

2016/3 www.property-forum.euAirports make citiesfly higherÁkos BudaiAirports hAve become An importAnt pArt of dAily life And they hAve proven to be essentiAl for the development of cit- ies. Good And fAst connections Are key pArts of doinG business And the lAck of efficient infrAstructure cAn hinderthe economic Growth of entire reGions. Airports in cee hAve A lonG wAy to Go until they cAn secure their plAce on theGlobAl mAp, but they cAn eAsily improve their position within the reGion. the improvement of existinG infrAstructure, At-trActinG new developments And estAblishinG AdequAte trAnsport links Are AmonG the key inGredients of success.Air traffic plays an important role in interna- Thanks to strict security checks people changing demand can encourage passen-tional transport and it has increased signifi- spend more and more time at the airports, gers to arrive earlier and spend some timecantly over the past few decades, so airports so spending their time comfortably and in a relaxing at the terminal before departure.have become important factors in the devel- meaningful way have become ever more im- Making sure that passengers don’t thinkopment of local economies. The number of portant. Airports all over the world are do- back on the hours they have spent at air-incoming flights and the quantity of passen- ing their best to offer a wider range of enter- ports as a waste of time is only part of thegers and goods arriving to one city has an tainment options than ever before. Improv- equation, however. Another important as-increasingly large impact on the economy. ing shopping and dining options to meet pect of development is the flexibility of the 47

The biggest airport infrastructure, which should also ap- nually, so the main focus is on passenger ex- players ply to the structure of the buildings. It is im- perience enhancements. portant for the buildings to be able to adapt Budapest Airport has recently announced Central and Eastern Europe’s busiest to the ever changing requirements both in that it is going to build a new logistics base airport is located in Vienna: VIE han- terms of size and function. for DHL Express. A large warehouse and of- dled nearly 23 million passengers last fice complex totalling 13,000 sqm will be year. Other capital cities in the region Ambitious plAns erected near Terminal 1 of the airport. The are served by much smaller airports: construction of the new facility is an integral Prague, Warsaw, Budapest and Bu- All the major airports within Central and part of the airport’s BUD 2020 development charest all welcomed between 9 and Eastern Europe have plans to expand their program, which envisages ca. EUR 160 mil- 12 million passengers at their air- infrastructure. Like most airports in the re- lion for airport development over the next ports in 2015. Belgrade has the only gion, Vienna International Airport has made five years. One of the most important ele- other airport in CEE that is one of Eu- it a priority to prepare for further increas- ments of the program is the new pier B. Nu- rope’s 100 busiest, handling less than es in passenger traffic. An additional, third merous priority projects such as the airport 5 million passengers last year. take-off and landing runway is in the plan- hotel as well as a series of logistics and se- Unlike Vienna which offers the wid- ning stages. curity developments are also to commence est range of destinations, including Prague Airport is also working on increasing soon. A new terminal building is also under several long-haul flights, the other the terminal’s capacity with passenger num- consideration. four airports rarely serve destina- bers expected to reach 24 million a year by tions outside of Europe and the 2024. The most important ongoing project Quick links Are essentiAl Middle East and are highly popular is the construction of a new parallel runway among low cost airlines. These com- which is currently in the preparatory stages. Great accessibility is just as important as the panies have established several op- In Bucharest a new terminal building (Henri quality of the infrastructure within the air- erating bases in the region over the Coandă 2) is envisaged, but very few details port itself. The most popular airports in Eu- last few years, and are responsible are known at this stage. rope all offer quick and convenient railway for a significant portion of air traffic Warsaw Chopin Airport, which handles growth in Central and Eastern Eu- nearly 40% of Poland’s air passenger traf- rope. The expansion of low cost air- fic, finished the modernisation of Terminal lines has also significantly increased A last year. The airport is now ready to ac- traffic at secondary airports in CEE commodate up to 25 million passengers an- countries. Although usually the main purpose of these flights is to connect Airport Airport workers in Western and Northern henri coandă budapest liszt ferenc Europe with their home regions, international Airport international Airport they still offer a bundle of develop- nr of pAssengers (2015) nr of pAssengers (2015) ment opportunities for these cities. 9 274 629 10 298 963 Airport chAnge over 2014 chAnge over 2014 belgrade nikola tesla Airport nr of pAssengers (2015) 11.5% 12.5% rAnk (europe 2015) rAnk (europe 2015) 4 776 110 chAnge over 2014 52 49 3.0% rAnk (europe 2015) 8748

links to the city centre, but this is rarely the Budapest intends to follow in the footsteps 2016/3 www.property-forum.eucase in CEE. Currently only Vienna Interna- of Vienna by building a branch line to the air-tional Airport and Warsaw’s Frederic Chopin port that would connect to Hungary’s most AirportAirport are directly accessible by rail. How- important eastern mainline at both ends. vienna international Airportever, a single line connecting the airport and The project would make Budapest Airport nr of pAssengers (2015)the city centre has proven to be insufficient directly accessible not only from the heartto attract a desirable amount of passengers of the capital but from all major cities in 22 775 054in both cases. chAnge over 2014Vienna has decided to connect the airportbranch with the main branch, so now sever- 1.3%al long-distance trains, both domestic and rAnk (europe 2015)international, call at the airport station and 24 Airport václav havel Airport prague nr of pAssengers (2015) 12,030,928 chAnge over 2014 7.9% rAnk (europe 2015) 40 Airport warsaw chopin Airportnr of pAssengers (2015) 11 206 700 chAnge over 2014 6.0% rAnk (europe 2015) 42the service is expected to be extended to Eastern Hungary and later on possibly from port itself, which means that passengersother regional destinations. Warsaw’s air- other regional centres in the western part have to change to a shuttle bus. There haveport station is served by suburban lines of the country. been plans to move the station closer to thethat offer connections to several destina- Prague has long planned to extend one of its airport in order to make this journey moretions within Mazovia, including the capital’s metro lines to the airport but instead has de- comfortable, but now the construction of asecondary airport, Warsaw Modlin. cided to build a new branch line, thus estab- new metro line between the airport and the lishing a direct connection with a centrally lo- city’s main railway station seems more re- cated suburban station. Both the Czech and alistic. the Hungarian government intend to secure Improving transport connections is impor- EU funding and start construction within the tant for air passengers as well as air cargo, current financing period that ends in 2020. as it can increase traffic in both categories. Bucharest Airport is served by a railway sta- But this is not the only reason why estab- tion that is located 900 metres from the air- lishing fast links between airports and ur- ban centres is essential. The proper infra- structure can improve the availability of workplaces in the region, which might en- courage new economic entities to relocate to the area, as well as provide new oppor- tunities for the companies already operat- ing there. 49

Ambitiouslong-term plansat Budapest AirportÁkos BudaiThe BudapesT commercial properTy markeT has seen a real Turnaround over The pasT Two years. demand is evi- denTly sTrong for qualiTy office and logisTic space in many parTs of The hungarian capiTal, including iTs airporT.BudapesT airporT has an area larger Than london heaThrow and amBiTious long-Term plans ThaT aim To aTTracT awide range of companies, including cargo and logisTics operaTors. rené droese and réka seBesTyén, responsiBle forThe properTy Business of Bud, Talked To us aBouT The airporT’s developmenT plans. Budapest airport and dHL Express have recently signed an agree­ment about the development of a new lo­gistics base in august. are there otherlarge deals on the horizon?R. s.: DHL is a long-time partner of Buda- Réka Sebestyén and René Droese Cargo City project planned in the vicinitypest Airport. DHL Express has had daily of Terminal 2. This area is an ideal locationoperations at the airport for almost 25 has been going on since mid-July and will for long-term cargo development betweenyears. Now we have decided to upgrade be approximately the same size as the Highway 4 and the airport. Here we foreseetheir landside facility by building a 13,000 neighbouring DHL Express facility, a huge a complex with office and warehouse spacesqm warehouse, office and manoeuvring construction site of more than 60,000 to serve dedicated cargo airlines and the so-area exclusively for DHL Express, right next sqm. In the upcoming months we will called belly cargo business, a project thatto the cargo apron around Terminal 1. This disclose more details about this project. was postponed after Malév’s bankruptcywill allow them to improve their services Both facilities will be operational by the in 2012. Our cargo volume has alreadyto customers and to further increase their summer next year. Having secured these increased by 14% this year compared to theoperations. Nowadays they operate a daily two integrator projects with constructionflight of an Airbus A300-600F between ongoing, we are focussing on restarting theLeipzig and Budapest and another flightbetween Brussels and Budapest executedby a Boeing 737 freighter. Furthermore, DHLFreight and DHL Global Forwarding havealso been based at the airport since 2014and have been operating here successfully.R. d.: We will develop yet another mo-dern warehouse-office-manoeuvring areacomplex for another integrator whom Icannot name right now. This construction50