CBRE Fit-Out Cost Guide Update 2019

UPDATE – 2019

Based on CBRE's experience, the Y2018 real estate market trends will continue in Y2019 as well and, compared to the data communicated in the spring of 2018, market participants are already using significantly higher price levels in the planning and realization phase of their investments than a year earlier. Prior to the publication of our traditionally biennial edition, we have prepared the 2018 review and update of our 2018 guide, which will be more suitable for preparation and benchmarking purposes regarding office fitout projects.

EN

In the commercial segment of the real estate market (including office, retail plus industrial and logistic projects), the overheated residential real estate market and large-scale central-financed investments will result serious labour shortages and its negative effects will continue to be perceptible in Y2019, following the pattern of previous years. In addition to the steady rise in construction costs, project lead times are also increasing because of shrinking supplier and subcontractor capacities. It is also important to point out that the shortage of professionals has now become a feature of practically all the professions involved, from skilled workers on site to highly trained engineers. The situation is further exacerbated by the fact that, in addition to the office segment, the retail investment market and the industrial and logistic business are showing an increasing activity as well by Y2019. As a result of all these processes, the price increase experienced by CBRE regarding office fit-outs is around 16% in Q1 2019 compared to Q1 2018. In relation to an average size office with premium specification including all typical cost elements (and assuming a shell & core baseline), the total cost is expected to be around 890 EUR / m2 in Q1 2019 compared to an average cost of ~ 770 EUR / m2 in Q1 2018. OFFICE FITOUT

As in previous years, construction works with higher labour input and specialized expertise have a stronger, other design & engineering and general construction works have a lower cost increase rate.

REAL ESTATE MARKET OVERVIEW

In the residential market, private constructions and large-scale residential property investments continue to account for a significant share of the market - approx. 15- 20%. The main driving force behind the trend of this segment is and will be the remaining 5% tax rate until the end of Y2019. While the residential real estate market is expected to be characterized by significant construction activity and an increasing number of occupied homes throughout this year, a slight downturn is already notable the first quarter of Y2019 when new housing is permitted. Although, according to the data of the HCSO, the number of dwellings to be built based on building permits and notifications decreased only by 2.1% compared to the same period of Y2018, but only for Budapest and other cities this figure is already 8%. On this basis, the residential property boom started in Y2016 will gradually slow down by Y2020 and is expected to stabilize at a lower level by Y2023. Governmental and Central Funded so-called National Economy Investments have been increased by 17% in Y2018 compared to the previous year and are expected to deliver a significant market segment in Y2019 as well. Public and municipal property development and infrastructure investments continue to take up nearly half of the construction industry.

FORECAST TILL Y2020

In Y2019, it is expected that the trends will not change significantly, and the market will not make a serious turn until the end of 2020. Based on this prognose, it is worth expecting a 10-15% price increase by the end of the year and an additional 15% by the end of Y2020. Using the previous example, this may result in Y2019 a specific fit-out cost of even 1000 EUR / m2 for the year-end projects and office fit-out projects with cost levels of 1100-1200 EUR / m2 will become more and more general in Y2020.

RESIDENTAL DEVELOPMENT

Thousand house/apartment

11

10

9

8

7

6

5

4

3

2

1 0

2015

2016

2017

2018

2019

nr. of residential building permits / lakásépítési engedélyek száma nr. of residential occupancy permits / használatba vett lakások száma

34

FIT-OUT COST GUIDE