The View 7th edition

16

10,00%

9,00%

8,00%

Office Industrial Shopping Centre High Street

7,00%

6,00%

5,00%

2007 Q4

2008 Q4

2009 Q4

2010 Q4

2011 Q4

2012 Q4

2013 Q4

2014 Q4

2015 Q4

2016 Q4

2017 Q4

2018 Q4

Evolution of Prime Yields in Hungary

Source: CBRE Research

portfolio sale to Singapore-basedMapletree, following their park in Hegyeshalom that sold earlier in the year to an end user. A small city logistics building in north Pest also was sold to an end user. Along with IPD’s sale of South Base 1 & 2 in Dunakeszi to IAD Investment and a handful of smaller single asset deals in the countryside, the industrial investment volume in 2018 totalled EUR 106 million, less than half of the preceding year’s figure. Two countryside hotel deals were registered as closed in 2018, involving Greenfield Golf & Spa Resort in Bük as well as Novotel Szeged, adding an estimated EUR 24 million to the 2018 investment volume. SOURCES OF CAPITAL The dominance of Hungarian investors continued to increase in H2 2018, reaching a share of 84% of the total volume in the latter half of the year. On an annual basis, domestic investors stood for 65% of the 2018 investment volume, up from 37% in 2017, and hence this marked the first year on record when local investors provided more than half of the total invested capital. Although a continued gain in market share was anticipated, the magnitude of the increase surpassed expectations. In terms of cross-border investment, the second half of the year added capital sourcing countries to the list for 2018. Mapletree’s arrival on the market marks the second logistics deal closed by an Asian institutional investor, albeit once again as part of an international portfolio as in the case of CIC’s Logicor acquisition in 2017. US based investors also showed activity after a prolonged idle period, with AEW purchasing three classical buildings in the CBD and Goldman Sachs acquiring Science Park. Earlier in the

year, the acquisition of Premier Outlet Center marked the long-awaited return of a German open-ended fund to the local market after not having closed a deal since the crisis. PRICING AND YIELDS Prime yield levels remained stable throughout most of the year, as there was no new product on the market that could clearly break below the prevailing benchmark figures at the time. However, based on recently closed and ongoing transactions benefitting from resilient investor sentiment, CBRE are of the opinion that a prime yield benchmark compression of 25 bps, q-o-q, is motivated across all sectors as of Q4. Despite concerns related to trade conflicts, overly stringent monetary tightening and a looming economic slowdown, the outlook for the local market remains positive and yields could still see potential compression for true Core/Core Plus assets in the office, industrial and hotel sectors. The prime yield for offices stands at 5.75%, while high-quality secondary assets in the sector can achieve around 6.75%. Retail assets retain their somewhat more ambitious pricing profile with a prime yield benchmark of 5.50%, which is valid for the best quality shopping centres and high street units alike. However, the gap between prime and secondary shopping centres is wider, as the latter would face difficulties breaking below 7.50%. The industrial sector still lags behind with a prime yield level of 7.50%. This obstinate gap remains partly due to the continued shortage of top-grade product coming tomarket – the right opportunities would place strong pressure on the current figure.